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What Is an Assignment of Contract?

Assignment of Contract Explained

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Assignment of contract allows one person to assign, or transfer, their rights, obligations, or property to another. An assignment of contract clause is often included in contracts to give either party the opportunity to transfer their part of the contract to someone else in the future. Many assignment clauses require that both parties agree to the assignment.

Learn more about assignment of contract and how it works.

What Is Assignment of Contract?

Assignment of contract means the contract and the property, rights, or obligations within it can be assigned to another party. An assignment of contract clause can typically be found in a business contract. This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark , and copyright) agreements.

How Does Assignment of Contract Work?

An assignment may be made to anyone, but it is typically made to a subsidiary or a successor. A subsidiary is a business owned by another business, while a successor is the business that follows a sale, acquisition, or merger.

Let’s suppose Ken owns a lawn mowing service and he has a contract with a real estate firm to mow at each of their offices every week in the summer. The contract includes an assignment clause, so when Ken goes out of business, he assigns the contract to his sister-in-law Karrie, who also owns a lawn mowing service.

Before you try to assign something in a contract, check the contract to make sure it's allowed, and notify the other party in the contract.

Assignment usually is included in a specific clause in a contract. It typically includes transfer of both accountability and responsibility to another party, but liability usually remains with the assignor (the person doing the assigning) unless there is language to the contrary.

What Does Assignment of Contract Cover?

Generally, just about anything of value in a contract can be assigned, unless there is a specific law or public policy disallowing the assignment.

Rights and obligations of specific people can’t be assigned because special skills and abilities can’t be transferred. This is called specific performance.   For example, Billy Joel wouldn't be able to transfer or assign a contract to perform at Madison Square Garden to someone else—they wouldn't have his special abilities.

Assignments won’t stand up in court if the assignment significantly changes the terms of the contract. For example, if Karrie’s business is tree trimming, not lawn mowing, the contract can’t be assigned to her.

Assigning Intellectual Property

Intellectual property (such as copyrights, patents, and trademarks) has value, and these assets are often assigned. The U.S. Patent and Trademark Office (USPTO) says patents are personal property and that patent rights can be assigned. Trademarks, too, can be assigned. The assignment must be registered with the USPTO's Electronic Trademark Assignment System (ETAS) .  

The U.S. Copyright Office doesn't keep a database of copyright assignments, but they will record the document if you follow their procedure.

Alternatives to Assignment of Contract

There are other types of transfers that may be functional alternatives to assignment.

Licensing is an agreement whereby one party leases the rights to use a piece of property (for example, intellectual property) from another. For instance, a business that owns a patent may license another company to make products using that patent.  

Delegation permits someone else to act on your behalf. For example, Ken’s lawn service might delegate Karrie to do mowing for him without assigning the entire contract to her. Ken would still receive the payment and control the work.

Do I Need an Assignment of Contract?

Assignment of contract can be a useful clause to include in a business agreement. The most common cases of assignment of contract in a business situation are:

  • Assignment of a trademark, copyright, or patent
  • Assignments to a successor company in the case of the sale of the business
  • Assignment in a contract with a supplier or customer
  • Assignment in an employment contract or work for hire agreement

Before you sign a contract, look to see if there is an assignment clause, and get the advice of an attorney if you want to assign something in a contract.

Key Takeaways

  • Assignment of contract is the ability to transfer rights, property, or obligations to another.
  • Assignment of contract is a clause often found in business contracts.
  • A party may assign a contract to another party if the contract permits it and no law forbids it.

Legal Information Institute. " Assignment ." Accessed Jan. 2, 2021.

Legal Information Institute. " Specific Performance ." Accessed Jan. 2, 2021.

U.S. Patent and Trademark Office. " 301 Ownership/Assignability of Patents and Applications [R-10.2019] ." Accessed Jan. 2, 2021.

Licensing International. " What is Licensing ." Accessed Jan. 2, 2021.

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Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

Founded in 1939, our law firm combines the ability to represent clients in domestic or international matters with the personal interaction with clients that is traditional to a long established law firm.

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What is a contract assignment definition.

A contract assignment is a document that assigns rights and obligations under a contract to another party.3 min read A contract assignment can be used for a variety of reasons, but most commonly it is used when one party to a contract wants to transfer its rights or obligations to another party. For example, if Company A enters into a contract with Company B to provide services , but Company A then wants Company C to provide the services instead, Company A would use a contract assignment to assign the contract rights and obligations to Company C. Contract assignments are also common in the real estate industry. For example, if someone buys a house with the intention of flipping it, they will often assign the purchase agreement (and therefore the underlying contract rights and obligations) to the company or person they are selling the house to.

What is a contract assignment?

A contract assignment is a legal agreement between two parties in which one party assigns (gives) its rights under a contract to another party. The term “assignment” is used in the law of contracts to refer to the transfer of rights or duties under a contract from one person or entity to another. An assignment can be made orally or in writing, but it is generally advisable to have any assignment agreement in writing so that there is no dispute about the terms of the agreement later on.

There are several reasons why someone might want to assign their rights under a contract. For example, if you are a small business owner and you have a contract with a big company that you cannot fulfill, you may want to assign your rights under the contract to another company that can fulfill the contract. Or, if you are an employee who has been assigned to work on a project for a specific period of time, you may want to assign your rights under the employment contract to another employee so that they can continue working on the project after you leave.

In order for an assignment to be valid, there must be mutual assent between the parties; that is, both parties must agree to the terms of the assignment. Furthermore, an assignment cannot conflict with the terms of the original contract; if it does, then it will be void and unenforceable.

If you are considering assigning your rights under a contract, it is important to seek legal advice first so that you can understand

What are the benefits of a contract assignment?

There are many benefits to taking on a contract assignment. For one, it can help to diversify your income and give you a steadier stream of work . Additionally, it can help build your portfolio and credibility as a freelancer, which can lead to more opportunities down the road.

Another benefit of contract assignments is that they often come with shorter deadlines than traditional projects , which can be helpful if you’re struggling to find time to fit freelancing into your schedule. Finally, working on a contract basis can help build relationships with clients and allow you to get a foot in the door with companies you may be interested in working with long-term.

What are the risks of a contract assignment?

When taking on a contract assignment, it is important to be aware of the risks involved . These can include:

-The client may not be happy with the work you produce and may try to cancel the contract . -You may not be able to complete the work within the specified time frame . -The scope of the work may change, which could lead to additional costs. -There may be unforeseen circumstances that make it difficult or impossible to complete the work.

