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Ultimate Checklist for Understanding Contract Assignment Rules

• February 28, 2024
• Moton Legal Group

In contracts, understanding assignment is key. Simply put, an assignment in contract law is when one party (the assignor) transfers their rights and responsibilities under a contract to another party (the assignee). This can include anything from leasing agreements to business operations. But why is this important? It’s because it allows for flexibility in business and personal dealings, a critical component in our world.

Here’s a quick rundown: – Contract Basics: The foundational agreements between parties. – Assignment Importance: Allowing the transfer of obligations and benefits to keep up with life’s changes.

Contracts are a staple in both personal and business worlds, acting as the backbone to many transactions and agreements encountered daily. Understanding the nuances, like assignments, can empower you to navigate these waters with confidence and ease. Whether you’re a business owner in the Southeast looking to expand or an individual managing personal agreements, grasp these basics, and you’re on the right path.

Understanding Contract Assignment

Contract Assignment sounds complicated, right? But, let’s break it down into simple terms. In contracts and legal agreements, knowing about assignment can save you a lot of headaches down the road. Whether you’re a business owner, a landlord, or just someone who deals with contracts, this is for you.

Legal Definition

At its core, contract assignment is about transferring rights or obligations under a contract from one party to another. Think of it as passing a baton in a relay race. The original party (the assignor) hands off their responsibilities or benefits to someone else (the assignee). But, there’s a twist – the race keeps going with the new runner without starting over.

Contract Law

In contract law, assignment comes into play in various ways. For example, if you’re a freelancer and you’ve agreed to complete a project but suddenly find yourself overbooked, you might assign that contract to another freelancer. This way, the job gets done, and your client is happy. However, not all contracts can be freely assigned. Some require the other party’s consent, and others can’t be assigned at all, especially if they involve personal skills or confidential trust.

Property Law

When it comes to property law, assignment often surfaces in landlord-tenant relationships. Say you’re renting a shop for your business, but you decide to move. If your lease allows it, you might assign your lease to another business. This means they take over your lease, stepping into your shoes, with all the rights and obligations that come with it.

The concept might seem straightforward, but there are important legal requirements and potential pitfalls to be aware of. For instance, an assignment could be prohibited by the contract itself, or it may significantly change the original deal’s terms in a way that’s not allowed. Plus, when you’re dealing with something that requires a unique skill set, like an artist or a consultant, those services typically can’t be passed on to someone else without agreement from all parties involved.

To navigate these complexities, understanding the fundamentals of assignment in contract law and property law is crucial. It ensures that when you’re ready to pass that baton, you’re doing it in a way that’s legal, effective, and doesn’t leave you tripping up before you reach the finish line.

The goal here is to make sure everyone involved understands what’s happening and agrees to it. That way, assignments can be a useful tool to manage your contracts and property agreements, keeping things moving smoothly even when changes come up.

For more detailed exploration on this topic, consider checking the comprehensive guide on Assignment (law)). This resource dives deeper into the nuances of contract assignment, offering insights and examples that can help clarify this complex area of law.

By grasping these basics, you’re well on your way to mastering the art of contract assignment. Whether you’re dealing with leases, business deals, or any agreement in between, knowing how to effectively assign a contract can be a game-changer.

Key Differences Between Assignment and Novation

When diving into contracts, two terms that often cause confusion are assignment and novation . While both deal with transferring obligations and rights under a contract, they are fundamentally different in several key aspects. Understanding these differences is crucial for anyone involved in contract management or negotiation.

Rights Transfer

Assignment involves the transfer of benefits or rights from one party (the assignor) to another (the assignee). However, it’s important to note that only the benefits of the contract can be assigned, not the burdens. For instance, if someone has the right to receive payments under a contract, they can assign this right to someone else.

Novation , on the other hand, is more comprehensive. It involves transferring both the rights and obligations under a contract from one party to a new party. With novation, the original party is completely released from the contract, and a new contractual relationship is formed between the remaining and the new party. This is a key distinction because, in novation, all parties must agree to this new arrangement.

Obligations Transfer

Assignment doesn’t transfer the original party’s obligations under the contract. The assignor (the original party who had the rights under the contract) might still be liable if the assignee fails to fulfill the contract terms.

In contrast, novation transfers all obligations to the new party. Once a novation is complete, the new party takes over all rights and obligations, leaving the original party with no further legal liabilities or rights under the contract.

Written Agreement

While assignments can sometimes be informal or even verbal, novation almost always requires a written agreement. This is because novation affects more parties’ rights and obligations and has a more significant impact on the contractual relationship. A written agreement ensures that all parties are clear about the terms of the novation and their respective responsibilities.

In practice, the need for a written agreement in novation serves as a protection for all parties involved. It ensures that the transfer of obligations is clearly documented and legally enforceable.

For example, let’s say Alex agrees to paint Bailey’s house for $1,000. Later, Alex decides they can’t complete the job and wants Chris to take over. If Bailey agrees, they can sign a novation agreement where Chris agrees to paint the house under the same conditions. Alex is then relieved from the original contract, and Chris becomes responsible for completing the painting job.

Understanding the difference between assignment and novation is critical for anyone dealing with contracts. While both processes allow for the transfer of rights or obligations, they do so in different ways and with varying implications for all parties involved. Knowing when and how to use each can help ensure that your contractual relationships are managed effectively and legally sound.

