in case of assignment of a contract

Assignment of Contract

Jump to section, what is an assignment of contract.

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 approved incoming party.

How Does Assignment of Contract Work?

An assignment of contract is simpler than you might think.

The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.

When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement . Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer. However, the general rule is that contracts are freely assignable unless there is an explicit provision that says otherwise.

In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment ” to notify any other contract signers of the change.

The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. If the assignment is valid, the assignor is not required to obtain the consent or signature of the other parties to the original contract for the valid assignment to take place.

Check out this article to learn more about how assigning a contract works.

Contract Assignment Examples

Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:

Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.

Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.

Here is an article where you can find out more about contract assignments.

Assignment of Contract in Real Estate

Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts .

This process is called real estate wholesaling.

Real Estate Wholesaling

Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.

The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.

This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.

This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.

But how do real estate wholesalers find these properties?

It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:

Direct mailers
Place newspaper ads
Make posts in online forums
Social media posts

The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.

Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to another person, they are always upfront about during the preliminary phases of the sale.

In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.

After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.

Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.

If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.

One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.

On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.

Learn more about assignment of contract in real estate by checking out this article .

Who Handles Assignment of Contract?

The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract , post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.

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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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Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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by Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

Person presenting documents to another person who is signing them

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

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 the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
The assignor must agree to assign their rights and duties under the contract to the assignee.
The assignee must agree to accept, or "assume," those contractual rights and duties.
The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
The effective date of the assignment and assumption agreement
Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

14.1: Assignment of Contract Rights

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LEARNING OBJECTIVES

Understand what an assignment is and how it is made.
Recognize the effect of the assignment.
Know when assignments are not allowed.
Understand the concept of assignor’s warranties.

The Concept of a Contract Assignment

Contracts create rights and duties. By an assignment , an obligee (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor (the one who has a duty to perform) to a third person ( assignee ); the obligee then becomes an assignor (one who makes an assignment).

The Restatement (Second) of Contracts defines an assignment of a right as “a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires the right to such performance.”Restatement (Second) of Contracts, Section 317(1). The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring. A factor is one who purchases the right to receive income from another.

Figure 14.1 Assignment of Rights

Method of Assignment

Manifesting assent.

To effect an assignment, the assignor must make known his intention to transfer the rights to the third person. The assignor’s intention must be that the assignment is effective without need of any further action or any further manifestation of intention to make the assignment. In other words, the assignor must intend and understand himself to be making the assignment then and there; he is not promising to make the assignment sometime in the future.

Under the UCC, any assignments of rights in excess of $5,000 must be in writing, but otherwise, assignments can be oral and consideration is not required: the assignor could assign the right to the assignee for nothing (not likely in commercial transactions, of course). Mrs. Franklin has the right to receive $750 a month from the sale of a house she formerly owned; she assigns the right to receive the money to her son Jason, as a gift. The assignment is good, though such a gratuitous assignment is usually revocable, which is not the case where consideration has been paid for an assignment.

Acceptance and Revocation

For the assignment to become effective, the assignee must manifest his acceptance under most circumstances. This is done automatically when, as is usually the case, the assignee has given consideration for the assignment (i.e., there is a contract between the assignor and the assignee in which the assignment is the assignor’s consideration), and then the assignment is not revocable without the assignee’s consent. Problems of acceptance normally arise only when the assignor intends the assignment as a gift. Then, for the assignment to be irrevocable, either the assignee must manifest his acceptance or the assignor must notify the assignee in writing of the assignment.

Notice to the obligor is not required, but an obligor who renders performance to the assignor without notice of the assignment (that performance of the contract is to be rendered now to the assignee) is discharged. Obviously, the assignor cannot then keep the consideration he has received; he owes it to the assignee. But if notice is given to the obligor and she performs to the assignor anyway, the assignee can recover from either the obligor or the assignee, so the obligor could have to perform twice, as in Exercise 2 at the chapter’s end, Aldana v. Colonial Palms Plaza . Of course, an obligor who receives notice of the assignment from the assignee will want to be sure the assignment has really occurred. After all, anybody could waltz up to the obligor and say, “I’m the assignee of your contract with the bank. From now on, pay me the $500 a month, not the bank.” The obligor is entitled to verification of the assignment.

Effect of Assignment

General rule.

An assignment of rights effectively makes the assignee stand in the shoes of the assignor. He gains all the rights against the obligor that the assignor had, but no more. An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee. Likewise, under UCC Section 9-318(1), the assignee of an account is subject to all terms of the contract between the debtor and the creditor-assignor. Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 per month and the car is warranted for 50,000 miles. If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, $250 and deduct that $250 from the amount owed Dealer on the next installment (called a setoff). Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments. First, it is inapplicable to the sale of a negotiable instrument to a holder in due course. Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor.Uniform Commercial Code, Section 9-206. While a waiver of defenses makes the assignment more marketable from the assignee’s point of view, it is a situation fraught with peril to an obligor, who may sign a contract without understanding the full import of the waiver. Under the waiver rule, for example, a farmer who buys a tractor on credit and discovers later that it does not work would still be required to pay a credit company that purchased the contract; his defense that the merchandise was shoddy would be unavailing (he would, as used to be said, be “having to pay on a dead horse”).

For that reason, there are various rules that limit both the holder in due course and the waiver rule. Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted. Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective. Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such consumer transactions . Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them. Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.

When Assignments Are Not Allowed

The general rule—as previously noted—is that most contract rights are assignable. But there are exceptions. Five of them are noted here.

Material Change in Duties of the Obligor

When an assignment has the effect of materially changing the duties that the obligor must perform, it is ineffective. Changing the party to whom the obligor must make a payment is not a material change of duty that will defeat an assignment, since that, of course, is the purpose behind most assignments. Nor will a minor change in the duties the obligor must perform defeat the assignment.

Several residents in the town of Centerville sign up on an annual basis with the Centerville Times to receive their morning paper. A customer who is moving out of town may assign his right to receive the paper to someone else within the delivery route. As long as the assignee pays for the paper, the assignment is effective; the only relationship the obligor has to the assignee is a routine delivery in exchange for payment. Obligors can consent in the original contract, however, to a subsequent assignment of duties. Here is a clause from the World Team Tennis League contract: “It is mutually agreed that the Club shall have the right to sell, assign, trade and transfer this contract to another Club in the League, and the Player agrees to accept and be bound by such sale, exchange, assignment or transfer and to faithfully perform and carry out his or her obligations under this contract as if it had been entered into by the Player and such other Club.” Consent is not necessary when the contract does not involve a personal relationship.

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right that cannot be assigned. For example, a student seeking to earn pocket money during the school year signs up to do research work for a professor she admires and with whom she is friendly. The professor assigns the contract to one of his colleagues with whom the student does not get along. The assignment is ineffective because it matters to the student (the obligor) who the person of the assignee is. An insurance company provides auto insurance covering Mohammed Kareem, a sixty-five-year-old man who drives very carefully. Kareem cannot assign the contract to his seventeen-year-old grandson because it matters to the insurance company who the person of its insured is. Tenants usually cannot assign (sublet) their tenancies without the landlord’s permission because it matters to the landlord who the person of their tenant is. Section 14.4.1 "Nonassignable Rights" , Nassau Hotel Co. v. Barnett & Barse Corp. , is an example of the nonassignability of a personal right.

Assignment Forbidden by Statute or Public Policy

Various federal and state laws prohibit or regulate some contract assignment. The assignment of future wages is regulated by state and federal law to protect people from improvidently denying themselves future income because of immediate present financial difficulties. And even in the absence of statute, public policy might prohibit some assignments.

Contracts That Prohibit Assignment

Assignability of contract rights is useful, and prohibitions against it are not generally favored. Many contracts contain general language that prohibits assignment of rights or of “the contract.” Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning “the contract” bars “only the delegation to the assignee of the assignor’s performance.”Restatement (Second) of Contracts, Section 322. In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties.