How to assign a contract

If you’re thinking of assigning a contract, there are a few things you should know first. Here’s a quick guide on how to assign a contract:

1. Make sure the contract you’re assigning allows for assignment. Not all contracts do, so it’s important to check before moving forward.

2. Determine who will be assuming the contractual obligations . This person is known as the “assignee.”

3. Get the assignee to agree to assume the obligations in writing. This written agreement is called an “assignment agreement.

4. Notify the other party to the original contract (known as the “obligor”) of the assignment in writing. The notice should include: (a) the date of the assignment; (b) the names and addresses of both parties; and (c) a statement that indicates that all rights and obligations under the contract have been transferred to the assignee.

5. Make sure that any conditions precedent in the original contract have been satisfied before completing the assignment process. A condition precedent is something that must happen before an obligation under a contract becomes effective. For example, if a contract requires that certain repairs be made to a property before it can be sold, those repairs must be completed beforethe assignment can take place.

6. Check local laws and regulations regarding assignments, as there may be restrictions in place that you need to be aware of before proceeding.

A contract assignment is a legal agreement between two parties that assigns rights and responsibilities to one party. The assignee agrees to take on the duties of the contract , while the assignor transfers their rights under the contract to the assignee. This type of agreement is often used in business deals or when one party wants to transfer their interest in a property or asset to another party.

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6.4: Assignment, Delegation, and Commonly Used Contracts Clauses

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  • Page ID 24123

Learning Objectives

  • Learn about assignment and delegation.
  • Examine novation.
  • Explore restrictions on assignment, exculpatory clauses, noncompete clauses, mandatory arbitration clauses, acceleration clauses, and liquidated damages clauses.
  • Explore the parol evidence rule.

What if you formed a contract with a rock ’n’ roll band for its services? Specifically, you wanted the band to play at your nightclub, because you thought that your customers would enjoy the band enough to pay to see it perform. You hired this specific band because you heard that it drew large crowds of paying customers. Imagine your surprise when, as you anticipate the band’s performance, you discover that another band—one you have never heard of—has come to play instead of the original contracting band. On inquiry, you learn that the original band transferred its duties to perform to a lesser-known band. Can it do that?

Contract elements—the terms of the contract—are important. They may, among other things, foreclose your ability to bring a complaint in court, they may render you unable to be hired in your profession (at least within certain boundaries), or they may limit liability to a party that had a role in causing injury to you. If you are not aware of these elements, then you may face an unpleasant surprise if you act in a way contrary to the restrictions imposed by those terms. Likewise, contracts possess certain qualities that prohibit parties from acting in certain ways, unless those qualities are expressly waived. This section identifies common properties of contracts, as well as commonly used elements of contracts. If you are negotiating a contract and you do not like a term, then you should not agree to it. In law, there is a presumption that you have read, understood, and agreed to each and every term of any contract to which you are a party. Arguing that you did not understand or that you did not approve of a particular term in the contract will not be a valid excuse to performance. You should know what you can expect when you enter into a contract. Are you getting the band that you wanted to hire to play in your nightclub, or are you really getting any band that the original band happens to transfer its duties to?

As a preliminary matter, it is important to realize that contracts are, by law, assignable and delegable. This means that the rights conveyed by the contract may be transferred to another party by assignment, unless an express restriction on assignment exists within the contract, or unless an assignment would violate public policy. Likewise, the duties imposed on a party may be transferred to another party by delegation, unless the contract expressly restricts delegation, or there is a substantial interest in personal performance by the original party to the contract, or if delegation would violate public policy. In the case of a band hired to perform at a nightclub, an argument could be made that the original band cannot delegate its duties under the contract because there was a substantial interest in personal performance by the original band. This would render the contract nondelegable. To be on the safe side, your contract with that band should have had a clause expressly prohibiting delegation.

Many students have seen restrictions on assignment in the form of no-sublease clauses in leases with landlords. Do you have a no-sublease clause in your lease? If so, that is a restriction on assignment. This clause is necessary to prevent you from assigning your rights under the lease—your rights to inhabit the premises—to another party. It is necessary for the landlord to include that provision expressly if she wishes to prevent you from subleasing the unit, because there is a presumption in law that assignment is permitted unless it is expressly prohibited by the contract or unless the assignment would violate public policy. Since it is unlikely that letting someone else live in your housing unit in your absence would violate public policy, then the landlord must expressly prohibit the assignment within the original contract if she wishes to prevent tenants from subleasing. A landlord may have a very good reason to wish to prevent subleasing; she may wish to ensure that each tenant is creditworthy prior to allowing the tenant to live in the property.

Note that in delegation and in assignment, the original contracting party is not “off the hook” if it transfers its duties or rights to another party. For instance, if subleasing was not prohibited, and the new tenant assumed the rights and duties imposed by the original contract, the original party to the contract is still liable for the payment of rent. If the subleasing tenant does not pay the rent, the original party to the lease is still liable. The way to excuse oneself from this liability is to form a three-way novation with the original party and the new party, thereby excusing the exiting party from future liability arising under the contract. A novation is essentially a new contract that transfers all rights and duties to the new party to the contract and releases the previous party from any further obligation arising from the original contract.

Restrictions on assignment or delegation are not the only common elements that can be found in contracts. For example, you have probably encountered exculpatory clauses. An exculpatory clause is an express limitation on potential or actual liability arising under the subject matter of the contract. In short, exculpatory clauses are often employed when risk of injury exists. They seek to limit one party’s liability to another. You most certainly have signed exculpatory agreements or contracts containing exculpatory clauses if you have participated in any potentially dangerous activity at a club or with an organized group that could incur liability from injuries suffered by its patrons or members. For example, if you join a kayaking club, you will most likely be asked to sign such an agreement to “hold harmless” the club in the event of any accident or injury. However, despite the existence of an exculpatory clause, liability will not be limited (that is, the liability limitations will be unenforceable) when the party who would benefit from the limitation on liability acted with gross negligence, committed an intentional tort, or possessed greatly unequal bargaining power, or if the limitation on liability violates public policy. Imagine that you signed an agreement to engage in kayaking activities with a kayaking group, but the leader of the group battered you with her oar because she was angry with you for mishandling your kayak. Since battery is an intentional tort, the exculpatory clause will not protect the kayaking organization from liability it incurred through the actions of its employee.