For further in-depth information and real-life case examples on assignment in contract law, you can explore detailed resources such as Assignment (law) on Wikipedia).

Next, we’ll delve into the legal requirements for a valid assignment, touching on express prohibition, material change, future rights, and the rare skill requirement. Understanding these will further equip you to navigate the complexities of contract assignments successfully.

Legal Requirements for a Valid Assignment

When dealing with assignment in contract law , it’s crucial to understand the legal backbone that supports a valid assignment. This ensures that the assignment stands up in a court of law if disputes arise. Let’s break down the must-know legal requirements: express prohibition, material change, future rights, and rare skill requirement.

Express Prohibition

The first stop on our checklist is to look for an express prohibition against assignment in the contract. This is a clause that outright states assignments are not allowed without the other party’s consent. If such language exists and you proceed with an assignment, you could be breaching the contract. Always read the fine print or have a legal expert review the contract for you.

Material Change

Next up is the material change requirement. The law states that an assignment cannot significantly alter the duties, increase the burdens, or impair the chances of the other party receiving due performance under the contract. For instance, if the contract involves personal services tailored to the specific party, assigning it to someone else might change the expected outcome, making such an assignment invalid.

Future Rights

Another important aspect is future rights . The rule here is straightforward: you can’t assign what you don’t have. This means that a promise to assign rights you may acquire in the future is generally not enforceable at present. An effective assignment requires that the rights exist at the time of the assignment.

Rare Skill Requirement

Lastly, let’s talk about the rare skill requirement . Some contracts are so specialized that they cannot be assigned to another party without compromising the contract’s integrity. This is often the case with contracts that rely on an individual’s unique skills or trust. Think of an artist commissioned for a portrait or a lawyer hired for their specialized legal expertise. In these scenarios, assignments are not feasible as they could severely impact the contract’s intended outcome.

Understanding these legal requirements is pivotal for navigating the complexities of assignment in contract law. By ensuring compliance with these principles, you can effectively manage contract assignments, safeguarding your interests and those of the other contracting party.

For anyone looking to delve deeper into the intricacies of contract law, you can explore detailed resources such as Assignment (law) on Wikipedia).

Moving forward, we’ll explore the common types of contract assignments, from landlord-tenant agreements to business contracts and intellectual property transfers. This will give you a clearer picture of how assignments work across different legal landscapes.

Common Types of Contract Assignments

When we dive into assignment in contract law , we find it touches nearly every aspect of our business and personal lives. Let’s simplify this complex topic by looking at some of the most common types of contract assignments you might encounter.

Landlord-Tenant Agreements

Imagine you’re renting a fantastic apartment but have to move because of a new job. Instead of breaking your lease, you can assign your lease to someone else. This means the new tenant takes over your lease, including rent payments and maintenance responsibilities. However, it’s crucial that the landlord agrees to this switch. If done right, it’s a win-win for everyone involved.

Business Contracts

In the business world, contract assignments are a daily occurrence. For example, if a company agrees to provide services but then realizes it’s overbooked, it can assign the contract to another company that can fulfill the obligations. This way, the project is completed on time, and the client remains happy. It’s a common practice that ensures flexibility and efficiency in business operations.

Intellectual Property

Intellectual property (IP) assignments are fascinating and complex. If an inventor creates a new product, they can assign their patent rights to a company in exchange for a lump sum or royalties. This transfer allows the company to produce and sell the invention, while the inventor benefits financially. However, it’s critical to note that with trademarks, the goodwill associated with the mark must also be transferred to maintain its value.

Understanding these types of assignments helps clarify the vast landscape of contract law. Whether it’s a cozy apartment, a crucial business deal, or a groundbreaking invention, assignments play a pivotal role in ensuring these transitions happen smoothly.

As we navigate through the realm of contract assignments, each type has its own set of rules and best practices. The key is to ensure all parties are on the same page and that the assignment is executed properly to avoid any legal pitfalls.

Diving deeper into the subject, next, we will explore how to execute a contract assignment effectively, ensuring all legal requirements are met and the process runs as smoothly as possible.

How to Execute a Contract Assignment Effectively

Executing a contract assignment effectively is crucial to ensure that all legal requirements are met and the process runs smoothly. Here’s a straightforward guide to help you navigate this process without any hiccups.

Written Consent

First and foremost, get written consent . This might seem like a no-brainer, but it’s surprising how often this step is overlooked. If the original contract requires the consent of the other party for an assignment to be valid, make sure you have this in black and white. Not just a handshake or a verbal agreement. This ensures clarity and avoids any ambiguity or disputes down the line.

Notice of Assignment

Next up, provide a notice of assignment to all relevant parties. This is not just common courtesy; it’s often a legal requirement. It informs all parties involved about the change in the assignment of rights or obligations under the contract. Think of it as updating your address with the post office; everyone needs to know where to send the mail now.

Privity of Estate

Understanding privity of estate is key in real estate transactions and leases. It refers to the legal relationship that exists between parties under a contract. When you assign a contract, the assignee steps into your shoes, but the original terms of the contract still apply. This means the assignee needs to be aware of and comply with the original agreement’s requirements.