Even if a contractual provision explicitly prohibits it, a right to damages for breach of the whole contract is assignable under UCC Section 2-210(2) in contracts for goods. Likewise, UCC Section 9-318(4) invalidates any contract provision that prohibits assigning sums already due or to become due. Indeed, in some states, at common law, a clause specifically prohibiting assignment will fail. For example, the buyer and the seller agree to the sale of land and to a provision barring assignment of the rights under the contract. The buyer pays the full price, but the seller refuses to convey. The buyer then assigns to her friend the right to obtain title to the land from the seller. The latter’s objection that the contract precludes such an assignment will fall on deaf ears in some states; the assignment is effective, and the friend may sue for the title.

Future Contracts

The law distinguishes between assigning future rights under an existing contract and assigning rights that will arise from a future contract. Rights contingent on a future event can be assigned in exactly the same manner as existing rights, as long as the contingent rights are already incorporated in a contract. Ben has a long-standing deal with his neighbor, Mrs. Robinson, to keep the latter’s walk clear of snow at twenty dollars a snowfall. Ben is saving his money for a new printer, but when he is eighty dollars shy of the purchase price, he becomes impatient and cajoles a friend into loaning him the balance. In return, Ben assigns his friend the earnings from the next four snowfalls. The assignment is effective. However, a right that will arise from a future contract cannot be the subject of a present assignment.

Partial Assignments

An assignor may assign part of a contractual right, but only if the obligor can perform that part of his contractual obligation separately from the remainder of his obligation. Assignment of part of a payment due is always enforceable. However, if the obligor objects, neither the assignor nor the assignee may sue him unless both are party to the suit. Mrs. Robinson owes Ben one hundred dollars. Ben assigns fifty dollars of that sum to his friend. Mrs. Robinson is perplexed by this assignment and refuses to pay until the situation is explained to her satisfaction. The friend brings suit against Mrs. Robinson. The court cannot hear the case unless Ben is also a party to the suit. This ensures all parties to the dispute are present at once and avoids multiple lawsuits.

Successive Assignments

It may happen that an assignor assigns the same interest twice (see Figure 14.2 "Successive Assignments" ). With certain exceptions, the first assignee takes precedence over any subsequent assignee. One obvious exception is when the first assignment is ineffective or revocable. A subsequent assignment has the effect of revoking a prior assignment that is ineffective or revocable. Another exception: if in good faith the subsequent assignee gives consideration for the assignment and has no knowledge of the prior assignment, he takes precedence whenever he obtains payment from, performance from, or a judgment against the obligor, or whenever he receives some tangible evidence from the assignor that the right has been assigned (e.g., a bank deposit book or an insurance policy).

Some states follow the different English rule: the first assignee to give notice to the obligor has priority, regardless of the order in which the assignments were made. Furthermore, if the assignment falls within the filing requirements of UCC Article 9 (see Chapter 22 "Secured Transactions and Suretyship" ), the first assignee to file will prevail.

Figure 14.2 Successive Assignments

Assignor’s Warranties

An assignor has legal responsibilities in making assignments. He cannot blithely assign the same interests pell-mell and escape liability. Unless the contract explicitly states to the contrary, a person who assigns a right for value makes certain assignor’s warranties to the assignee: that he will not upset the assignment, that he has the right to make it, and that there are no defenses that will defeat it. However, the assignor does not guarantee payment; assignment does not by itself amount to a warranty that the obligor is solvent or will perform as agreed in the original contract. Mrs. Robinson owes Ben fifty dollars. Ben assigns this sum to his friend. Before the friend collects, Ben releases Mrs. Robinson from her obligation. The friend may sue Ben for the fifty dollars. Or again, if Ben represents to his friend that Mrs. Robinson owes him (Ben) fifty dollars and assigns his friend that amount, but in fact Mrs. Robinson does not owe Ben that much, then Ben has breached his assignor’s warranty. The assignor’s warranties may be express or implied.

KEY TAKEAWAY

Generally, it is OK for an obligee to assign the right to receive contractual performance from the obligor to a third party. The effect of the assignment is to make the assignee stand in the shoes of the assignor, taking all the latter’s rights and all the defenses against nonperformance that the obligor might raise against the assignor. But the obligor may agree in advance to waive defenses against the assignee, unless such waiver is prohibited by law.

There are some exceptions to the rule that contract rights are assignable. Some, such as personal rights, are not circumstances where the obligor’s duties would materially change, cases where assignability is forbidden by statute or public policy, or, with some limits, cases where the contract itself prohibits assignment. Partial assignments and successive assignments can happen, and rules govern the resolution of problems arising from them.

When the assignor makes the assignment, that person makes certain warranties, express or implied, to the assignee, basically to the effect that the assignment is good and the assignor knows of no reason why the assignee will not get performance from the obligor.

If Able makes a valid assignment to Baker of his contract to receive monthly rental payments from Tenant, how is Baker’s right different from what Able’s was?
Able made a valid assignment to Baker of his contract to receive monthly purchase payments from Carr, who bought an automobile from Able. The car had a 180-day warranty, but the car malfunctioned within that time. Able had quit the auto business entirely. May Carr withhold payments from Baker to offset the cost of needed repairs?
Assume in the case in Exercise 2 that Baker knew Able was selling defective cars just before his (Able’s) withdrawal from the auto business. How, if at all, does that change Baker’s rights?
Why are leases generally not assignable? Why are insurance contracts not assignable?

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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.

Detailed infographic on the concept of contract assignment in law, explaining the roles of the assignor and assignee, the process of an actual assignment, and a visual representation of the transfer of rights and obligations under a contract. - assignment in contract law infographic process-5-steps-informal

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.

Landlord and tenant shaking hands - assignment in contract law

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.

Patent documents and invention sketches - assignment in contract law

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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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.

Contract Law

Under contract law, assignment of a contract is both: (1) an assignment of rights; and (2) a delegation of duties , in the absence of evidence otherwise. For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C. That is, this assignment is both: (1) an assignment of A’s rights under the contract to the $50; and (2) a delegation of A’s duty to teach guitar to C. In this example, A is both the “assignor” and the “delegee” who d elegates the duties to another (C), C is known as the “ obligor ” who must perform the obligations to the assignee , and B is the “ assignee ” who is owed duties and is liable to the “ obligor ”.

(1) Assignment of Rights/Duties Under Contract Law

There are a few notable rules regarding assignments under contract law. First, if an individual has not yet secured the contract to perform duties to another, he/she cannot assign his/her future right to an assignee . That is, if A has not yet contracted with B to teach B guitar, A cannot assign his/her rights to C. Second, rights cannot be assigned when they materially change the obligor ’s duty and rights. Third, the obligor can sue the assignee directly if the assignee does not pay him/her. Following the previous example, this means that C ( obligor ) can sue B ( assignee ) if C teaches guitar to B, but B does not pay C $50 in return.

(2) Delegation of Duties

If the promised performance requires a rare genius or skill, then the delegee cannot delegate it to the obligor. It can only be delegated if the promised performance is more commonplace. Further, an obligee can sue if the assignee does not perform. However, the delegee is secondarily liable unless there has been an express release of the delegee. That is, if B does want C to teach guitar but C refuses to, then B can sue C. If C still refuses to perform, then B can compel A to fulfill the duties under secondary liability.

Lastly, a related concept is novation , which is when a new obligor substitutes and releases an old obligor. If novation occurs, then the original obligor’s duties are wiped out. However, novation requires an original obligee’s consent .

Property Law

Under property law, assignment typically arises in landlord-tenant situations. For example, A might be renting from landlord B but wants to another party (C) to take over the property. In this scenario, A might be able to choose between assigning and subleasing the property to C. If assigning , A would be giving C the entire balance of the term, with no reversion to anyone whereas if subleasing , A would be giving C for a limited period of the remaining term. Significantly, under assignment C would have privity of estate with the landlord while under a sublease, C would not.