Another common contract element that you may have encountered is a noncompete clause. A noncompete clause attempts to restrict competition for a specified period of time, within a certain geographic region, and for specified activities. Noncomplete clauses are generally valid against the party who signed it if the time, place, and scope are reasonable. These are very common clauses in employment contracts, particularly where the duties involved in employment are likely to involve trade secrets or other proprietary information that the company wishes to protect.

A mandatory arbitration clause is very common in consumer contracts and employment contracts. You have certainly subjected yourself to the restrictions imposed by these clauses if you have signed a contract for a credit card. Mandatory arbitration clauses require parties to a contract that contains such a clause to submit to mandatory arbitration in the event of a dispute arising under the contract. Mandatory arbitration clauses frequently foreclose any possibility of appealing arbitration awards in court.

An acceleration clause commonly exists in contracts where periodic payments are contemplated by the agreement. For example, if you signed a lease for your housing unit, then you most likely pay rent on a month-to-month basis. If you breached your lease, you would still owe rent for each subsequent month contemplated by the lease agreement. This means that your landlord would have new injury every month that you did not pay. An acceleration clause accelerates all payments due under the contract on breach. This allows the injured party—in this case, the landlord—to sue for all damages due for unpaid rent under that contract at once, rather than having to bring a new suit each month to seek monthly unpaid rent.

A liquidated damages clause allows parties to set the amount of damages in the event of breach. Agreeing to a damage amount before any breach occurs can save money and time spent litigating. Providing that the liquidated damages clause does not look like a penalty, the clause will be valid and enforced by a court that hears a dispute arising under the contract. For example, imagine that you entered into a contract for the sale of your car. If the liquidated damages clause provided for two thousand dollars of damages in the event of breach, that will probably be a valid liquidated damages clause, providing that your car is an “average” car. However, if the liquidated damages clause provided for one million dollars of damages payable by the breaching party, then that would not be enforceable by the court because it looks like a penalty. The proposed liquidated damages far exceed the value of the car that is the subject of the agreement.

Of course, there are additional common elements to contracts. This is not an exhaustive study of possible provisions, though it is a list of commonly encountered elements. For example, time of performance is often included as a separate provision. However, time for performance is an essential element in common-law contract formation, and without it, the contract may fail due to lack of definite and certain terms in formation.

A major assumption made about a written contract is that it is integrated, which means that it contains the entire expression of the parties’ agreement. That means that any statements made before the parties signed the contract are not part of the contract, unless those statements are memorialized in the contract itself. In fact, any statements or actions that are not captured within the four corners of the contract are considered parol evidence, and they will not be used to interpret the meaning of the contract.

Key Takeaways

Parties to contracts must not only take care to form the agreement so that it is legally enforceable, but they must also be aware of the properties of contracts in general, as well as specific provisions contained within contracts to which they are a party. Properties of contracts include ability to assign, delegate, and exclude parol evidence. Several types of contracts clauses are commonly used to restrict rights and limit liability.

Exercise \(\PageIndex{1}\)

  • Think of an example of an exculpatory clause that you have signed. For what type of activity would you be unwilling to sign an exculpatory clause? If your refusal to sign the exculpatory clause or agreement prevented you from participating in that activity, would you still refuse to sign it?
  • Do you think that too many limitations and restrictions can be placed on parties in a contract? Should there be more government regulation and standardization of contract terms between private parties? Why or why not?

Contract Assignment Agreement

Jump to section, what is a contract assignment agreement.

A contract assignment agreement is a document that transfers the contractual rights and duties of one party to another. The other party involved in the contract must agree to the terms of the transfer as well as they will now be in a contractual agreement with a different party.

Contract of assignment agreements must not violate any other laws or statutes in order to be enforced. The original contract must also allow assignments, or at least not explicitly prohibit them. Contract of assignment agreements cannot alter what is expected from the original contract.

Contract Assignment Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.45 61 dex1045.htm ASSIGNMENT OF CONTRACT , Viewed October 27, 2022, View Source on SEC .

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What Is an Assignment Clause?

An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the contractual parties to another party. 3 min read updated on February 01, 2023

Updated October 29, 2020:

An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the contractual parties to another party. The assignment may be in whole or in part, and the clause also details the conditions under which a party can assign these duties.

U.S. law dictates that most contractual rights can be freely assigned or delegated, unless an agreement states otherwise.

The assignment clause often overlaps with two other clauses:

  • Parties in Interest
  • Successors and Assigns

These control who assumes contractual rights and obligations.

Legal Background and Freely Assignable Rights

When one party in a contract “assigns” the agreement to someone else, this means the first party — the assignor — transfers its contractual rights and obligations to the second party — the assignee.

In some instances, one party will not want the other contractual party to freely assign its duties. Contracts will then include language that states this.

One exception to the general assignability rule is intellectual property licenses . Legally, a licensor must first give consent before an IP licensee can assign or delegate its rights or obligations, even in the case where the license agreement is silent.

Requirements for Assignment Consent

There are different ways to say the same thing in a contract. Some people prefer lengthier statements, and others like to keep things brief. The following are various ways to make the same points.

  • One contractual party isn't allowed to assign its agreement to another person without prior written consent of the other contractual party, except as provided for in the contract. If an assignment is made without this consent, it won't be considered valid.
  • One party may not assign any interest or right arising out of this contract — in whole or in part — without prior consent.
  • To keep all doubts at bay, no consent is required for an assignment — including collateral, absolute, or other — for a contractual right to payment.

These are the takeaways from these stipulations:

  • This type of requirement for an assignment clause can create obstacles for the non-assigning party in corporate reorganizations or future mergers.
  • The party that's being asked to consent to an assignment clause requirement may want to negotiate its position. For instance, it may find negotiations helpful in a situation when the assignment involves a substantial sale.

A Party May Not Unreasonably Withhold or Delay Consent

It's not permissible to hold up consent to unreasonable delays.

Other ways to state this include:

  • To avoid doubt, a party that suffers damage due to the unreasonable delay or withholding of consent by the other party can treat them as direct damages.
  • To avoid doubt, damages that arise to one party from the unreasonable delay or withholding of consent by the other party aren't excluded from remedies.

Even when these provisions aren't in place, the law may still impose a reasonableness requirement. This requirement may not hold a lot of practical value, whether it's implied by the law or contractual. A reasonableness requirement can't guarantee that the non-assigning party will give consent when the assigning party wants it. By the time a case has worked its way through the court system to a decision, the deal that the assigning party was working on could have fallen through or otherwise be negated or moot.