Secondary Liability

Lastly, let’s talk about secondary liability . Just because you’ve assigned a contract doesn’t always mean you’re off the hook. In some cases, the original party (the assignor) may still hold some liability if the assignee fails to perform under the contract. It’s essential to understand the terms of your assignment agreement and whether it includes a release from liability for the assignor.

Executing a contract assignment effectively is all about dotting the I’s and crossing the T’s . By following these steps—securing written consent, issuing a notice of assignment, understanding privity of estate, and clarifying secondary liability—you’re setting yourself up for a seamless transition.

The goal is to ensure all parties are fully informed and agreeable to the changes being made. This not only helps in maintaining good relationships but also in avoiding potential legal issues down the line.

We’ll dive into some of the frequently asked questions about contract assignment to clear any lingering doubts.

Frequently Asked Questions about Contract Assignment

When navigating contracts, questions often arise, particularly about the concepts of assignment and novation. Let’s break these down into simpler terms.

What does assignment of a contract mean?

In the realm of assignment in contract law , think of assignment as passing the baton in a relay race. It’s where one party (the assignor) transfers their rights and benefits under a contract to another party (the assignee). However, unlike a relay race, the original party might still be on the hook for obligations unless the contract says otherwise. It’s like handing off the baton but still running alongside the new runner just in case.

Is an assignment legally binding?

Absolutely, an assignment is as binding as a pinky promise in the playground – but with legal muscle behind it. Once an assignment meets the necessary legal criteria (like not significantly changing the obligor’s duties or having express consent if required), it’s set in stone. This means both the assignee and the assignor must honor this transfer of rights or face potential legal actions. It’s a serious commitment, not just a casual exchange.

What is the difference between assignment and novation?

Now, this is where it gets a bit more intricate. If assignment is passing the baton, novation is forming a new team mid-race. It involves replacing an old obligation with a new one or adding a new party to take over an old one’s duties. Crucially, novation extinguishes the old contract and requires all original and new parties to agree. It’s a clean slate – the original party walks away, and the new party steps in, no strings attached.

While both assignment and novation change the playing field of a contract, novation requires a unanimous thumbs up from everyone involved, completely freeing the original party from their obligations. On the other hand, an assignment might leave the original party watching from the sidelines, ready to jump back in if needed.

Understanding these facets of assignment in contract law is crucial, whether you’re diving into a new agreement or navigating an existing one. Knowledge is power – especially when it comes to contracts.

As we wrap up these FAQs, the legal world of contracts is vast and sometimes complex, but breaking it down into bite-sized pieces can help demystify the process and empower you in your legal undertakings.

Here’s a helpful resource for further reading on the difference between assignment and cession.

Now, let’s continue on to the conclusion to tie all these insights together.

Navigating assignment in contract law can seem like a daunting task at first glance. However, with the right information and guidance, it becomes an invaluable tool in ensuring that your rights and obligations are protected and effectively managed in any contractual relationship.

At Moton Legal Group, we understand the intricacies of contract law and are dedicated to providing you with the expertise and support you need to navigate these waters. Whether you’re dealing with a straightforward contract assignment or facing more complex legal challenges, our team is here to help. We pride ourselves on our ability to demystify legal processes and make them accessible to everyone.

The key to successfully managing any contract assignment lies in understanding your rights, the obligations involved, and the potential impacts on all parties. It’s about ensuring that the assignment is executed in a way that is legally sound and aligns with your interests.

If you’re in need of assistance with a contract review, looking to understand more about how contract assignments work, or simply seeking legal advice on your contractual rights and responsibilities, Moton Legal Group is here for you. Our team of experienced attorneys is committed to providing the clarity, insight, and support you need to navigate the complexities of contract law with confidence.

For more information on how we can assist you with your contract review and other legal needs, visit our contract review service page .

In the constantly evolving landscape of contract law, having a trusted legal partner can make all the difference. Let Moton Legal Group be your guide, ensuring that your contractual dealings are handled with the utmost care, professionalism, and expertise. Together, we can navigate the complexities of contract law and secure the best possible outcomes for your legal matters.

Thank you for joining us on this journey through the fundamentals of assignment in contract law. We hope you found this information helpful and feel more empowered to handle your contractual affairs with confidence.

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“Representations,” “warranties” and “covenants” are so common in contracts that the words are likely to be overlooked. They appear not only as nouns, but as verb forms as well. Sometimes there is a separate section for each word, implying that they have distinct meanings. Often they are grouped together as “represents and warrants” or “represents, warrants and covenants.” Unfortunately, these repetitious phrases blur their meanings. Their imprecise use does not frequently result in litigation, but there’s much to be said for reducing redundancy and ambiguity.

These words are basic building blocks of contracts and have a long history. Each has traditionally had a distinct meaning and purpose. The key difference among these words is temporal – past and present for representations; past, present, but mainly future for warranties; and mainly future for covenants. The remedies for a false representation, breach of a warranty or violation of a covenant also have differed. Giving attention when drafting or editing a contract to their backgrounds and the traditional distinctions among them will promote clarity.