[Last updated in May of 2020 by the Wex Definitions Team ]

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Assignment of Rights and Obligations Under a Contract: Everything You Need to Know

An assignment of rights and obligations under a contract occurs when a party assigns their contractual rights to a third party. 3 min read updated on January 01, 2024

Updated October 29, 2020:

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 assignee.

What Is an Assignment of Contract?

In an assignment contract, the assignor prefers that the assignee reverses roles and assumes the contractual rights and obligations as stated in the contract. Before this can occur, all parties to the original contract must be notified.

Contracts create duties and rights. An obligor is the party who is legally or contractually obliged to provide a benefit or payment to another, while an obligation is owed to the obligee. The obligee transfers a right to obtain a benefit owed by the obligor to a third party. At this point, the obligee becomes an assignor. An assignor is the party that actually creates an assignment.

The party that creates an assignment is both the obligee and a transferor. The assignee receives the right to acquire the obligations of the promisor/obligor. The assignor can assign any right to the obligor unless:

Doing so will materially alter the obligation
It's materially burdening
It decreases the value of the original contract
It increases their risk
Public policy or a statute makes it illegal
The contract prevents assignment

Assignments are important in business financing, especially in factoring . A factor is someone who purchases a right to receive a benefit from someone else.

How Assignments Work

The specific language used in the contract will determine how the assignment plays out. For example, one contract may prohibit assignment, while another contract may require that all parties involved agree to it before proceeding. Remember, an assignment of contract does not necessarily alleviate an assignor from all liability. Many contracts include an assurance clause guaranteeing performance. In other words, the initial parties to the contract guarantee the assignee will achieve the desired goal.

When Assignments Will Not Be Enforced

The following situations indicate when an assignment of a contract is not enforced:

The contract specifically prohibits assignment
The assignment drastically changes the expected outcome
The assignment is against public policy or illegal
The contract contains a no-assignment clause
The assignment is for a future right that only would be attainable in a contract in the future
The contract hasn't been finalized or written yet

Delegation vs. Assignment

Occasionally, one party in a contract will desire to pass on or delegate their responsibility to a third party without creating an assignment contract. Some duties are so specific in nature they cannot be delegated. Adding a clause in the contract to prevent a party from delegating their responsibilities and duties is highly recommended.

Characteristics of Assignments

An assignment involves the transfer by an assignor of some or all of its rights to receive performance under the contract to an assignee. The assignee then receives all the benefits of the assigned rights. The assignment doesn't eliminate or reduce the assignor's performance commitments to the nonassigning party.

Three Steps to Follow if You Want to Assign a Contract

There are three main steps to take if you're looking to assign a contract:

Make sure the current contract does not contain an anti-assignment clause
Officially execute the assignment by transferring the parties' obligations and rights
Notify the obligor of the changes made

Once the obligor is notified, the assignor will effectively be relieved of liability.

Anti-Assignment Clauses

If you'd prefer not to allow the party you're doing business with to assign a contract, you may be able to prevent this from occurring by clearly stating anti-assignment clauses in the original contract. The three most common anti-assignment clauses are:

Consent required for assignment
Consent not needed for new owners or affiliates
Consent not unreasonably withheld

Based on these three clauses, no party in the contract is allowed to delegate or assign any obligations or rights without prior written consent from the other parties. Any delegation or assignment in violation of this passage shall be deemed void. It is not possible to write an anti-assignment clause that goes against an assignment that is issued or ordered by a court.

If you need help with an assignment of rights and obligations under a contract, you can post your job 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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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.

Legal Dictionary

The Law Dictionary for Everyone

A person or entity that signs over or transfers their rights to any property or asset to another person or entity. A concept commonly used in contract law , an individual or entity has the right of assignment, which entails one party (the “assigner”) transferring the rights or benefits of a contract to another party (the “assignee”). To explore this concept, consider the following assignor definition.

Definition of Assign

One who transfers assets or property to another

13th century Middle English assigner

Assignment of Contract

U.S. law allows most contracts to be assigned, and most duties under a contract may be delegated, unless there is some special character of the duty. In a situation in which a party to a contract does not want the contract to be assignable, specific language must be put into the contract to that effect. An assignment of contract transfers only the rights or benefits of the contract, the obligations remaining with the original party, the “assignor.” Additionally, no assignment of contract can affect the other, non-assigning party to the contract or reduce his benefits from the contract.

Example of Assignment of Contract

Sally enters into a contract with Tom, the owner of Stay-Fresh Diaper Service, to have clean cloth diapers delivered to her house twice a week. Tom assigns the contract (and thus the weekly income) to another diaper service, notifying Sally of the change. Sally continues to receive regular diaper deliveries, and her contract is now with the new service.

Assignment of a contract does not necessarily relieve the assignor of his duties or liability under the contract. For example, if the new diaper service in the example above failed to deliver clean diapers as scheduled, or otherwise fails to uphold the provisions of the contract, Tom may be held liable to fulfill the terms of the agreement.

Consent to Assignment

In the case of a contract permitted to be assigned by law, the assignor is not required to consult or seek the permission of the other party to the contract, so long as the assignment has no material effect on that party. A contract may include a clause prohibiting assignment such as:

This agreement may not be assigned to any other person or entity without the express prior written consent of the other party or its successor in interest.

No party to this agreement may assign any responsibility , right, or interest arising out of this agreement, in whole or in part, without the express prior written consent of the other party or its successor in interest.

These provisions may also include the phrase “consent to assignment of this agreement may not be unreasonably or unduly withheld.” Any party seeking consent to assign their rights under a contract should document the agreement in writing, with all parties to the original contract signing.

Assignment Agreement

While it is necessary to put an assignment agreement in writing, no specific language is required to make it legally binding. There should, however, be certain elements, including a clear statement identifying the contractual rights and benefits being transferred to the assignee, a specific statement of the benefit of the assignment to the assignor, and the effective date. An assignment must occur in the present, as a promise to assign contractual benefits at a later date generally has no legal effect. An exception may be made when a prior economic relationship between the assignor and assignee exists, and the promise of such assignment induced the assignee to enter into another agreement.

For example, Mary would like to borrow $1,000 from Sam. She expects to make an agreement, in 2 months, to sell her antique piano for $1,500 to her neighbor. Mary promises to assign the entire amount from the sale of the piano to Sam if he loans her the money now. Sam is enticed into taking the assignment of a future contract by the prospect of profiting 50 percent on the deal.

In certain situations a unique relationship between the parties to a contract exists making it impossible to assign the contract without changing the responsibilities under, or benefits from, the terms of the contract. For example, Sam and Emma hired a band to play at their engagement party. The band could not take the couple’s money, then assign the gig to another band because Sam and Emma hired that specific band to entertain their guests. This is more accurately called “delegation,” as the band might seek to delegate their responsibilities under the contract.

The counterpart to assignment, delegation involves assignment of a party’s duties, responsibilities, or liabilities under a contract, rather than rights. A clause in the contract barring assignment may also contain language barring delegation. For example, “Neither party may assign or delegate its rights or obligations under this agreement.” To allow assignment or delegation with the approval of the other party, adding the phrase “without the express prior written consent of the other party” enables such a transaction.

Related Legal Terms and Issues

Contract – an agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.
Consent – to approve, permit, or agree

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What Is a Contract?

A contract is a legally binding arrangement between two or more parties. A contract supplies particulars of what the parties agree to perform or exchange. A contract may be in written or oral form. In most cases, to be legally binding, a contract must be in writing and signed by all parties concerned.

Courts typically require three things for a contract to be enforceable:

Mutual assent, or agreement to the contract terms;
A valid offer and acceptance; and
Consideration.

Contracts are deemed the foundation of the business world. They may be easy or very complicated. Examples of contracts include employment contracts, real estate purchase agreements, and insurance arrangements.

Contracts must be entered into by all parties freely. All parties signing the contract must do so of their own free will and not under duress . Contracts can be used whenever parties want to document an agreement to ensure all parties’ rights are covered.

