Chemical Bank v. Rinden Professional Association Case Brief Summary | Law Case Explained

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Chemical Bank v. Rinden Professional Association
New Hampshire Supreme Court
498 A.2d 706 (1985)

When short on cash, a business may assign its right to collect payment under a contract to another party in exchange for a lump sum. But what happens to the rights of the other contractual party if the assignor fails to meet its obligations?

In Chemical Bank versus Rinden Professional Association, we'll examine how such an assignment can impact the protections available to each party. In nineteen seventy four, Rinden Professional Association, a law firm, entered into a lease purchase agreement with Inter Tel Communications Corporation for an office phone system. Under the contract, Rinden agreed to make monthly payments to Inter Tel for eight years with the option to purchase the equipment for one dollar at the end of the term.

Soon after, InterTel notified Rinden of its intent to assign its rights to receive payments under the party's contract to Chemical Bank. The notice included a waiver of defenses clause stating that Rinden's obligation to pay Chemical Bank was absolute and unconditional, meaning Rinden would remain obligated to pay Chemical Bank even if the lease purchase agreement was terminated early.

Rinden consented to the assignment, and Chemical Bank paid Inter Tel a lump sum of eighty eight hundred dollars.

Three years later, the phone system began malfunctioning.

Rinden notified Inter Tel of the issues, but after the parties were unable to resolve the matter, Rinden refused to make further payments to Chemical Bank. Chemical Bank brought suit against Rinden to recover the unpaid amounts, pointing to the assignment's waiver of defenses clause.

Rinden responded that the clause was unenforceable because it hadn't received any consideration for the waiver.

After a hearing on the merits, a court appointed master found that the document sent to Rinden constituted a valid notice of assignment and waiver of defenses.

As a result, the master concluded that Chemical Bank was entitled to collect all payments due under the contract.

The trial court approved the master's report.

Rinden appealed to the New Hampshire Supreme Court.

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