Representations

In traditional usage, a representation precedes and induces a contract. It is information by which a contracting party decides whether to proceed with the contract. A representation is an express or implied statement that one party to the contract makes to the other before or at the time the contract is entered into regarding a past or existing fact. An example might be that a seller of equipment represents that no notice of patent infringement had been received.

A representation traditionally was not part of a contract, and a claim for damages due to a misrepresentation generally would not be allowed. Instead, a claim that a misrepresentation induced a contract might be pursued in fraud, either to rescind the contract or for damages. In some instances, a claim might be based on the tort of negligent misrepresentation.

If a representation was included as part of a contract, it typically would function as a “condition” or “warranty.” A condition is a vital term going to the root of the contract (for example, that a lawyer hired under an employment agreement must be licensed to practice law), which, if the condition were false, would entitle the employer to repudiate the contract. In contrast, a representation in a contract might be a “warranty,” which would be an independent, subsidiary promise that did not go to the root of the contract (such as that the lawyer claims to always wear a suit to the office), and, if false, might give rise only to a claim for damages.

Warranties generally are promises that appear on the face of the contract. They are important parts of the contract, requiring strict compliance. Warranties may include representations, agreements or promises that a proposition of fact is true at the time of the contract and will be true in the future. A warranty provides that something in furtherance of the contract is guaranteed by a contracting party, often to give assurances that a product is as promised. It often is equivalent in effect to a promise that the warranting party will indemnify the other if the assurances are not satisfied.

Warranties may be categorized as affirmative warranties, i.e., those that focus on assurances that certain facts are true or acts have been performed at the time of the contract, and promissory warranties, i.e., those that are agreements for the future. Either type of warranty entitles the protected party to damages for breach or to the particular remedies set forth in the contract. Damages are based on the difference between the value of contract as agreed upon compared to the value of the contract given the facts at the breach.

Warranties now commonly provide protection for consumer products, and are subject to the Uniform Commercial Code and federal law. An “extended warranty” protects beyond the initial agreement between a buyer and seller. It is a form of insurance and may be regulated as such depending on state law and the particulars involved.

Comparing Representations and Warranties

Justifiable reliance generally is an element for a misrepresentation claim, but the state of mind of the party to whom the warranty is given is not pertinent to a warranty claim, and a party may enforce an express warranty even if the beneficiary believes the warranty will be breached and the problem it covers will arise.

Traditionally, a warranty also differed from a representation in these ways: (1) a warranty was always part of a contract, while a representation usually was a collateral (or a separate) inducement prior to the contract; (2) a warranty was on the face of a contract, while a representation might be written or even oral; (3) a warranty was conclusively presumed to be material, while a party claiming a misrepresentation had to establish materiality; (4) a warranty had to be strictly complied with, while substantial truth was enough for a representation; (5) a contract remained binding if a warranty was breached (unless the warranty was also a condition that was vital to the contract, e.g., that the lawyer hired under an employment agreement was licensed); and (6) only damages were recoverable from a breach of warranty, while a party defrauded by a misrepresentation might in some circumstances rescind the contract or recover damages for fraud.

A covenant in a contract traditionally has been a solemn promise in writing, signed, sealed and delivered, by which a party pledges that something has been or will be done or that certain facts are true. Historically, a covenant was in a sealed document that was self-authenticating, and witnesses were not required to establish the terms in the document. Of course, with the abolition of private seals over the last hundred years or more, contracts have been enforceable without being sealed documents.

Covenants usually are formal agreements or promises in a written contract, and are usually in agreements relating to real property. Covenants in or related to a contract usually are secondary to the main reason for the contract. They are an undertaking to do or not do something in the future; for example, that conditions will be maintained between the signing of a contract and the closing of the transaction, or while a loan is unpaid, or that a party will not compete or sue. A covenant – similar to a warranty – has always been part of the contract. A claim for breach of a covenant may be for damages or specific performance, or, potentially, if the covenant is important enough, for rescission or termination.

Dispensing with “representations,” “warranties” or “covenants” might be the norm for contracts in the future. Some commentators and model forms avoid the words, substituting “agree” or “obligate” or use “represent” to also cover “warrant.” Distinctions based on these terms have been important – perhaps to an excessive degree – in the past. Courts today are more willing than before to excuse formalism related to particular words, but it’s safe to warrant that archaic distinctions still matter in the digital age.

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8.2 Warranties and Sales Contracts

A warranty is a guarantee on the good that comes as part of the sales contract, but contract law treats warranties as an additional form of contract that binds the selling party to undertake a certain action. Typically, the selling party has an obligation to provide a product that achieves a specified task, or to deliver a service that meets certain minimal standards. Warranties are offered for a range of different goods and services, from manufactured goods to real estate to plumbing services. The warranty assures the buyer that the good or service is free from defects, and it is a legally binding commitment. In the event that the product or service fails to meet the standards set out in the warranty, then the contract provides a specific remedy, such as a replacement or repair.

According to UCC 1-203, the performance and execution of all contracts must be undertaken in good faith. Good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing. If the parties in the contract are merchants, the UCC also requires that the contract be undertaken in accordance with commercial reasonableness. This requirement means that the transaction should be undertaken in a sensible and prudent way.

Express and Implied Warranties

Warranties can be express, implied, or both. Both express and implied warranties provide legal relief for the purchaser in the event of a breach of contract.