Drafting a contract refers to writing the terms and details of a contract to specify and summarize the legal responsibilities of all parties to the contract. This permits all parties to the contract to understand their duties and legal obligations to one another clearly.

Anyone can draft a contract, but it would be in the best interest of all parties involved to have an attorney draft a contract, particularly if it is intricate or complicated. For instance, a real estate agreement often involves multiple aspects, multiple parties, and intricate land descriptions. To ensure your sale or purchase, financial investment, and rights are shielded, having an attorney draft this type of agreement would be preferable.

A contract will also deliver sections outlining whether or not it may be canceled and how to revoke it. The agreement will also outline the results if a party breaches the contract terms. A well-written contract will contain explicit definitions of what comprises a breach of the agreement so all parties can support their responsibilities.

What Are the Elements of a Legally Binding Contract?

What is a contract assignment, when is a contract assignment valid, are there any limitations on contract assignments, what does a contract lawyer do, do i need a lawyer for help with a contract assignment.

To be legally binding, a contract is required to include certain elements. Some contracts must be in writing to be valid, such as contracts for money over $500.00. A contract must be created for a lawful purpose. For instance, an individual cannot contract to perpetrate a crime. It is essential to be familiar with the requirements of a valid contract.

A valid contract must include:

An acceptance of the offer;
A promise to perform;
A valuable consideration ;
A date, a time window, or an event when the performance must be satisfied;
Terms and conditions of the performance; and
Performance.

The offer and acceptance segments of a contract are also known as the “meeting of the minds” or mutual agreement of the parties. All parties’ signing of the contract is often used to prove that agreement. In some circumstances, offers may have an expiration period, where the offer is open for a reasonable time. Some offers may not have a time limitation. Offers can be withdrawn until the time of acceptance.

Acceptance happens when the parties agree to the terms of the offer. If a modification is made to the offer terms, it would be deemed a counteroffer. Different states have various regulations in this area of contracts, so it is essential to review local laws.

For a contract to be proper, consideration must be supplied. When both parties agree to provide something of value in exchange for a benefit, consideration ensues. For instance, consideration must be something of value and can include money, a car, or manual labor.

For a contract to be proper, all parties must be legally competent . Some people cannot enter into contracts, such as minors or the mentally impaired. A party must be of sound mind and not under the influence of drugs or alcohol at contracting. All parties to a contract must be free from coercion at contracting. Contracts will be proclaimed void if there is a mistake, coercion, or deception by one or more parties.

In a contracts setting, an “assignment” refers to transferring benefits or rights granted by the contract terms from the receiving party to a different party. Therefore, contract assignments bring an additional party to the existent contract parties.

An illustration of this is where a contractor assigns their right to payments to another party. The other party would then be entitled to fees for the contractor’s work. This is different from a contract delegation , which transmits obligations rather than rights to another party. Assignment usually ensues because it involves some potential for profit for the party making the assignment.

Contract rights and benefits can lawfully be assigned so long as no prior agreement prohibits an assignment. All required is for the assigning party (the assignor) to agree with the assignee (the third party recipient) that they will be transmitting their rights to them. The original party rendering the payment (the “obligor”) doesn’t usually need to be told that an assignment has occurred.

When assigning contract rights to an assignee, an oral agreement may suffice. Yet, as in any deal, it’s best to reduce the assignment to writing so that the parties have a record of the agreement in the future.

The validity of an assignment may depend on the kind of language used in the written agreement. It needs to be in the present tense. That is, the assignor must state, “I am assigning my contract rights to X party,” rather than “I will be assigning my contract rights to X party”

Typically, the parties are free to make assignments, so long as they stick to the following rules:

The assignment should be permitted according to local, state, and federal regulations (for instance, some states make it unlawful to allocate wages to another individual)
The assignment should only shield present transfers of rights and not future transfers.
If the contract contains a specific “no-assignment” condition or clause, then an assignment can’t be made (if one is made in such a case, it may comprise a breach of contract)
The assignment should not substantially change the contract or subject the obligor to losses or financial risks.

Also, any time an assignment is made, the assignor implicitly warrants that the rights are accurate, that they own the assigned rights, and won’t interfere with the party’s new claim to the rights. Assignments become proper when formed (even if the recipient is not yet cognizant of the assignment).

The tasks and duties of a contract attorney include preparing contracts, checking contracts, and ensuring their clients’ rights are safeguarded. Contract attorneys are experienced in the prerequisites of contracts and how to make sure they will be enforceable. These types of arrangements must often include certain legal aspects and language.

A contract attorney will help a company or person include the essential terms needed for their business needs and include any legal language the person may not know is required.

Contract assignments can often become somewhat difficult, as they involve the privileges and responsibilities of many different parties. It’s in your best interests to speak with a contracts lawyer if you have any questions about a contract assignment.

Your lawyer will be able to examine the contract and the assignment terms to decide what your legal rights are. In the event of a lawsuit, your attorney can help represent your interests in court.

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Assignment of Contract (What It Is And How It Works: Best Overview)

Looking for Assignment of Contract ?

What is the assignment of a contract in simple terms?

How does it work?

In this article, I will break down the meaning of contract assignment so you know all there is to know about it!

Keep reading as I have gathered exactly the information that you need!

Let me explain to you what assignment of contract means and why it matters!

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Let’s get started!

Table of Contents

What Is Assignment of Contract

The assignment of contract refers to instances where one party to a contract transfers its rights and obligations to another party.

In other words, one contracting party exits the contract and another party steps in the exiting party’s shoes.

For instance, Mary and Joe are parties to a contract.

Joe assigns his rights and obligations under the contract to Tim.

The original contract now continues between Mary and Tim where Joe has stepped out.

The party assigning the contract is called the “assignor” and the third party stepping in to the assignor’s shoes is the “assignee”.

Be sure to keep reading as I will explain to you how the assignment works and it’s important that you know more about the assignor’s liability when assigning the contract.

Assignment Under Contract Law

Under contract law , the assignment of a contract is considered to include the assignment of rights and the delegation of the party’s duties to another.

This means that the assignor’s rights are passed on to the assignee.

In addition to that, the assignor’s duties under the contract are also assigned to the assignee.

Assignment Under Property Law

In property law, the assignment of contract generally takes place between landlords and tenants.

Typically, a person (the tenant) will sign a lease with another party (the landlord) to rent an apartment or premises.

If the tenant wishes to leave the premise without breaching the terms of the contract, an assignment may be an option.

In that case, the tenant will assign its rights and duties under the lease agreement to another party (a new tenant).

How Assignment of Contract Works

To better understand the assignment of contract, let’s look more closely at how it works.

Contract Assignment Clause

One of the first things you should consider when contemplating an assignment of a contract is to find the contract assignment clause in your contract.

In most commercial contracts, the parties will include an assignment clause governing the possible assignment by the parties.

Some contracts will authorize the assignment, others will limit assignment to specific situations, while some contracts entirely prohibit assignments.

Be sure to read the contract assignment to see how your contract regulates assignments.

Consent To Assignment of Contract

In most cases, a contracting party looking to assign the contract to another party will need to get the consent of the other contracting party.

If the staying party consents to the assignment, the assignor can proceed with the assignment of the agreement to a third party (or assignee).

However, if the staying party does not consent to the assignment, then the other party must remain in the contract and observe its contractual obligations.

Assignor’s Liability

Assigning a contract does not necessarily mean that the assignor will be released of all liability under the contract.

Depending on the assignment clause language, the assignor may have the right to assign the contract but continue to remain liable under the contract.

In the event the assignor may continue to remain liable under the contract, it’s important that an assignment agreement be signed where the staying party releases and discharges the assignor of future contract liability .

Assignment Enforceability

Under the assignment law, when a contract is assigned as per the terms of the contract, the assignment will be legally enforceable.

However, assignment contracts are not enforceable if the contract prohibits the assignment, the assignment agreement is not materially consistent with the obligations under the original contract, or the assignment violates public policy or the law in some way.

