Facts
- In March 1973, Robert C. Miller enrolled as a student at a Fred Astaire Dance Studio in Washington, D.C.
- Miller signed a written “Student Enrollment Agreement” for 200 hours of dance lessons to be completed within one year, for a total price of $1,430.
- The agreement required Miller to pay $1,100 of the price in 11 equal monthly installments.
- The agreement was signed on behalf of the studio by James Hash, the studio’s licensee and operator at the time.
- The agreement stated it was made “solely” between Miller and the studio’s licensee (an independent contractor) and that neither “Fred Astaire” nor any person or corporation other than the licensee and Miller would “be bound” by the agreement.
- In August 1973, during the contract term, Hash sold his studio license to Billy V. Bewley.
- As part of the sale, Hash assigned to Bewley all outstanding dance-instruction contracts, including Miller’s enrollment agreement.
- Bewley continued providing dance lessons to Miller after the transfer, and Miller accepted the lessons without objecting to the change in ownership.
- Miller continued making payments under the agreement until December 1973, then stopped paying.
- When the one-year term expired on March 30, 1974, Miller had taken 180.5 hours of lessons and still owed $600 under the contract price.
- Bewley sued Miller to recover the $600 balance as assignee of Hash’s contract rights.
- The trial court construed the “bound by” language as a nonassignability clause and granted Miller’s motion to dismiss.
- Bewley sought review, and the District of Columbia Court of Appeals considered whether dismissal on that ground was proper.
Issues
- Whether the enrollment agreement’s statement that neither “Fred Astaire” nor any person or corporation other than the licensee and the student would “be bound” by the agreement barred assignment of the licensee’s contract rights to a successor.
- Whether Bewley, as assignee of the prior licensee, could sue Miller to collect the unpaid contract balance.
Decision
- The District of Columbia Court of Appeals reversed the dismissal and remanded for further proceedings.
- The court held that the “bound by” clause did not constitute a nonassignability provision and did not prevent assignment of the licensee’s rights.
- Because the assignment was not barred, Bewley could pursue the claim for the unpaid $600 balance.
Legal Principles
- Contract rights are generally assignable unless the contract clearly prohibits assignment or the assignment would materially alter the obligor’s duty or risk.
- Language stating that only the named parties are “bound” by an agreement commonly serves to identify who is liable on the contract (and to disclaim liability of third parties) and, without clear anti-assignment language, does not bar assignment.
- A transfer of a business with assignment of outstanding customer contracts is consistent with ordinary commercial practice; absent a clear contractual prohibition, the assignee may enforce the assigned right to payment.
- A party’s acceptance of continued performance after a transfer, and continued payments for a period afterward, supports enforcement of the assignee’s claim and weakens the argument that the assignment was improper.
Conclusion
In Bewley v. Miller, the D.C. Court of Appeals held that a dance-lesson enrollment agreement clause stating that only the student and the studio’s licensee were “bound” was meant to limit third-party liability (including the franchisor) and did not clearly forbid assignment; therefore, when the original licensee sold the studio and assigned outstanding contracts, the successor licensee could sue the student for the unpaid contract balance, and the trial court’s dismissal was reversed and remanded.