An express warranty is one in which the seller explicitly guarantees the quality of the good or service sold. Typically, the vendor provides a statement, or other binding document, as part of the sales contract. What this means in practice is that the buyer has engaged in the contract on the reasonable assumption that the quality, nature, character, purpose, performance, state, use, or capacity of the goods or services are the same as those stated by the seller. Therefore, the sales contract is based, in part, on the understanding that the goods or services being supplied by the seller will conform to the description, or any sample, that has been provided.

There are myriad ways in which the seller can make statements as to the characteristics of the goods.

Here are a few examples of express warranties:

“Wrinkle-free shirt”

“Lifetime guarantee”

“Made in the USA”

“This orange juice is not from concentrate”

There is not a specific way that words must be formed to make an express warranty valid. Importantly, the sales contract does not need to explicitly state that a warranty is being intended. It is enough that the seller asserts facts about the goods that then become part of the contract between the parties. However, the courts do apply a reasonableness test of reliance upon warranties. Puffery, or language used to bolster sales, is lawful, and the consumer is required to apply reason when evaluating such statements. For example, buyers are expected to use reason when judging seller claims such as “this sandwich is the best in the world.” Obvious sales talk cannot ordinarily be treated as a legally binding warranty.

A breach of the warranty occurs when the express warranty has been found to be false. In such circumstances, the warrantor is legally liable just as though the truth of the warranty had been guaranteed. The courts do not accept as a defense:

• Seller claims the warranty was true.
• Seller claims due care was exercised in the production or handling of the product.
• Seller claims there is not any reason to believe that the warranty was false.

Implied Warranties

In certain circumstances where no express warranty was made, the law implies a warranty. This statement means that the warranty automatically arises from the fact that a sale was made. With regard to implied warranties, the law distinguishes between casual sellers and merchant sellers, with the latter held to a higher standard, given that they are in the business of buying or selling the good or service rendered. For example, unless otherwise agreed, goods sold by merchants carry an implied warranty against claims by any third party by way of trademark infringement, patent infringement, or any other intellectual property law infringement. This type of warranty is known as the warranty against infringement. Another implied warranty provided by merchant sellers is the warranty of fitness for normal use , which means that the goods must be fit for the ordinary purposes for which they are sold.

It is important to note that if express warranties are made, this does not preclude implied warranties. If an express warranty is made, it should be consistent with implied warranties, and can be treated as cumulative, if such a construction is reasonable. If the express and implied warranties cannot be construed as consistent and cumulative , the express warranty generally prevails over the implied warranty, except in the case of the implied warranty of merchantability , or fitness for purpose.

Breaches of Warranty

If the buyer believes that there has been a breach of the implied warranty of merchantability, it is their responsibility to demonstrate that the good was defective, that this defect made the good not fit for purpose, and that this defect caused the plaintiff harm. Typical examples of defects are:

• Design defects
• Manufacturing defects
• Inadequate instructions on the use of the good
• Inadequate warning against the dangers involved in using the good.

Specific Examples of Goods Under the Warranty of Merchantability

The buyer might intend to use the goods purchased for a different purpose than that for which it was sold. In this case, the implied warranty holds only if the buyer relies on the seller’s skill or judgment to select the product, the buyer informs the seller at the time of purchase of his or her intention for the use of the good, and the buyer relies on the seller’s judgment and skill in making the final choice. If the seller is not made aware of the buyer’s true intention, or does not offer his or her skill and judgment in aiding the sale, then warranty of fitness for a particular purpose does not arise. For this reason, it is common for vendors to include provisions in the average terms and conditions of sale with regard to the true and intended purpose of use.

Warranty of Title

By the mere act of selling, the vendor implies a warranty that the title is good and that the transfer of title is lawful. In addition, the act of the sale creates a warranty that the goods shall be delivered free from any lien of which the buyer was unaware. In some circumstances, the warranty of title can be excluded from the contract documents. For instance, when the seller makes the sale in a representative capacity (e.g. as an executor of an estate), then a warranty of title will not arise.

Remedies to Buyers under the UCC

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• assignments basic law

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.

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What Is a Warranty?

How warranties work, special considerations.

• Why a Warranty Be Denied

Warranty vs. Guarantee

Resolving warranty disputes, warranty tips.

• Warranty FAQs

The Bottom Line

• Business Essentials

Warranty Definition, How It Works, Types, and Example

Investopedia / Candra Huff

A warranty is a guarantee or promise made by a manufacturer or similar party regarding the condition of their product. A warranty also refers to the terms and situations in which repairs, refunds , or exchanges will be made if the product does not function as originally described or intended. Warranties offer consumers some assurance that the goods and services they purchase are as advertised.

Key Takeaways

• Warranties are promises offered by manufacturers and other parties on production conditions.
• Buyers must fulfill specific duties for the warranty to be honored.
• Warranties can be either expressed or implied.
• The Magnuson-Moss Warranty Act was created to protect consumers from fraud and misrepresentations.
• Unlike a warranty, a guarantee is a promise from a seller that their product will meet certain quality and performance standards.

As noted above, warranties are promises made by manufacturers or retailers about their products and services. These promises can be either explicit or implied. Warranties provide a guarantee about the condition of goods and services purchased, providing an assurance that they are as advertised. They are generally only good for a specified period. When that period ends, the issuing entity is no longer obligated to repair or replace a product previously covered.