In addition, a contract cannot be assigned if the assignor is not formally in a contract.

There are also instances where the contract requires that a party with special skills or unique characteristics render the services or perform the obligations, and an assignment would not work.

Keep reading as I will now give you an example of contract assignment so you can see how it works in practice.

Contract Assignment Process

The actual contract assignment process is fairly straightforward for most contracts.

Contract Assignment Steps

Here are the steps you’ll need to take to assign a contract:

See if the contract has an assignment clause
Make sure that the assignment clause authorizes assignments
If the assignment is authorized, follow the assignment logistic provided in the contract
If the assignment is prohibited, you may want to speak to the other contracting party to see if you could get consent to assign the contract

In some cases, all you may need to do is to give notice of assignment to provide the details of the assignment if the contract allows for an assignment this way.

In other cases, you may want to have an assignment agreement signed by the staying party, the exiting party, and the third party detailing the terms and conditions of the assignment.

Assignment Agreement Content

When a contract assignment agreement is needed, you should make sure that you include all the right information for the assignment to be valid and enforceable.

In most cases, the assignment of the contract is simple where you may find an assignment of contract form online to complete.

For simple assignment contracts, here is the content that you should expect:

Identification of the parties (original contract parties and assignee)
Contract assignment effective date
Original contracting party’s consent to the assignment
Assignee’s acceptance of the assignment
Assignor’s release and discharge of obligations going forward
Governing law
Signature block for the three parties

Alternatives To Assignment Contracts

What are the alternatives to a contract assignment?

Here are the main alternatives to a contract assignment:

Novation

Licensing refers to situations when a party authorizes another party to use a property or asset (whether tangible or intangible).

Delegation is when someone authorizes another to act on its behalf under a contract.

Novation is when a new party takes on a contracting party’s rights and obligations where the existing party’s rights are relinquished and all liability under the original contract wiped out.

Assignment of Contract vs Delegation of Contract

What is the difference between the assignment of a contract and the delegation of a contract?

The “assignment” of contract refers to a situation where one contracting party “transfers” the contract to a third party.

Once the assignment is completed, the assignor will no longer be in a contract with the other contracting party and the assignee will take the assignor’s place.

For example, Party A and Party B are part of a service contract.

Party B assigns the contract to Party C.

Going forward, the contract will be between Party A and Party C.

On the other hand, a delegation is when a party to a contract subcontracts parts of a contract to another party.

The party delegating the contract to another remains a contracting party and will remain responsible for the contract even though the obligations were delegated to another.

For example, a general contractor may delegate the plumbing work in a project to a plumber.

Although the general contractor has delegated part of the project to a subcontractor, it remains a contracting party and will remain responsible for the overall project.

Assignment of Contract Example

Let’s look at a few examples of when a contract may be assigned to another.

Assignment of Contract In Bankruptcy

You have entered into a contract with a company providing you with phone services.

The company goes bankrupt.

In the context of the bankruptcy, another phone company buys out a portion of the bankrupt’s book of business and your contract is in the pool of assets purchased.

The bankruptcy trustee assigns your contract from the bankrupt phone company to the new phone company.

Assignment of Contract In Real Estate

In real estate, some investors engage in assignment transactions where they do not actually buy the property but enter into a purchase contract that it then assigns to another.

In essence, the real estate investor enters into a real estate purchase agreement defining the terms and conditions relating to the purchase of a property.

Following the executing of the real estate purchase agreement and prior to the “closing” of the transaction, it assigns the contract to another party in an attempt to make a profit without ever actually owning the property.

Assignment of Contract In Corporate Restructuring

In the corporate world, companies tend to restructure their operations to ensure they are legally and operationally optimized.

In the context of a corporate restructuring transaction, a company may assign a contract to another entity within its group, a subsidiary, or an affiliate.

Assignment of Agreement Takeaways

So there you have it folks!

What Does Assignment of Contract Mean

“Assignment of contract” is a legal term used to refer to situations where a party to an existing contract transfers its contractual obligations to another party.

Following the assignment , the assignee becomes responsible to execute the contractual obligations in favor of the party staying in the original contract.

If you are looking to assign a contract, you may want to consult with a qualified contract attorney who can assess your rights and obligations.

Keep in mind that a simple assignment of a contract does not necessarily mean that the assignor is released from liability under the original contract.

Now that you know what is an assignment of contract, how it works, and what it entails, good luck with your transaction!

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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.

• 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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Understanding Contract Assignment (All You Need To Know)

Wondering what is contract assignment and how it works?

You’re looking to assign your contract and need to better understand the assignment process.

Don’t go any further…

We’ve got what you need!

In this article, we will talk about everything there is to know about a contract assignment process.

We’ve divided this article into the following sections:

What is the assignment of contract

Assignment clause in a contract, types of assignment clauses in a commercial contract, is a contract assignment enforceable.

Who is involved in contract assignments

How does the assignment of a contract work

Type of contract that can be assigned, assignment vs delegation.

Let’s get started…

An assignment of contract is when a party to a contract hands off the contract terms and conditions to another party.

The assigning party is the “assignor” and the party receiving the contract is the “assignee”.

Once the assignor assigns the contract to the assignee, then the terms and conditions of the contract will apply to the assignee as well.

In some cases the assignor will be completely liberated from its obligations under the contract and in other cases the assignor will have varying degrees of responsibility or liability.

We will cover such details in this article.

When you are looking to assign a contract, the first thing that you should do is to look at your contract and see if you have an assignment clause.

In most commercial contracts, businesses will plan ahead and include an assignment clause.

In most instances, the assignment clause will state that the parties to the contract are not authorized to assign the contract to another unless it is approved by the other party.

The assignment clause will also state in some cases the liability applicable to the assignor.

The assignment clause may state that the assignor will remain obligated to the same extent as the assignee towards the other party to the original contract.

In such a scenario, the assignment of the contract will benefit the other party as it will now have the assignor and assignee responsible and liable towards it.

Before performing an assignment, it’s important to consult the assignment clause in the contract to ensure you respect its terms.

There are different variations of an assignment clause in business contracts.

We’ll go over the three main contract assignment flavours.

The first type of assignment clause in a contract is when the assignment is entirely prohibited.

In this case, neither party may assign the contract without the prior consent of the other.

Another scenario is that the assignment is generally not authorized unless a party wishes to assign the contract to a subsidiary, an affiliate or an entity of its own corporate group.

If the assignor intends to assign the contract to another entity in its own group of entities the assignment will generally be authorized if the assignor owns more than fifty percent of the shares of the assignee or controls the management.

A third scenario is when the assignment is generally authorized but subject to a prior notification of the other party.

In such clauses, the other party will still be required to give consent for the assignment but the consent must not be unreasonably withheld.

A contract assignment, to the extent the assignor has followed the terms and conditions of the contract, will be enforceable against the other party.

However, if the assignor does not follow the terms of the contract, the assignment will be unenforceable against the other original contracting party.

If the assignment is not done properly, the assignor, assignee and the other party to the original contract may all get entangled in unwanted legal risk.

To avoid creating legal risk for all parties involved, make sure that you ensure that the contract authorizes the assignment.

If the contract allows for the assignment, make sure the assignor gives the proper preliminary notifications to the other contracting party and receives any required consent or authorization before assigning the contract.

In the assignment agreement between the assignor and assignee, make sure the assignee understands the terms and conditions of the contract so it will perform its obligations as it was originally intended between the original contracting parties.

It is also important for the assignor to ensure it understands the extent of liability or responsibility it will continue to have following the assignment should the contract require the assignor to remain responsible in some way.

If the assignor continues to have ongoing responsibilities after the assignment, the assignor must include terms and conditions in its own assignment agreement with the assignee to ensure the assignee adequately observes the contract terms to avoid triggering the responsibility of the assignor towards the other contracting party.

Provided the terms and conditions of the assignment are respected, the assignment of the contract will be enforceable.

And assignment will not be effective if it substantially changes the terms and conditions for the other contracting party.

