The Weyburn Farmers' Co-op contracted to sell a carload of grain to Mr. Takemori for $2000. The co-op assigned, in writing, its contractual right to receive the $2000 to the Royal Bank, to which it was indebted. The Royal Bank gave written notice of the assignment to Takemori. Unknown to the buyer and the seller, at the time of the contract the grain had been destroyed because of a train derailment caused by the negligence of the train conductor. On these facts, which of the following is true?

A) The Royal Bank, the assignee, will receive the $2000 because it could prove privity of contract with Takemori.
B) The Royal Bank will receive part payment from Takemori.
C) The Royal Bank will receive nothing from Takemori because Takemori owes nothing to the Co-op.
D) The Royal Bank will receive $2000 from Takemori because there was an assignment in writing and that is the sole test for determining if the assignee will be paid the amount of the assignment.
E) Because of the conductor's negligence, the railroad will have to honour Mr. Takemori's contract with the Royal Bank.

Question

Shannon Andrews · Accepted Answer

Final Answer : C, Explanation :  The Royal Bank will receive nothing from Takemori because the underlying contract between the Weyburn Farmers' Co-op and Mr. Takemori was for the sale of grain that, unbeknownst to both parties, had already been destroyed at the time of the contract. Since the subject matter of the contract no longer exists due to circumstances beyond the control of either party, Mr. Takemori owes nothing to the Co-op, and consequently, nothing can be assigned to the Royal Bank. The assignment of the right to receive payment is contingent upon the existence of that payment obligation, which in this case has been nullified by the destruction of the grain.

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