Warranties usually have exceptions that limit the conditions in which a manufacturer is obligated to rectify a problem. For example, many warranties for common household items only cover the product for up to one year from the date of purchase. Generally, they are covered only if the product has problems due to defective parts or workmanship.

As a result of these limited manufacturer warranties, many vendors offer extended warranties. Extended warranties are essentially insurance policies for products that consumers pay for upfront. Coverage will usually last for several years above and beyond the manufacturer's warranty and is often more lenient in terms of limited terms and conditions.

Home warranties can provide discounted repair and replacement services for household appliances and systems, and the best home warranties offer a range of plans depending on the coverage you want.

The U.S. Congress passed the Magnuson-Moss Warranty Act of 1975 to set standards and rules for consumer product warranties to protect consumers from fraud and misrepresentations.

The act stipulates that the terms and conditions of warranties must be fully and clearly disclosed to the buyer before purchase, including whether it is a full or limited warranty. It also prohibits deceptive practices, such as the inclusion of misleading or false terms or requiring the buyer to purchase another product to validate the warranty.

In addition to what the manufacturer guarantees in an express warranty, the Uniform Commercial Code (UCC) provides additional consumer protection by providing the implied warranty of merchantability. This warranty guarantees remedy if the product fails to perform as designed.

Warranty terms can vary from free repairs on the defective product to complete replacement. The owner may be instructed to bring the product to the nearest authorized repairman, the seller, or ship it to the manufacturer.

Types of Warranties

There are two general types of warranties, expressed and implied. Each category has different sub-types of warranties, with terms, conditions, and guarantees.

Express Warranty

As its name suggests, an express warranty is an expressed guarantee from a seller or manufacturer to a buyer that the purchased product performs according to certain specifications. If defects are present, the seller agrees to repair or replace the defective product. The warranty can be expressed in writing or verbally in advertising, on the product, or through other means.

All expressed guarantees are not warranties. For example, if a retailer claims that its mattresses will give you the "best night's sleep ever," they are not issuing a guarantee that it will deliver upon that statement. It is considered puffery, which is a form of exaggerated language used to advertise a product and attract customers. It can be reasonably assumed that this claim is based only on the opinion of the person making the statement in an attempt to promote the product.

Implied Warranty

An implied warranty , which is also called an implied warranty of merchantability, is a guarantee that the purchased product functions in the manner designed. It need not be expressed to be valid. This guarantee is implied unless it is explicitly excluded—typical of "as is" sales.

Implied warranties also apply when sellers present and sell a product fit to fulfill a specific purpose. The buyer relies on the seller's expertise to purchase the product. Any statements made by the seller regarding the product can be considered assurances.

Warranty Sub-Types

There are many different warranty subtypes, but the most common are extended warranties and special warranty deeds.

• Extended warranties are available on products of substantial value, such as cars , electronics, and appliances. Although sold by the retailer, the manufacturer is responsible for executing the extended warranty on behalf of the customer.
• Special warranty deeds transfer property ownership from one person to another and assure the buyer that the title at the time of sale is free of encumbrances, liens, or claims. This deed transfers ownership to the grantee with an expressed warranty about the title.

Denied Warranty Claims

Even though manufacturers and retailers may offer warranties, there are instances where they may not honor these promises. We've outlined a few of these below.

Altered Products

Warranties are meant to guarantee the condition of products and services as they are when they are purchased. This means that they typically only apply to products that have not been altered or modified after they were purchased.

For example, car enthusiasts enjoy changing engines or making other enhancements to a vehicle's drivetrain to coax a particular type of performance. Many modifications can nullify the vehicle's warranty coverage of the modified and affected components because they can affect the vehicle's reliability in ways for which the dealer and manufacturer are not responsible.

Owner Actions

Each company has a unique process for addressing warranties. Even if a product is within the timeframe designated by a warranty, the company may require multiple proof points to show that the product failed in normal use.

If the product failed because of the owner's actions rather than a fault in the design or manufacturing, the warranty is not likely to be honored. For instance, the owner might have placed the product in an extreme environment that was too hot or too cold for its reasonable use.

The terms warranty and guarantee are often used interchangeably, but there are subtle differences between the two. Both require sellers to act on certain promises they make to consumers about their offerings. However, the difference lies in the level of confidence the manufacturer expresses regarding the product's quality and functionality.

A warranty is a guarantee from a seller that if their product fails to meet certain specifications, a remedy is available. A warranty describes the conditions in which the seller is liable and what conditions are excluded. Although the buyer does not pay a separate cost for the warranty, the warranty price is included in the product's price.

A guarantee, on the other hand, is a promise or assurance from the manufacturer or seller that the product will work as described or meet specific quality standards . If it doesn't, the manufacturer will fix or replace it. Guarantees are of no cost to the buyer and can be offered for both products and services.

Foreign companies are subject to the Magnuson-Moss Warranty Act if their deceptive practices are likely to cause injury within the United States.