For example, if you are a software company, you will not be able to assign the contract to a real estate company.

This goes without saying!

Who is involved in contract assignments

There are typically at least three parties to an assignment.

You will have two original contracting parties and a third party.

Among the two original contracting parties, one party intends to assign the contract to the third party.

That party is the assignor.

The third-party agreeing to take over the contract from the assignor is referred to as the assignee.

Essentially, once the contract assignment is performed, the third party becomes a contracting party and the assignor becomes a third party.

So the assignor and assignee swap positions in relation to the other contracting party.

The assignment of a contract is fundamentally not complicated.

The process starts with one party to a contract notifies in writing of its intention to assign the contract to a third-party or assignee.

The other contracting party will either consent or not to the request.

If the consent is given, then the assignor enters into a commercial agreement with the assignee.

This agreement will typically cover the terms and conditions and the commercial considerations between the assignor and the assignee.

Every contract has a value and the assignor will probably require the assignee to pay for the right to take over the contract.

The agreement between the assignor and assignee will also clarify their obligations and responsibilities towards the other contracting party.

Once the assignor and assignee agree on the assignment terms and conditions between themselves, the assignor will prepare an assignment agreement that will be executed between the assignor, the assignee and the other contracting party.

This assignment agreement will clarify the terms and conditions of the actual assignment and will formally result in the assignment of the contract as of that date.

In the business world, nearly all types of business contracts can be assigned.

The assignment clause will govern the assignment process from a legal point of view.

Although most types of contracts can be assigned, some types of contracts cannot be effectively assigned.

If a business contract was signed with a person specifically for the skills and abilities of that individual, that individual may not assign the contract.

For example, you’ve asked your favorite band to sign at your wedding, the band could not assign that contract to another because you don’t care for the other signers to be at your wedding.

So a contract signed with an individual or entity based on the considerations and value brought by that specific person or entity cannot be assigned.

In some cases we talk about contract assignment and in other cases we talk about contract delegation.

What is the difference between a contract assignment and contract delegation?

The assignment of a contract is when you hand off the entire contract to another party.

The assignor will typically want to be discharged from its own obligations and the assignee inherits all the contract obligations towards the other party.

When we talk about contract delegation, this is a case when a party does not assign the entire contract but delegates part of its own responsibilities to another party.

A contract assignment is a process where a party to an existing contract transfers or gives up its contract rights and obligations for the benefit of another party.

Contract assignments are relatively frequent in cases where a company restructures and changes its corporate operations.

It can also happen between a company and its suppliers.

No matter the reason for the contract assignment, you’ll need to ensure that you follow the terms and conditions of your contract, particularly the assignment clause.

If you follow the assignment terms of the contract, your assignment will be enforceable against the other contracting party.

We hope that this article was useful to you.

Should you need any legal advice on contract assignment or contract law , we are here to support you.

In the meantime, best of luck!

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Corruption or Just Politics? Supreme Court Weighs New Bribery Case as More Clashes Are Brewing

W ASHINGTON—The Supreme Court for years has been making it more challenging for prosecutors to bring corruption cases against public officials, guided by the belief that some of the dealmaking and fundraising in the political realm is unseemly but not illegal.

A new batch of cases making their way through the courts shows that where to draw the line remains in flux.

In New York, a U.S. appeals court recently revived the prosecution of a former lieutenant governor after a trial judge earlier tossed the charges. In Ohio, a group of top former Justice Department officials is criticizing the bribery prosecution of a former Cincinnati City Council member whose political-action committee took money from undercover FBI agents posing as businessmen working with a developer.

And the Supreme Court jumped back into the fray on Monday in a case that examines the viability of prosecutions against officials who take gratuities after performing actions that helped their benefactors.

City contracts, then a check

The justices heard arguments in an appeal by James Snyder, the former mayor of Portage, Ind., who was convicted of bribery in 2021.

Portage needed new garbage trucks when Snyder took office, so he arranged a public bidding process. The city eventually awarded two contracts worth a combined $1.1 million to a local truck dealership whose owners Snyder was frequently calling and texting at the time. Not long after the second contract was awarded, the dealership gave Snyder a $13,000 check.

The former mayor said the money was an upfront payment for future consulting services he was to provide. Prosecutors said the money was an illegal reward for Snyder directing city business to the dealership.

Snyder, a Republican, was sentenced to 21 months in prison. The Seventh U.S. Circuit Court of Appeals affirmed the conviction last year, in a decision that highlighted a split in the lower courts on whether federal bribery law covers gratuities paid to public officials to reward them for acts they have already taken, as opposed to upfront payments made to secure a favor.

The Supreme Court is poised to resolve that disagreement.

Lisa Blatt, a lawyer for Snyder, said the prosecution’s theory would potentially criminalize all sorts of thank-you gifts that constituents give to public officials, as well as campaign contributions made in recognition of an official’s past actions.

“Congress did not plausibly subject all of these people to 10 years in prison just for accepting gifts,” Blatt told the court.

Justice Department lawyer Colleen Sinzdak said Snyder’s parade of horribles wasn’t grounded in reality. Gratuities have long been viewed as a type of corrupt payment that can be addressed under the antibribery statute used against Snyder, Sinzdak said.

A decision is expected by late June.

Wins for the defense

The latest case comes on the heels of Supreme Court rulings last year that threw out a pair of corruption convictions stemming from the tenure of former Democratic New York Gov. Andrew Cuomo.

The court in one of those cases sided with longtime Cuomo aide Joseph Percoco, who had been prosecuted for taking payments to assist a developer during a period when he had left his state job to run Cuomo’s re-election campaign. The decision didn’t accept all of Percoco’s arguments, but the court found that the jury instructions in the case had been flawed.

In 2020, the Supreme Court unanimously tossed a pair of public-corruption convictions in the New Jersey scandal known as Bridgegate. And in a unanimous 2016 ruling, the court invalidated the conviction of former Virginia Gov. Bob McDonnell.

Some lawyers have applauded these rulings as a safeguard against prosecutorial overreach, saying the court needed to restrain the Justice Department from using broadly worded fraud statutes in ways Congress never intended.

“I think it’s wrong to take away from these cases that the court doesn’t want to do anything about public corruption,” said Temple University law Prof. Lauren Ouziel. “I’m not that cynical.”

Others say the court has gone too far, effectively blessing a range of corrupt conduct.

“In the Snyder case, the court stands on the precipice of further hindering the ability of the federal government to guard against corruption,” said Jessica Levinson, a professor at Loyola Law School in Los Angeles.

Contribution cases to come

More cases could land at the high court soon. The Cincinnati case, now on appeal, has drawn an unusual amount of interest from former Justice Department leaders. They argue federal prosecutors went too far in pursuing former city councilman Alexander “P.G.” Sittenfeld, who was convicted of soliciting $20,000 in bribes for his political-action committee.

Prosecutors alleged that Sittenfeld, a Democrat, took the money in exchange for promising to vote for a development project.

Sittenfeld, who is serving a 16-month prison sentence, said he was simply a pro-development politician who touted those views while raising funds from developers. The First Amendment protects political donations, he noted, and said he was constitutionally entitled to solicit them.

Sittenfeld has drawn support from three former U.S. attorneys general—William Barr, John Ashcroft and Michael Mukasey—as well as former Obama White House counsel Greg Craig. A group of business executives, including from Google and Procter & Gamble, also filed a brief in support of Sittenfeld, citing free-speech concerns.

“Without a clear line, the resultant political environment is a minefield,” the executives said.

In New York, the state’s former Lt. Gov. Brian Benjamin has pledged to petition the Supreme Court after an appeals court revived bribery charges against him dating from his time as a state senator.

Benjamin, a Democrat, is fighting charges that he funneled a $50,000 state grant to a real-estate developer’s nonprofit in Harlem in exchange for illegal campaign contributions. A trial judge threw out most of the case in 2022, saying prosecutors hadn’t alleged an explicit agreement between Benjamin and the developer. But the judge also noted that there was “confusion among the courts” about how bribery laws apply to campaign contributions.