However, this provision for unreasonable withholding should get the non-assigning party to carefully consider taking too much time due to the prospect of being held liable for damages. This can result in costly consequences.

On the other hand, having an unreasonable delay provision could create conflict with the provision concerning material breach of contract.

When you enter into a contract, it's important that you know what your rights and obligations are, as well as the other party's rights and obligations. If you don't want certain outcomes — assignment of duties, for instance — you must usually make it clear in the agreement. Getting help from a legal professional in the contract law field is a good idea when writing up a contract . That way, you increase the chances of covering everything you want covered, from the finer points to the bigger ones.

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Assignment provisions in contracts

Author’s note, Nov. 22, 2014: For a much-improved update of this page, see the Common Draft general provisions article .

(For more real-world stories like the ones below, see my PDF e-book, Signing a Business Contract? A Quick Checklist for Greater Peace of Mind , a compendium of tips and true stories to help you steer clear of various possible minefields. Learn more …. )

Table of Contents

Legal background: Contracts generally are freely assignable

When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor , has transferred its rights under the contract to someone else, known as the assignee , and also has delegated its obligations to the assignee.

Under U.S. law, most contract rights are freely assignable , and most contract duties are freely delegable, absent some special character of the duty, unless the agreement says otherwise. In some situations, however, the parties will not want their opposite numbers to be able to assign the agreement freely; contracts often include language to this effect.

Intellectual-property licenses are an exception to the general rule of assignability. Under U.S. law, an IP licensee may not assign its license rights, nor delegate its license obligations, without the licensor’s consent, even when the license agreement is silent. See, for example, In re XMH Corp. , 647 F.3d 690 (7th Cir. 2011) (Posner, J; trademark licenses); Cincom Sys., Inc. v. Novelis Corp. , 581 F.3d 431 (6th Cir. 2009) (copyright licenses); Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp. , 284 F.3d 1323 (Fed. Cir. 2002) (patent licenses). For additional information, see this article by John Paul, Brian Kacedon, and Douglas W. Meier of the Finnegan Henderson firm.

Assignment consent requirements

Model language

[Party name] may not assign this Agreement to any other person without the express prior written consent of the other party or its successor in interest, as applicable, except as expressly provided otherwise in this Agreement. A putative assignment made without such required consent will have no effect.

Optional: Nor may [Party name] assign any right or interest arising out of this Agreement, in whole or in part, without such consent.

Alternative: For the avoidance of doubt, consent is not required for an assignment (absolute, collateral, or other) or pledge of, nor for any grant of a security interest in, a right to payment under this Agreement.

Optional: An assignment of this Agreement by operation of law, as a result of a merger, consolidation, amalgamation, or other transaction or series of transactions, requires consent to the same extent as would an assignment to the same assignee outside of such a transaction or series of transactions.

• An assignment-consent requirement like this can give the non-assigning party a chokehold on a future merger or corporate reorganization by the assigning party — see the case illustrations below.

• A party being asked to agree to an assignment-consent requirement should consider trying to negotiate one of the carve-out provisions below, for example, when the assignment is connection with a sale of substantially all the assets of the assignor’s business {Link} .

Case illustrations

The dubai port deal (ny times story and story ).

In 2006, a Dubai company that operated several U.S. ports agreed to sell those operations. (The agreement came about because of publicity and political pressure about the alleged national-security implications of having Middle-Eastern companies in charge of U.S. port operations.)

A complication arose in the case of the Port of Newark: The Dubai company’s lease agreement gave the Port Authority of New York and New Jersey the right to consent to any assignment of the agreement — and that agency initially demanded $84 million for its consent.

After harsh criticism from political leaders, the Port Authority backed down a bit: it gave consent in return for “only” a $10 million consent fee, plus $40 million investment commitment by the buyer.

Cincom Sys., Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009) (affirming summary judgment)

A customer of a software vendor did an internal reorganization. As a result, the vendor’s software ended up being used by a sister company of the original customer. The vendor demanded that the sister company buy a new license. The sister company refused.

The vendor sued, successfully, for copyright infringement, and received the price of a new license, more than $450,000 as its damages. The case is discussed in more detail in this blog posting.

The vendor’s behavior strikes me as extremely shortsighted, for a couple of reasons: First, I wouldn’t bet much on the likelihood the customer would ever buy anything again from that vendor. Second, I would bet that the word got around about what the vendor did, and that this didn’t do the vendor’s reputation any good.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, No. 5589-VCP (Del. Ch. Apr. 8, 2011) (denying motion to dismiss).

The Delaware Chancery Court refused to rule out the possibility that a reverse triangular merger could act as an assignment of a contract, which under the contract terms would have required consent. See also the discussion of this opinion by Katherine Jones of the Sheppard Mullin law firm.

Assignment with transfer of business assets

Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party’s business.

Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party’s business to which this Agreement specifically relates.

Optional: The assignee must not be a competitor of the non-assigning party.

• A prospective assigning party might argue that it needed to keep control of its own strategic destiny, for example by preserving its freedom to sell off a product line or division (or even the whole company) in an asset sale.

• A non-assigning party might argue that it could not permit the assignment of the agreement to one of its competitors, and that the only way to ensure this was to retain a veto over any assignment.

• Another approach might be to give the non-assigning party, instead of a veto over asset-disposition assignments, the right to terminate the contract for convenience . (Of course, the implications of termination would have to be carefully thought through.)

Assignment to affiliate

[Either party] may assign this Agreement without consent to its affiliate.

Optional: The assigning party must unconditionally guarantee the assignee’s performance.

Optional: The affiliate must not be a competitor of the non-assigning party.

Optional: The affiliate must be a majority-ownership affiliate of the assigning party.

• A prospective assigning party might argue for the right to assign to an affiliate to preserve its freedom to move assets around within its “corporate family” without having to seek approval.

• The other party might reasonably object that there is no way to know in advance whether an affiliate-assignee would be in a position to fulfill the assigning party’s obligations under the contract, nor whether it would have reachable assets in case of a breach.

Editorial comment: Before approving a blanket affiliate-assignment authorization, a party should consider whether it knew enough about the other party’s existing- or future affiliates to be comfortable with where the agreement might end up.

Consent may not be unreasonably withheld or delayed

Consent to an assignment of this Agreement requiring it may not be unreasonably withheld or delayed.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are to be treated as direct damages.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are not subject to any exclusion of remedies or other limitation of liability in this Agreement.