Understandably, it is easy to become confused with the coverage a warranty provides because of the language used in it. However, if you believe a warranty covers an issue, here are some steps you can take:

• Ensure you read the warranty and instructions. If you've damaged an item using it for something it wasn't designed for, most warranties won't cover the damages or issues. Additionally, some warranties may not cover certain issues.
• Contact the seller, then the manufacturer. Sometimes, a seller will provide an additional warranty. You can contact the retailer to see if it covers your issue. If it doesn't, contact the manufacturer.
• Report the manufacturer to the Federal Trade Commission (FTC) . If you believe the warranty covers your issue and you're not getting help, you can file a report with the Federal Trade Commission, which will forward it to law enforcement for investigation.
• File a lawsuit . You can always file a lawsuit against the manufacturer, seeking reimbursement for damages. Depending on the item, this option often costs more than replacing the article, and there is no guarantee that you'll win the lawsuit. If you believe this is your only option, contact an attorney and discuss the matter.

Before a sale, sellers must provide written warranties to consumers for products that cost more than $15.

As a consumer, there are some things you can do to minimize warranty issues:

• Read the warranty before you buy, and purchase additional coverage from the seller if it is offered. Additionally, you'll need the receipt when dealing with a warranty issue, so it helps to keep it with the warranty.
• Keep a copy of the warranty to refer back to if an issue arises.
• Only purchase from companies known for adhering to their warranties and their customer service.
• Use items for intended purposes in accordance with the instructions. Also, if there is a maintenance schedule, ensure you conduct and document any periodic maintenance.

How Does a Warranty Work?

A warranty is a guarantee issued by a seller to a buyer that a product will meet certain specifications. If the product does not meet those specifications, the buyer can ask the manufacturer or seller to correct the problem. Certain exceptions apply, and not every defect is covered. The terms and conditions of the warranty depend on the type of warranty covering the product.

What Does Having a Warranty Mean?

A warranty means that a manufacturer or seller will replace or repair an item under specific conditions and circumstances. Generally, the conditions and covered issues are outlined in the warranty document.

What Are the 3 Types of Warranties?

There are two types of warranties—express and implied. Each has sub-types intended for different circumstances and products.

What Is an Example of a Warranty?

Imagine you purchase a new television. In the box with the instructions, you find a document that explains what the manufacturer will do if you experience specific issues within a certain time frame.

A warranty is a guarantee from a manufacturer or seller that defective products will be repaired or replaced. The warranty sets forth the terms and conditions to which the warranty applies, as well as exclusions. There are two types—express and implied, with many sub-types in each category designed for specific products and services.

In the U.S., the Magnuson-Moss Warranty Act and the FTC's Uniform Commercial Code provide rules on consumer product warranties. If you experience a problem covered by a warranty, contacting the seller or manufacturer is the first step to resolving the issue. You can contact the FTC or file a lawsuit if they can't or won't fix a matter covered by the warranty.

Office of the Law Revision Counsel United States Code. " 15 USC Ch. 50: Consumer Product Warranties From Title 15—Commerce and Trade ."

Cornell Law School. " Implied Warranty of Merchantability ."

Federal Trade Commission. " FTC Staff Sends Warranty Warnings ."

Federal Trade Commission. " Report Fraud ."

Federal Trade Commission. " Final Action: Magnuson-Moss Warranty Act Interpretations ," Page 5.

New York State. " Uniform Commercial Code ."

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Assignment of a collateral warranty

Published by a lexisnexis construction expert.

This Practice Note focuses on the assignment of collateral warranties (see Practice Note: What are collateral warranties?). For more detailed guidance on assignment in general, see Practice Notes: Assignment in construction contracts and Legal and equitable assignment in construction contracts. Although this Practice Note refers to collateral warranties, the principles also apply where third party rights are used as an alternative to collateral warranties, see: Contracts (Rights of Third Parties) Act 1999 in construction—overview.

Assignment provisions in collateral warranties

The general rule is that if a contract is silent on the issue of assignment, this means that the benefit of the contract can be assigned without limit or without requiring consent (as permitted by law under section 136(1) of the Law of Property Act 1925 (LPA 1925))—there is no requirement to obtain the consent of the obligor to any proposed assignment. See Practice Note: Restrictions on the assignment of rights in construction contracts.

Most construction contracts contain express assignment clauses to clarify the rights of each of the parties in respect of assignment and this is also usually the

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Related legal acts:

• Contracts (Rights of Third Parties) Act 1999 (1999 c 31)
• Law of Property Act 1925 (1925 c 20)

Key definition:

Assignment definition, what does assignment mean.

An assignment is 'an immediate transfer of an existing proprietary right, vested or contingent from one party to another'. Assignments can occur by consent or by operation of law.

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Assignment Of Rights Agreement

Jump to section, what is an assignment of rights agreement.

​​An assignment of rights agreement is a written document in which one party, the assignor, assigns to another party all or part of their rights under an existing contract. The most common example of this would be when someone wants to sell their shares of stock in a company.

When you buy shares from someone else (the seller), they agree to transfer them over and give up any control they had on that share. This way, another party can take ownership without going through the trouble of trying to buy the whole company themselves.

Common Sections in Assignment Of Rights Agreements

Below is a list of common sections included in Assignment Of Rights Agreements. These sections are linked to the below sample agreement for you to explore.

Assignment Of Rights Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-99.(H)(7) 5 dex99h7.htm FORM OF ASSIGNMENT AGREEMENT , Viewed December 20, 2021, View Source on SEC .

