Reference no: EM132178236

Frank Stewart owns Evergreen Landscaping, Inc. Frank has experienced cash flow problems and he has borrowed $5,000 from Friendly Finance Company to keep his business open. He must pay Friendly $500 per month until the debt is repaid. Frank has a small book of business that generates $1,500 per month in income. Frank has been awarded a contract from Tower Apartments to maintain the common areas of the large apartment complex. The contract will pay him $1,000 per month. The contract with Tower contains a provision that prevents either party from assigning the contract to a third party without the consent of the other party.

Friendly is pressing Frank for a payment plan since he has had difficulty making the monthly payments on his loan. When Friendly learns of Frank’s new contract with Tower, it demands that Frank enter into an agreement with Friendly whereby Frank assigns to Friendly the right to receive $500 of the $1,000 monthly payment from Tower until such time as the debt is paid in full. The terms of their agreement is finalized in a written contract. Friendly sends a copy of the agreement to Tower with a notice that Friendly expects to receive the monthly $500 payments beginning on the first of the next month. Friendly can prove that Tower received the notice of assignment.

Frank performs the required work at the Tower complex for one month. He submits an invoice to Tower for payment. Tower ignores the notice from Friendly and sends Frank a check for $1,000.

At the beginning of the second month of the contract with Tower, Frank is injured while he is working on the property of one of his customers and he is not able to work. In an effort to keep his business alive until he is able to work again he reaches a deal with Sunset Landscaping to whereby Frank assigns all of his rights under his existing customer contracts, including the contract with Tower, to Sunset. When Sunset learns that it will not be receiving the full $1,000 from Tower, Sunset stops performing any work for any of Frank’s customers.

When Sunset stops performing the work at the Tower complex, Tower contracts with Friendly Landscaping Service to perform the work at its apartment complex. Tower must pay Friendly $1,200 per month.

Discuss the following claims:

1. Friendly claims it is entitled to a $500 payment from Tower for the work Evergreen performed during the first month of the contract. Tower claims it does not have to honor the agreement between Frank and Friendly because Tower never consented to the assignment of the payment to Friendly. Is Friendly entitled to the payment. If so why, if not, why not?

2. Tower brings an action against Frank alleging breach of contract. As damages for the breach, Tower claims Frank must pay them $200 per month for each month the landscaping services are performed by Friendly Landscaping. Frank defends on the grounds that he assigned the Tower contract to Sunset Landscaping and Sunset is liable for any breach of the contract. Can Frank assign his rights under the Tower contract to Sunset? If so why, if not, why not? Is Frank liable to Tower for Sunset’s failure to perform the agreement with Tower? If so, why, if not, why not? What type of damages is Tower claiming for breach of the agreement? Is their calculation correct? Is so, why, if not why not?