• Even if this provision were absent, applicable law might impose a reasonableness requirement; see the discussion of the Shoney case in the commentary to the Consent at discretion provision.

• A reasonableness requirement might not be of much practical value, whether contractual or implied by law. Such a requirement could not guarantee that the non-assigning party would give its consent when the assigning party wants it. And by the time a court could resolve the matter, the assigning party’s deal could have been blown.

• Still, an unreasonable-withholding provision should make the non-assigning party think twice about dragging its feet too much, becuase of the prospect of being held liable for damages for a busted transaction. Cf. Pennzoil vs. Texaco and its $10.5 billion damage award for tortious interference with an M&A deal.

• Including an unreasonable-delay provision might conflict with the Materiality of assignment breach provision, for reasons discussed there in the summary of the Hess Energy case.

Consent at discretion

A party having the right to grant or withhold consent to an assignment of this Agreement may do so in its sole and unfettered discretion.

• If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include that in the contract language. Otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law (see the next bullet). On the other hand, asking for such language but not getting it could be fatal to the party’s case that it was implicitly entitled to withhold consent in its discretion.

• If a commercial- or residential lease agreement requires the landlord’s consent before the tentant can assign the lease, state law might impose a reasonableness requirement. I haven’t researched this, but ran across an unpublished California opinion and an old law review article, each collecting cases. See Nevada Atlantic Corp. v. Wrec Lido Venture, LLC, No. G039825 (Cal. App. Dec. 8, 2008) (unpublished; reversing judgment that sole-discretion withholding of consent was unreasonable); Paul J. Weddle, Pacific First Bank v. New Morgan Park Corporation: Reasonable Withholding of Consent to Commercial Lease Assignments , 31 Willamette L. Rev. 713 (1995) (first page available for free at HeinOnline ).

Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)

In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a proposed sublease. The supreme court noted that the contract specifically gave Shoney’s the right, in its sole discretion , to consent to any proposed assignment or sublease.

Significantly, prior case law from Alabama was to the effect that a refusal to consent would indeed be judged by a commercial-reasonableness standard. But, the supreme court said, “[w]here the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be construed as written.” Shoney’s LLC v. MAC East, LLC , No. 1071465 (Ala. Jul. 31, 2009) (on certification by Eleventh Circuit), cited by MAC East, LLC v. Shoney’s [LLC] , No. 07-11534 (11th Cir. Aug. 11, 2009), reversing No. 2:05-cv-1038-MEF (WO) (M.D. Ala. Jan. 8, 2007) (granting partial summary judgment that Shoney’s had breached the contract).

Termination by non-assigning party

A non-assigning party may terminate this Agreement, in its business discretion , by giving notice to that effect no later than 60 days after receiving notice, from either the assigning party or the assignee, that an assignment of the Agreement has become effective.

Consider an agreement in which a vendor is to provide ongoing services to a customer. A powerful customer might demand the right to consent to the vendor’s assignment of the agreement, even in strategic transactions. The vendor, on the other hand, might refuse to give any customer that kind of control of its strategic options.

A workable compromise might be to allow the customer to terminate the agreement during a stated window of time after the assignment if it is not happy with the new vendor.

Assignment – other provisions

Optional: Delegation: For the avoidance of doubt, an assignment of this Agreement operates as a transfer of the assigning party’s rights and a delegation of its duties under this Agreement.

Optional: Promise to perform: For the avoidance of doubt, an assignee’s acceptance of an assignment of this Agreement constitutes the assignee’s promise to perform the assigning party’s duties under the Agreement. That promise is enforceable by either the assigning party or by the non-assigning party.

Optional: Written assumption by assignee: IF: The non-assigning party so requests of an assignee of this Agreement; THEN: The assignee will seasonably provide the non-assigning party with a written assumption of the assignor’s obligations, duly executed by or on behalf of the assignee; ELSE: The assignment will be of no effect.

Optional: No release: For the avoidance of doubt, an assignment of this Agreement does not release the assigning party from its responsibility for performance of its duties under the Agreement unless the non-assigning party so agrees in writing.

Optional: Confidentiality: A non-assigning party will preserve in confidence any non-public information about an actual- or proposed assignment of this Agreement that may be disclosed to that party by a party participating in, or seeking consent for, the assignment.

The Delegation provision might not be necessary in a contract for the sale of goods governed by the Uniform Commercial Code, because a similar provision is found in UCC 2-210

The Confidentiality provision would be useful if a party to the agreement anticipated that it might be engaging in any kind of merger or other strategic transaction.

Materiality of assignment breach

IF: A party breaches any requirement of this Agreement that the party obtain another party’s consent to assign this Agreement; THEN: Such breach is to be treated as a material breach of this Agreement.

A chief significance of this kind of provision is that failure to obtain consent to assignment, if it were a material breach, would give the non-assigning party the right to terminate the Agreement.

If an assignment-consent provision requires that consent not be unreasonably withheld , then failure to obtain consent to a reasonable assignment would not be a material breach, according to the court in Hess Energy Inc. v. Lightning Oil Co. , No. 01-1582 (4th Cir. Jan. 18, 2002) (reversing summary judgment). In that case, the agreement was a natural-gas supply contract. The customer was acquired by a larger company, after which the larger company took over some of the contract administration responsibilities such as payment of the vendor’s invoices. The vendor, seeking to sell its gas to someone else at a higher price, sent a notice of termination, on grounds that the customer had “assigned” the agreement to its new parent company, in violation of the contract’s assignment-consent provision. The appeals court held that, even if the customer had indeed assigned the contract (a point on which it expressed considerable doubt) without consent, the resulting breach of the agreement was not material, and therefore the vendor did not have the right to terminate the contract.

See also (list is generated automatically) :

  • Notebook update: Reverse triangular merger might be an assignment of a contract, requiring consent Just updated the Notebook with a citation to a case in which the Delaware Chancery Court refused to rule out the possibility that a reverse...
  • Assignment-consent requirements can cause serious problems in future M&A transactions A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a...
  • SCOTX rejects implied obligation not to unreasonably withhold consent to assignment of contract In a recent Texas case, two sophisticated parties in the oil and gas busi­ness — let’s call them Alpha and Bravo — were negotiating a contract....
  • Ken Adams and the marketplace of ideas I (used to) comment occasionally at Ken Adams’s blog. Recent examples: Here, here, here, here, and here. Ken and I disagree on a number of issues; some...