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ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Meet some of our Assignment Of Rights Agreement Lawyers

Rhea de Aenlle is a business-savvy attorney with extensive experience in Privacy & Data Security (CIPP/US, CIPP/E), GDPR, CCPA, HIPAA, FERPA, Intellectual Property, and Commercial Contracts. She has over 25 years of legal experience as an in-house counsel, AM Law 100 firm associate, and a solo practice attorney. Rhea works with start-up and midsize technology companies.

I began my career at "big law" firms, worked in-house for 14 years, and now have my own practice, providing big law quality at small firm rates. My practice focuses on strategic and commercial transactions, including M&A, preferred stock and common stock offerings, asset purchases and sales, joint ventures and strategic partnerships, stock option plans, master services agreements and SOWs, software development and license agreements, SaaS agreements, NDAs, employment and consulting agreements. I also manage corporate governance, advise boards and executives, and act as outside general counsel. I represent clients across the country and around the world.

Ryan Duffy is a skilled attorney with extensive experience in business law and estate planning. He received his undergraduate degree in Business from Franklin & Marshall College and went on to graduate from Villanova University Charles Widger School of Law. Ryan has worked with numerous clients on matters ranging from business formation and contract drafting to estate planning and asset protection. He is dedicated to helping businesses of all sizes achieve their goals while minimizing legal risks. He also works closely with individuals and families to help them protect their assets and plan for the future. With his extensive knowledge and practical approach, Ryan can provide valuable legal guidance and support to clients in need of business law and estate planning services.

Benjamin S.

Benjamin Snipes (JD/MBA/LLM) has 20 years of experience advising clients and drafting contracts in business and commercial matters.

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Karen V. Mills is the founding member of the woman-owned boutique law firm Mills Law, LLC, based in Atlanta, Georgia, specializing in contracts, corporate transactional and business law.

Business Venture Law: Andrew Moore, Esq. focuses on solving modern business problems with common sense at affordable rates.

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Assignment Agreement Definition: Everything You Need to Know

The assignment agreement definition is a part of the common law that is in charge of transferring the rights of an individual or party to another. 3 min read updated on February 01, 2023

The assignment agreement definition is a portion of the common law that is in charge of transferring the rights of an individual or party to another person or party. The assignment agreement is often seen in real estate but can occur in other contexts as well. An assignment is just the contractual transfer of benefits that will accrue or have accrued. Obligations don't transfer with the benefits of an assignment. The assignor will always keep the obligations.

Security Agreement

A part of contract law that is responsible for financial transactions is a security agreement. These are also called a secured transaction and include a grantor that promises collateral to the grantee. In contract law, the security agreement doesn't cover actual real estate or land. Instead, this agreement covers stock, vehicle, livestock, or another type of personal property. In a security agreement, in the case where a grantee already has the collateral, the grantor can verbally acquire the transaction.

However, it's preferred to have a security agreement that is written down instead of having a verbal agreement, just in case there's a disagreement among the parties. Both a security agreement and an assignment may apply to a variety of property rights.

Example of Using Assignment and Security Agreements in Property Rights

As an example, the agreements may cover the promise to use stocks as collateral or to transfer the rights of stock investments. It may also be possible for the agreements to include properties that are less tangible. The agreements may apply to creative rights, such as film production or written works. If it is a case of creative rights, any benefits often include future revenue that may be earned from the distribution or sale of said works.

How Can an Attorney Help You?

You may want to hire an attorney to help you draft a security agreement and legal assignment. There are other services that you might want to use that don't cost as much but will still help you draft your contracts. The following are ways to save money while drafting a contract:

• Buy software with a template that creates security agreements and assignments.
• Buy a generic contract form at the bookstore.
• Buy a book with advice.

Unless your background includes knowing particular legal knowledge about security agreements and assignments, you'll want to talk to an attorney before you use any contract forms that are self-generated. Both security agreements and assignments are complicated areas of contract law.

Lease Assignment Definitions

An agent is someone who is licensed by the state where a property is established to aid in real-estate transactions such as leases , assignments, and property sales. An agent is usually either an attorney, sales agent, or real estate broker. The tenant from the initial lease is the assignor, and he transfers his whole interest to another person. The assignee obtains the lease interest from the assignor or original tenant and will become the new tenant.

Consideration is what the assignor gets from the assignee for transferring the lease interest to the assignee. The consideration is often a certain amount of money. Interests that other people hold are encumbrances, and they can affect the title and possibly the possession and use of the property by the assignee and the assignor.

If the property in question is a residential unit that's above a commercial property, the lease is considered to be a residential one, even though the property is in a commercial building. The governing law is that of the jurisdiction in which the property is located, no matter what jurisdiction the landlord, assignee, and assignor reside in. The assignee is allowed to receive a copy of the master lease. The assignor can either give the assignee a copy directly or include the copy with the lease assignment.

If the assignor isn't liable for the assignee's conduct, the landlord will need to go after the assignee if he or she causes property damage. However, if the assignor has liability for the conduct of the assignee, the landlord may then ask for compensation from both the assignee and assignor should the assignee cause any damage to the property.

If you need help with an assignment agreement definition, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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