Information > Financial Terms > This page

Assignment Of Claims Act 
Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority.)

Approved Oct. 9, 1940, "to assist in the national defense program by amending Sections 3477 and 3737 of the Revised Statutes to permit the assignment of claims under public contracts" (P.L. 811,76^th Congress).  Such assignment of claims allowed manufacturers to assign the contracts as security for borrowings from banks needed for defense plant construction.

Accordingly, a new form of uniform bankable contract was developed by the NATIONAL DEFENSE ADVISORY COMMISSION after consultation with the War and Navy departments and the Comptroller General.  This contract had two purposes:  to expedite signing of supplies contracts by the Army and Navy by assuring the contractor against loss on construction undertaken for military purposes and to safeguard the government's interest in such facilities on termination or completion of the contract.

The contract provided that the government reimburse the contractor not in additions to the unit price, as previously, but in five equal annual installments covering the amount of his capital expansion costs.  Thus, cost of supplies and amortization of construction cost would be kept separate.  Prices were held at a minimum, and while the manufacturer was relieved of the risk involved in building fixed assets for the emergency, he still absorbed the risks involved in production.  The contract also contained provisions whereby the contractor might by purchase or lease from the government acquire use of the facilities for himself after they had served their emergency needs.

Back to Information