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contractual assignment definition

Assignment Clause and Anti-Assignment Clause in Contracts

An assignment clause is a contractual provision that outlines the rights and responsibilities of the parties involved when transferring rights, benefits, or obligations under a contract to a third party. The assignment of contractual rights and obligations can significantly impact the contractual relationship between the original parties. Here we discuss the assignment clause, its difference from an anti-assignment clause, and provide examples of how commercial contracts handle these provisions.

Assignment Clause

An assignment clause in a contract permits one party to assign or transfer its rights, benefits, or obligations to a third party, with or without the consent of the other party. The clause typically specifies the conditions and procedures for assignment, including notice requirements, and any limitations on the assignee's rights or obligations. Assignments can be useful in situations where a party's financial or operational circumstances change, or when a party wishes to bring in a new participant to the contract.

Example 1 - Assignment with Consent:

"Party A may assign its rights and obligations under this Agreement to a third party, provided that Party A obtains the prior written consent of Party B, which consent shall not be unreasonably withheld or delayed."

This example demonstrates a straightforward assignment clause that requires the consent of the non-assigning party before an assignment can take place.

Anti-Assignment Clause

An anti-assignment clause, on the other hand, prohibits or restricts a party from assigning its rights, benefits, or obligations under a contract to a third party. This type of clause is used to maintain control over the contractual relationship and ensure that the original parties continue to perform their respective obligations. An anti-assignment clause provides a safeguard against unforeseen issues or risks that may arise if a third party with different capabilities, resources, or intentions were to assume the contract rights and obligations.

Example 2 - Anti-Assignment Clause:

"Neither Party may assign, delegate, or otherwise transfer its rights or obligations under this Agreement without the prior written consent of the other Party. Any attempted assignment, delegation, or transfer without such consent shall be deemed null and void."

This example illustrates an anti-assignment clause that prevents either party from assigning their rights or obligations without the other party's consent, rendering any unauthorized assignment void.

Difference between Assignment and Anti-Assignment Clauses

The primary difference between an assignment clause and an anti-assignment clause lies in the permissibility of assigning rights and obligations to a third party. An assignment clause allows for the assignment or transfer, while an anti-assignment clause restricts or prohibits such actions.

How to manage clauses like these effectively?

Check out Clause Library implementation from ContractKen. It has a really smooth, easy to use interface which allows for easy curation, management, tagging, commenting and retrieval (from Microsoft Word) of your clauses.

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Case studies.

contractual assignment definition

Assignment and assumption agreement—How-to guide

Find out more about business management

contractual assignment definition

by   LegalZoom staff

Read more...

Updated on: February 15, 2024 · 5min read

1. Overview

  • 2. Do's & don’ts checklist

3. Assignment and assumption agreement instructions

After a contract has been signed, a change in business climate or in a party’s liquidity can necessitate an assignment of that agreement. If both of the original parties agree to the change and sign documents transferring existing interests and obligations, an agreement can be assigned and assumed by a third party.

A company can lose its footing in the marketplace, or local laws can leave one party unable to complete its obligations under an agreement. Rather than leave parties shackled to a dated or impractical agreement, an assignment allows for the substitution of parties better able to respond to a contract’s goals and requirements. The assignment process itself allows for continuing dialogue between the parties, a fact that develops and solidifies successful business relationships.

This package contains everything you’ll need to assign your agreement and have it assumed by a third party. A written assignment minimizes confusion, misunderstanding, and error and sets forth all of the parties’ expectations and fulfillment obligations. In every way, this promotes successful and profitable business arrangements and allows a company to extract itself gracefully from an unfeasible situation. 

2. Do's & don’ts checklist

  • Read the original agreement to make sure that you and the other party have complied with all of its requirements for assignments and assumptions. Some contracts have specific rules about what types of assignments will be permitted, to whom, and how the process should work.
  • Allow each party to spend some time reviewing both the original agreement and the assignment. This will reduce the likelihood, or at least the efficacy, of a claim that a party did not understand any terms or how those might affect the agreement or their rights and responsibilities. 
  • Both parties should review the assignment carefully to ensure that all relevant deal points have been included. It is better to be over-inclusive than under-inclusive. Do not assume that certain expectations or terms are agreed to if they are not stated expressly in the document.
  • The terms of the original agreement are still in effect, so make sure both original parties continue to perform their obligations under that contract until the assignment is completed and signed.
  • Sign three copies of the assignment, one for you and one for each of the other parties.
  • Keep your copy of the signed assignment with the original agreement it modified. Once the assignment is drafted and signed, it is part of the original agreement and should be treated accordingly.
  • Depending on the nature of its terms, you may decide to have your assignment witnessed or notarized. This will limit later challenges to the validity of a party’s signature. 
  • If your assignment is complicated, do not use the enclosed form. Contact an attorney to help you draft a document that will meet your specific needs. 

The following provision-by-provision instructions will help you understand the terms of your assignment and assumption agreement. The numbers below (e.g., Section 1, Section 2, etc.) correspond to the provisions in the contract. Please review the document in its entirety before starting the step-by-step process. 

  • Introduction. Identifies the document as the assignment and assumption of an existing agreement. Write in the date on which the original agreement was signed. Identify the parties and the date of the amendment. The Assignor must be the same as one of the parties who signed the original agreement (unless the new signer is an agent of that same company).
  • Recitals. Identifies the existing agreement that’s being modified and explains where the parties’ right to assign the document comes from. Put in the effective date of the original agreement and the section number of that agreement that allows you to assign it. The title of this section is usually “Assignments” or “Modifications.”
  • Section 1: Assignment. The party that is assigning its interest indicates here that this is its desire.
  • Section 2: Assumption. The party that is accepting the assignment indicates here that it is willing to take on (“assume”) those rights and responsibilities.
  • Section 3: Company’s consent and release. The consent of the other original party to the assignment and assumption.
  • Section 4: Inconsistency. Indicates that if there is a conflict between the assignment language and the language of the original agreement, the assignment language will be the final word on the question.
  • Section 5: Agreement continuance. This serves as an “affirmation” of the original agreement. In other words, the only things that change in the original agreement are the parties that have assigned their interest. All of the other terms of the original agreement remain effective. 
  • Section 6: Indemnification. This provision allocates responsibilities among all of the parties. Essentially, it says that the Assignor is responsible for things that happened before the assignment’s effective date, and the Assignee is responsible for things that happened after the assignment’s effective date.
  • Section 7: No release. An explanation that even if one party is assigning its interest, the other party to the original agreement can still hold that party liable for its actions before the assignment.
  • Section 8: Modification. Indicates that any changes to the document will be in writing and signed by all of the parties.
  • Section 9: Authority. A promise that the parties signing the agreement have the right and power to do so. 
  • Section 10: Governing law. Your original agreement probably includes a choice-of-law provision that governs what laws will be used to interpret it. If it does not, this section allows the parties to choose those laws. Note that this is not a venue provision: the included language will not impact where a potential claim can be brought.
  • Section 11: Counterparts/electronic signatures. The title of this provision sounds complicated, but it is simple to explain. It says that even if the parties sign the assignment in different locations, or use electronic devices to transmit signatures (e.g., fax machines or computers), all of the separate pieces will be considered part of the same agreement. In a modern world where signing parties are often not in the same city—much less the same room—this provision ensures that business can be transacted efficiently without sacrificing the validity of the agreement as a whole.
  • Section 12: Severability. Protects the terms of the agreement as a whole, even if one part is later invalidated. 
  • Section 13: Entire agreement. The parties’ agreement that the assignment they’re signing (when taken together with the original agreement) is “the agreement” about the issues involved. Unfortunately, the inclusion of this provision will not prevent a party from arguing that other enforceable promises exist, but it will provide you some protection from these claims.
  • Section 14: Headings. Notes that the headings at the beginning of each section are meant to organize the document and should not be considered operational parts of the agreement.

