Delaware Business Litigation Report

Court of Chancery Finds Assignment of Subcontract Ineffective Based on Plain Language of the Agreement

Kier Construction, Ltd. v. Raytheon Co., 2005 WL 628498 (Del. Ch. Mar. 10, 2005). This action arouse out of a construction subcontract between plaintiff, Kier Construction, Ltd. ("Kier"), and a non-party, Raytheon Engineers & Constructors, UK Ltd. ("REC UK"). Kier claimed it was owed over $12 million for work performed under the subcontract. Kier contended that the contract with REC UK was transferred to defendants, Raytheon Company ("Raytheon") as part of a transaction in which Raytheon sold REC UK and other subsidiaries to Morrison Knudsen Corporation. Kier contended that Raytheon, as REC UK's assignee, was directly liable to Kier for the work it performed under the subcontract. The parties filed cross motions for summary judgment. Each side contended that the disputed provisions of the agreements at issue were unambiguous. The court found that the agreements at issue were unambiguous and that Kier had not carried its burden to show that the Raytheon Defendants accepted an assignment of the rights under, or assumed the obligations of, the subcontract. Therefore, the Raytheon Defendants were not liable to Kier under the subcontract. To effect an assignment the parties must manifest an intent to assign by either act or declaration. Although an assignment need not utilize any particular phraseology or form, there must be a completed transfer of the entire interest of the assignor in the particular subject of assignment. Here, the court found the relevant agreement provisions unambiguous and interpreted the language to not manifest the Raytheon Defendants' intent either to be assigned or to assume the agreements. Thus, the Raytheon Defendants were not directly liable to Kier under the subcontract. Share