Smith and Roberson's Business Law 16th Edition by Richard Mann,Barry Roberts

Exercise 3

Tompkins-Beckwith, as the contractor on a construction project, entered into a subcontract with a division of Air Metal Industries. Air Metal procured American Fire and Casualty Company to be surety on certain bonds in connection with contracts it was performing for Tompkins-Beckwith and others. As security for these bonds, on January 3, Air Metal executed an assignment to American Fire of all accounts receivable under the Tompkins-Beckwith subcontract. On November 26 of that year, Boulevard National Bank lent money to Air Metal. To secure the loans, Air Metal purported to assign to the bank certain accounts receivable it hadunder its subcontract with Tompkins-Beckwith. In June of the following year, Air Metal defaulted on various contracts bonded by American Fire. On July 1, American Fire served formal notice on Tompkins- Beckwith of Air Metal's assignment. Tompkins-Beckwith acknowledged the assignment and agreed to pay. In August Boulevard National Bank notified Tompkins- Beckwith of its assignment. Tompkins-Beckwith ref usedto recognize the bank's claim and, instead, paid all remaining funds that had accrued to Air Metal to American Fire. The bank then sued to enforce its claim under Air Metal's assignment. Is the assignment effective? Why?