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Practical Law UK Glossary 1-107-6442  (Approx. 4 pages)

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  • Security and Quasi Security

§ 2-210. Delegation of Performance; Assignment of Rights.

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(1) A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract . No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.

(2) Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract , or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreement otherwise.

(3)Unless the circumstances indicate the contrary a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the assignor's performance.

(4) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract .

(5) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (Section 2-609 ).

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contractual assignment definition

Understanding what defines a contract

March 1, 2024 · 6 minute read

Contracts are crucial legal agreements shaping relationships in various aspects of life, defining obligations, and offering legal protection.

This blog is part of the “Contract Law” series.

contractual assignment definition

Contracts are the foundation of many personal and professional arrangements. One would be hard-pressed to find a legal pro who is not expected to deal with the documents in at least some capacity, and moreover, it is also very common for the non-legal community to enter into these arrangements regularly with respect to everything from renting an apartment to purchasing insurance.

Contracts, and the laws associated with their governance, are important to understand as they are the bedrock of the relationships between companies, employees, clients, and their associates. Knowing exactly what contracts are, how they work, and understanding their various roles in our day-to-day lives, will help law firms and businesses create better, more effective documents.

To better understand the essence of a contract agreement, it is helpful to break down some of the key elements that comprise their common forms. It is equally helpful to consider the different categories they may fall under and parse through some of the particulars of those categories. Here, you will find an overview of those elements and categories along with important helpful resources to create air-tight, effective, and enforceable legal agreements.

First, it will be helpful to define the term and answer the question, “What exactly is a contract?” A contract is a formal, legally binding agreement between two parties. This agreement creates “mutual obligations that are enforceable by law.”

In most cases, contact law calls for this agreement to be expressed with an offer, and then several other elements must be satisfied to complete the process. A few of the many different types of relationships a contract might be used to create include:

  • Mortgage agreements
  • Lease agreements
  • Online purchases
  • Sign-up agreements
  • Promissory notes

Key elements of a contract

Legally valid, binding contracts usually have several important facets. The individual elements of a contract can be broken down into six general components. Those components are offer ,  consideration ,  acceptance ,  mutuality, and among others.

  • Offer – One party promising to do something, or conversely, promising to refrain from doing a particular action
  • Acceptance – The unambiguous nature by which an agreement is solidified. This may be done verbally, or through performance or deed
  • Awareness – Both parties acknowledge the contract agreement exists
  • Consideration – When something of value is offered in exchange for the above-stated action or inaction; the value that induces the parties to enter into the contract
  • Capacity – Individuals must have the ability to reasonably understand what entering a contract agreement means; individuals compromised by, for example, alcohol, may be found to lack capacity with respect to contract law
  • Legality – Also referred to as mutuality , valid contracts must fall in line with existing laws

Different types of contracts

There are several different types of contracts, and those types vary based on the details of the relationship between the parties involved. Different contract types create different relationship dynamics. Below is a list of some common forms a contract might take, and some of the ways those contracts can shape the relationship between parties.

Some common contract genres are as follows:

  • Adhesion – These are negotiated between parties of uneven bargaining strength
  • Unilateral – When one entity makes a promise to another based on a given set of circumstances taking place
  • Bilateral – When both parties make a promise in order to fulfill the terms of a given agreement
  • Aleatory – An agreement in which the effects depend on an uncertain event
  • Fixed-Price – An agreement between a buyer and seller who each agree in advance on what constitutes full payment for services and supplies provided in a contract
  • Cost-Reimbursement – Used when the amount of work cannot be described in definite terms, or it is difficult to estimate the costs with any degree of reasonable certainty

What happens when a contract is breached?

Unfortunately, sometimes parties challenge the existence of a valid contract or the specific terms and clauses included in the agreement. Perhaps there are concerns with the drafting process, or perhaps there were concerns with the way a contract agreement was negotiated.

Parties frequently accuse one another of misrepresentation with respect to these considerations. When that happens, these disagreements require some form of arbitration or adjudication. Those disagreements can lead to an accusation of a “breach of contract.”

A breach of contract is “a failure, without legal excuse, to perform any promise that forms all or part of the contract. This includes failure to perform in a manner that meets the standards of the industry or the requirements.”

Special contract considerations

Sometimes contract agreements have special considerations or features setting them apart from more common types of contracts. For example, non-disclosure agreements and confidentiality clauses are sometimes included in contract agreements when the information being shared with one or more of the parties is not intended for public consumption.

Depending on the particular set of circumstances surrounding the relationship in question, these additional considerations can be either free-standing, which comes in the form of a non-disclosure agreement, or in the form of clauses included as part of a broader contract agreement.

Other contracts include “ indemnification clauses ,” which are often included in commercial contracts. These clauses involve the purported indemnifying party agreeing to compensate the other party—this individual is referred to as indemnified—for costs and expenses potentially stemming from the actions of a separate third party.