The Second U.S. Circuit Court of Appeals last month said the prosecution was valid and could move forward. The court said it didn’t matter that the alleged agreement between Benjamin and the developer wasn’t spelled out, because both men understood the pact.

Benjamin’s alleged deal “would not become legal if he simply avoided memorializing it expressly in words or in writing,” the appeals court said.

Write to Jan Wolfe at [email protected] and C. Ryan Barber at [email protected]

Corruption or Just Politics? Supreme Court Weighs New Bribery Case as More Clashes Are Brewing

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White Sox Designate Josimar Cousin For Assignment

By Darragh McDonald | April 16, 2024 at 4:30pm CDT

The White Sox announced that they have selected the contract of right-hander Jonathan Cannon , a move that was reported yesterday. In corresponding moves, they optioned left-hander Jared Shuster to Triple-A Charlotte and designated right-hander Josimar Cousin for assignment.

Cousin, now 26, is from Cuba and played six seasons in that country’s Serie Nacional de Béisbol. He appeared in 88 games in that league, 68 starts, with a 4.80 earned run average. He struck out 15% of batters faced while walking 9.3%. The Sox signed him to a minor league deal in May, per reporter Francys Romero , with a $100K bonus.

He then tossed 55 innings in the minors last year, going from the Complex League to High-A and Double-A. He had a combined 5.56 ERA in that time as well as a 19.6% strikeout rate and 6.3% walk rate.

The Sox added him to their 40-man roster in mid-December, though the timing was unusual as it had nothing to do with minor league free agency or the Rule 5 cutoff. Speculatively speaking, it’s possible that Cousin had some kind of opt-out in his contract or maybe an overseas opportunity that the Sox wanted to prevent him from pursuing.

Cousin was optioned to Double-A Birmingham but hasn’t pitched yet this year. According to his transactions tracker at MiLB.com, he was on the minor league injured list from April 5 to April 12. The Sox will now have one week to trade him or pass him through waivers.

17 Comments

12 hours ago

(Rodney Dangerfield voice) Tough crowd, tough crowd. First they designated Cousin, then they went after Uncle and Aunt.

11 hours ago

I don’t get it

6 hours ago

I’m not surprised.

Trade Roberts for meadows and jung

No one wants P Meadows, he couldn’t hit water if he fell out of a boat

LMAO at writing off a guy after 33 ABs in a season. He entered this year as a fringe top 100 guy.

10 hours ago

He’s never been that great of a hitter in the minors, .729 career OPS, I just think he’s going to end up as a quad-A type

Ah yes. Redsox 62 knows more than evaluators

Su cousin es mi cousin

The Pale Hosers are dumping Cousin, and crying “Uncle”.

Who’s your daddy

Shuster was one their best bullpen arms so far. Seems natural that he would be the option.

thought this was kendrick lamar

Cannon after Nastriani. Love it!

Any relation to My Cousin Vinny?

What led to Josimar Cousin’s sudden designation for assignment after being added to the 40-man roster just a few months ago?

7 hours ago

I thought Eloy was activated but I didn’t see it announced on here. Maybe that’s why?

Australian War Memorial kept ministers in the dark on contracts for $550m redevelopment, audit finds

In two cases, contracts were split to avoid triggering $1m threshold for ministerial approval, the Australian National Audit Office says

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The Australian War Memorial kept ministers in the dark on key details of its controversial $550m redevelopment and failed to manage conflicts of interest, a new audit report has found.

The Australian National Audit Office said the AWM’s advice to ministers lacked “transparency [and] accuracy”, while “in two instances contracts were split” to avoid triggering the $1m threshold for ministerial approval.

In a report scrutinising the long-running Canberra project , the ANAO also found that two unnamed officials had prior employment relationships with tenderers that they did not declare.

The report, tabled in parliament on Thursday, said a delegate responsible for a car park project “did not complete a conflict of interest declaration before approving the procurement outcome on 14 October 2019, six months after leaving employment with the successful tenderer, Lendlease”.

Because this delegate was not a senior executive, they were “not required to complete an annual declaration of interests”, the report said.

The AWM hired the law firm Sparke Helmore as a probity adviser in April 2019, but did not end up seeking its advice before it published its probity guidance five months later.

“Engagement with the external probity adviser was insufficient for the scale and risk of the procurements,” the report said.

“Conflicts of interest were not adequately documented and declared or known conflicts were not adequately managed.”

The ANAO report largely spans a period in which the Coalition was in government, although Labor took office in the latter stages.

The development project was first announced in 2018 by the Coalition, which argued it would allow the AWM to “proudly tell the stories from recent years in Afghanistan, Iraq, the Solomon Islands and East Timor”.

But the project’s detractors – including former AWM heads – have long argued that the money allocated to the “grandiose” expansion would be better spent supporting veterans’ welfare.

Under public governance laws , a minister must not approve public spending unless they are “satisfied, after making reasonable inquiries, that the expenditure would be a proper use of relevant money”.

But the new ANAO report said briefs provided by the AWM to the minister for veterans’ affairs “were insufficiently detailed” to allow the minister to meet those legal obligations.

The minister must sign off on any individual contracts worth $1m or more, but the ANAO found two contracts “where the memorial took steps that resulted in ministerial approval not being required”.

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It said Xact Project Management was hired in March 2018 for work up to $319,572 and this “was later varied in March 2019 to $999,999, one dollar below the threshold for ministerial approval”.

The ANAO also said a 2018 contract with Imagination (Australia) for stakeholder engagement was drafted to a value of $1.05m, before being “split into two contracts with the same supplier”.

These contracts for $841,875 and $207,659 were “signed on the same day” and did not require ministerial approval because they were each below the $1m threshold.

The report did not make any findings against any of the firms mentioned in this article, including Lendlease, Sparke Helmore, Xact Project Management or Imagination (Australia).

The ANAO made five recommendations to the AWM, including to maintain appropriate records on value for money and ensure “all officials, contractors and advisors involved in procurement activities” declare conflicts of interest.

Responding to the ANAO report, the AWM said it accepted the recommendations and had “addressed many of these issues already and is working to close out final recommendations”.

“As the Report itself highlights the Memorial’s Development Project is a project of national significance,” the AWM said in its formal response to the findings.

“The Report also notes project delivery has faced the unique challenge of keeping the Memorial open as the centre of national commemoration and that it has had to adapt to the simultaneous impacts of COVID-19 and record high construction inflation.”

The project, first announced in 2018 with a price tag of about $500m, has since required another $50m in funding. It is due to be completed by 2028.

Australian War Memorial
Australian military
Australian politics

Former Security Engineer Sentenced To Three Years In Prison For Hacking Two Decentralized Cryptocurrency Exchanges

Damian Williams, the United States Attorney for the Southern District of New York, announced today that SHAKEEB AHMED was sentenced today to three years in prison by U.S. District Judge Victor Marrero for hacking two separate decentralized cryptocurrency exchanges and stealing cryptocurrency worth over $12 million. AHMED previously pled guilty to computer fraud.

U.S. Attorney Damian Williams said: “Today, Shakeeb Ahmed was sentenced to prison in the first ever conviction for the hack of a smart contract and ordered to forfeit all of the stolen crypto. No matter how novel or sophisticated the hack, this Office and our law enforcement partners are committed to following the money and bringing hackers to justice. And as today’s sentence shows, time in prison — and forfeiture of all the stolen crypto — is the inevitable consequence of such destructive hacks.”

According to the charging documents and other filings and statements made in court:

On or about July 2 and 3, 2022, AHMED carried out an attack on a decentralized cryptocurrency exchange (the “Crypto Exchange”), in which he used fake pricing data to generate approximately $9 million worth of inflated fees, then withdrew those fees in the form of cryptocurrency. After he stole the fees, AHMED had communications with the Crypto Exchange in which he agreed to return all of the stolen funds except for $1.5 million if the Crypto Exchange agreed not to refer the attack to law enforcement.

On or about July 28, 2022, a few weeks after the hack of the Crypto Exchange, AHMED carried out an attack on a second decentralized cryptocurrency exchange called Nirvana Finance (“Nirvana”). AHMED used an exploit he discovered in Nirvana’s smart contracts to allow him to purchase cryptocurrency from Nirvana at a lower price than the contract was designed to allow. He then immediately resold that cryptocurrency to Nirvana at a higher price. Nirvana offered AHMED a “bug bounty” of as much as $600,000 to return the stolen funds, but AHMED instead demanded $1.4 million, did not reach agreement with Nirvana, and kept all the stolen funds. The $3.6 million AHMED stole represented approximately all the funds possessed by Nirvana, which as a result shut down shortly after AHMED’s attack.

AHMED laundered the millions that he stole from the Crypto Exchange and from Nirvana to conceal their source and ownership, using sophisticated techniques including token-swap transactions; “bridging” fraud proceeds from the Solana blockchain over to the Ethereum blockchain; exchanging fraud proceeds into Monero, an anonymized cryptocurrency that is particularly difficult to trace; using overseas cryptocurrency exchanges; and using cryptocurrency mixers, such as Samourai Whirlpool.

At the time of both attacks, AHMED, a U.S. citizen, was a senior security engineer for an international technology company, whose resume reflected skills in, among other things, reverse engineering smart contracts and blockchain audits, which are some of the specialized skills AHMED used to execute the hacks.

* * *

In addition to the prison term, AHMED, 34, of New York, New York, was sentenced to three years of supervised release. AHMED was also ordered to forfeit approximately $12.3 million and a significant quantity of cryptocurrency and pay restitution to the Crypto Exchange and Nirvana in the amount of over $5 million.

Mr. Williams praised the outstanding work of Homeland Security Investigations and Internal Revenue Service – Criminal Investigation.

The case is being prosecuted by the Office’s Illicit Finance and Money Laundering Unit and Complex Frauds and Cybercrime Unit. Assistant U.S. Attorneys David R. Felton and Kevin Mead are in charge of the prosecution.

Nicholas Biase, Lauren Scarff, Shelby Wratchford (212) 637-2600

Ex-Angels Infielder Claimed By Orioles is Designated for Assignment Again

Author: Maren Angus-Coombs

In this story:

Former Los Angeles Angels infielder Livan Soto has been going back and forth between the Angels' roster and the Baltimore Orioles' roster for the past couple months.

The Orioles claimed Soto off waivers from the Angels on Feb. 8, and the Angels claimed him 10 days later. He was claimed off waivers by Baltimore again on April 11 but was designated for assignment on Tuesday. Soto has now been designated for assignment four times since the beginning of February.

Baltimore has an infield loaded with young talent. The recent call-up of Jackson Holliday left Triple-A Norfolk with an open middle infield spot for Soto. He still has another option year remaining after this one, so if he can hang onto a 40-man roster spot, he could be a depth piece for the Orioles moving forward.

He made his debut with Triple-A Norfolk on Tuesday and finished the day 2-for-4 with a double, home run and two RBIs.

The 24-year-old has slashed .375/.414/.531 in his 71 plate appearances in the big leagues. However, his minor league numbers are a better sample size of what his offensive production is truly like. In 1,505 plate appearances since the start of 2021, he has a combined batting line of .246/.340/.355.

Soto appeared in nine games at Triple-A Salt Lake this year and was 6-for-28 (.214).

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Assignment of Contract: What Is It? How It Works
In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a "Letter of Assignment" to notify any other contract signers of the change.
Assignments: The 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 ...
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 ...
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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 ...
Assignment of Contract Rights: Everything You Need to Know
Assignment of rights changes the foundational terms of the agreement. The assignment is illegal in some way. If assignment of contract takes place, but the contract actually prohibits it, the assignment will automatically be voided. When a transfer of contract rights will somehow change the basics of the contract, assignment cannot happen.
Assignment Of Contracts
Assignment of contracts is the legal transfer of the obligations and benefits of a contract from one party, called the assignor, to another, called the assignee. The assignor must properly notify the assignee so that he or she can take over the contractual rights and obligations. This can be done using a document called an assignment agreement ...
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Acceptance and Revocation. For the assignment to become effective, the assignee must manifest his acceptance under most circumstances. This is done automatically when, as is usually the case, the assignee has given consideration for the assignment (i.e., there is a contract between the assignor and the assignee in which the assignment is the assignor's consideration), and then the assignment ...
Contract Assignment Agreement
A contract assignment agreement may be created in cases involving a contract assignment. An assignment is where the recipient of products, services, or other rights transfers (assigns) their rights to another party. The party transferring their rights is the assignor, while the party performing the services is dubbed the obligor.
Ultimate Checklist for Understanding Contract Assignment Rules
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). ... 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
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.
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 ...
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Upon assignment of a right, an assignor's right to performance of the contractual duty by the other party ends, and the assignee acquires the right to the performance. Restatement (2d) of Contracts, § 317. Assignment can be used as a defense in a contract case if the defendant can show that the right against it has been assigned to another party.
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Consent to Assignment. In the case of a contract permitted to be assigned by law, the assignor is not required to consult or seek the permission of the other party to the contract, so long as the assignment has no material effect on that party. A contract may include a clause prohibiting assignment such as:
Validity of a Contract Assignment
In a contracts setting, an "assignment" refers to transferring benefits or rights granted by the contract terms from the receiving party to a different party. Therefore, contract assignments bring an additional party to the existent contract parties. An illustration of this is where a contractor assigns their right to payments to another party.
Assignment of Contract (What It Is And How It Works: Best Overview)
The "assignment" of contract refers to a situation where one contracting party "transfers" the contract to a third party. Once the assignment is completed, the assignor will no longer be in a contract with the other contracting party and the assignee will take the assignor's place. For example, Party A and Party B are part of a ...
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Case laws on assignment of contract Kapilaben and Ors. v. Ashok Kumar Jayantilal Sheth through POA Gopalbhai Madhusudan Patel and Ors., (2019) Facts of the case. In this case, the appellants here had executed an agreement to sell in 1986 in favour of some of the respondents. The respondents had paid only a portion of the consideration amount.
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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 ...
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A. ISSUE The issue of this case is whether the advertisement offer would result in contact if accepted by offeree? or an invitation to treat. The primary legal issue is whether there was contact between the two parties which the offeror will be liable for beach of the contact. If the Court finds that there is contact between two parties, then Best Buys might be liable for breach of contract.
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Not long after the second contract was awarded, the dealership gave Snyder a $13,000 check. The former mayor said the money was an upfront payment for future consulting services he was to provide.
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The White Sox announced that they have selected the contract of right-hander Jonathan Cannon, a move that was reported yesterday. In corresponding moves, they optioned left-hander Jared Shuster to ...
Australian War Memorial kept ministers in the dark on contracts for
The ANAO also said a 2018 contract with Imagination (Australia) for stakeholder engagement was drafted to a value of $1.05m, before being "split into two contracts with the same supplier".
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U.S. Attorney Damian Williams said: "Today, Shakeeb Ahmed was sentenced to prison in the first ever conviction for the hack of a smart contract and ordered to forfeit all of the stolen crypto. No matter how novel or sophisticated the hack, this Office and our law enforcement partners are committed to following the money and bringing hackers ...
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He was claimed off waivers by Baltimore again on April 11 but was designated for assignment on Tuesday. Soto has now been designated for assignment four times since the beginning of February.
Press release: White Sox roster moves for April 16 2024
CHICAGO - Prior to tonight's game vs. Kansas City, the Chicago White Sox announced the following three roster moves: - Selected contract from Class AAA Charlotte (1): RHP Jonathan Cannon; - Optioned to Charlotte (1): LHP Jared Shuster; - Designated for Assignment (1): RHP Josimar Cousin. Cannon, 23, is rated

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