No matter what type of contract you are planning to draft, it is helpful to consider if a Contract Lifecycle Management system would be beneficial. Drafting contracts is an important function for enterprises of all shapes and sizes, and having a plan in place to manage the contract process from start to finish might be especially useful for entities engaging in new business arrangements, or even ones hoping to more formally codify existing ones. HighQ, for example, is one such management system that has shown to be highly effective for legal professionals looking to increase productivity, collaborate with others, share insights, and engage with colleagues and clients in a more effective manner.

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  1. What is the Assignment of Contract? Know Everything about it

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COMMENTS

  1. Assignment of Contract: What Is It? How It Works

    An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the ...

  2. What Is an Assignment of Contract?

    An assignment of contract occurs when one party to an existing contract (the "assignor") hands off the contract's obligations and benefits to another party (the "assignee"). Ideally, the assignor wants the assignee to step into his shoes and assume all of his contractual obligations and rights. In order to do that, the other party to the ...

  3. What Is an Assignment of Contract?

    Assignment of contract means the contract and the property, rights, or obligations within it can be assigned to another party. An assignment of contract clause can typically be found in a business contract. This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark, and copyright ...

  4. Assignments: The Basic Law

    The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

  5. assignment

    Assignment is a legal term whereby an individual, the "assignor," transfers rights, property, or other benefits to another known as the " assignee .". This concept is used in both contract and property law. The term can refer to either the act of transfer or the rights /property/benefits being transferred.

  6. Understanding an assignment and assumption agreement

    The assignment and assumption agreement. An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting ...

  7. Assignment Clause: Meaning & Samples (2022)

    Assignment Clause Examples. Examples of assignment clauses include: Example 1. A business closing or a change of control occurs. Example 2. New services providers taking over existing customer contracts. Example 3. Unique real estate obligations transferring to a new property owner as a condition of sale. Example 4.

  8. What is a Contract Assignment? Definition

    A contract assignment is a legal agreement between two parties that assigns rights and responsibilities to one party. The assignee agrees to take on the duties of the contract, while the assignor transfers their rights under the contract to the assignee. This type of agreement is often used in business deals or when one party wants to transfer ...

  9. Assignability Of Contracts: Everything You Need to Know

    As long as you're free to assign the contract, prepare and enter into the assignment, which is basically an agreement transferring your rights and obligations. Notify the obligor, or the non-transferring party. After you assign contract rights to the assignee, notify the other party that was the original contractor, also known as the obligor.

  10. Assignment of Rights and Obligations Under a Contract

    An assignment of rights and obligations under a contract occurs when a party assigns their contractual rights to a third party. The benefit that the issuing party would have received from the contract is now assigned to the third party. The party appointing their rights is referred to as the assignor, while the party obtaining the rights is the ...

  11. 6.4: Assignment, Delegation, and Commonly Used Contracts Clauses

    Exercise 6.4.1 6.4. 1. Learning Objectives. Learn about assignment and delegation. Examine novation. Explore restrictions on assignment, exculpatory clauses, noncompete clauses, mandatory arbitration clauses, acceleration clauses, and liquidated damages clauses. Explore the parol evidence rule.

  12. Contract Assignment Agreement: Definition & Sample

    A contract assignment agreement is a document that transfers the contractual rights and duties of one party to another. The other party involved in the contract must agree to the terms of the transfer as well as they will now be in a contractual agreement with a different party. Contract of assignment agreements must not violate any other laws ...

  13. What Is an Assignment Clause?

    An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the contractual parties to another party. The assignment may be in whole or in part, and the clause also details the conditions under which a party can assign these duties. U.S. law dictates that most contractual rights can be freely ...

  14. Assigning a contract

    A contract will usually contain provisions concerning assignment. The contract may: allow an assignment but only by agreement between the parties. allow either party to assign to any new (third) party whenever they wish. If the contract is silent on the subject, it is better to obtain the agreement of the existing parties before assignment ...

  15. Assignment of Contract

    A contract is a verbal or written agreement between two parties. An assignment of contract is defined as the handing off of an existing contract's obligations and/or benefits to another party ...

  16. Assignment provisions in contracts

    When a party to a contract " assigns " the contract to someone else, it means that party, known as the assignor, has transferred its rights under the contract to someone else, known as the assignee, and also has delegated its obligations to the assignee. Under U.S. law, most contract rights are freely assignable, and most contract duties ...

  17. What is a Contract Assignment?

    Definition of Contract Assignment. Before diving into the intricacies of contract assignment, it's crucial to establish a clear understanding of what it entails. In simple terms, a contract assignment refers to the process of transferring contractual obligations from one party to another. This is done by legally assigning the rights and ...

  18. Assignment: Detailed definition

    An assignment clause is a contractual provision that outlines the rights and responsibilities of the parties involved when transferring rights, benefits, or obligations under a contract to a third party. The assignment of contractual rights and obligations can significantly impact the contractual relationship between the original parties.

  19. assign

    Assign is the act of transferring rights, property, or other benefits to another party (the assignee) from the party who holds such benefits under contract (the assignor). This concept is used in both contract and property law. Contract Law Under contract law, when one party assigns a contract, the assignment represents both: (1) an assignment of rights; and (2) a delegation of duties.

  20. Assignment and assumption agreement—How-to guide

    Put in the effective date of the original agreement and the section number of that agreement that allows you to assign it. The title of this section is usually "Assignments" or "Modifications.". Section 1: Assignment. The party that is assigning its interest indicates here that this is its desire. Section 2: Assumption.

  21. Assignment

    Assignment. The transfer of a right from one party to another. For example, a party to a contract (the assignor) may, as a general rule and subject to the express terms of a contract, assign its rights under the contract to a third party (the assignee) without the consent of the party against whom those rights are held.

  22. Assignment (law)

    Assignment is a legal term used in the context of the laws of contract and of property.In both instances, assignment is the process whereby a person, the assignor, transfers rights or benefits to another, the assignee. An assignment may not transfer a duty, burden or detriment without the express agreement of the assignee.

  23. § 2-210. Delegation of Performance; Assignment of Rights

    (4) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the ...

  24. Assignment and novation

    Like assignment, novation transfers the benefits under a contract but unlike assignment, novation transfers the burden under a contract as well. In a novation the original contract is extinguished and is replaced by a new one in which a third party takes up rights and obligations which duplicate those of one of the original parties to the ...

  25. What is a contract?

    There are several different types of contracts, and those types vary based on the details of the relationship between the parties involved. Different contract types create different relationship dynamics. Below is a list of some common forms a contract might take, and some of the ways those contracts can shape the relationship between parties.