law of contract assignment writing

Assignment of Contract

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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.

Jeremiah C.

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.

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

145 Contract Law Topics to Write about & Examples

Are you a law school student? This contract law topics list is for you! Here, you will find the most interesting concepts and legal issues to explore. Write an outstanding essay with the help of our law of contract assignment topics and samples!

🔝 Top 10 Contract Law Topics for 2024

🏆 best contract law topic ideas & essay examples, 👍 good contract law topics for essays, 📝 simple & easy contract law assignment topics, 📑 interesting contract law research paper topics, ❓ contract law essay questions, 🤩 law of contract assignment topics: benefits.

The Elements of a Valid Contract
The Doctrine of Privity of Contract
Alternative Dispute Resolution Methods
Fraud and Misrepresentation in Contracts
How to Identify Unfair Terms and Conditions
Remedies and Legal Recourse for Non-Performance
Mental Incapacity and Its Implications in Contract Law
Mistakes and Their Effects on Contractual Validity
Which Contracts Must Be in Writing to Be Enforceable?
E-Signatures, Online Agreements, and Legal Validity
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Contract Law: Breach, Mutual and Unilateral Mistake The implication of this is that the contract would have ordinarily remained valid until the time the plaintiff moved to have it avoided.
English Contract Law: Fundamental Principles The buyer has an obligation to pay the price and the seller is obligated to transfer ownership to the buyer. Acceptance of the offer implies that there is an objective expression, by the recipient, of […]
Contract Law: Car Buying Agreement and Fraud When considering the purchase of a car, one must be aware of the legal specifics of the process, as the case of Jim and Laura shows quite clearly.
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Contract Law: Sand Diego Case In this case the old contract is discharged and there is a substitution of anew contract By vicarious performance: It is open to the parties to have their contract performed vicariously by another person, provided […]
Contract Law in Different Countries The applicability of certain laws therefore becomes the basis of a legal system and how this can be utilized in the greater complexity of certain involvements and participations. Lastly, conflicts of law and harmonization process […]
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The Duress Cases in Contract Law The court decided that the agreement was null and void because the wife did not receive adequate advice concerning the husband’s worth before or during the time she was required to sign the agreement.
Business Law: Contracts With Intoxicated Persons It is the client’s goal to rescind the contract, and she can do so in correspondence to the capacity to contract and duress and undue influence.
Business Laws in Contract Termination In the contract between the Commonwealth Government of Australia and Chill-Out company, dissolution can be applied because of the poor performance of the employed enterprise, as in the case of Abrams v RTO Asset Management.
Woody Allen vs. Amazon Contract Law Case The reasons given by the court were that the defendant and the plaintiff settled their issues in private and the appellant withdrew the case.
Contract Law: The Case Study The former decides to sue Johnny for breach of contract on the two commitments, buying the car and the $10,000 offer.
Contract Law Cases: Suspicious Directors in Firms The legal duty of care assigned to the defendant is one that emerges independently of contractual responsibility, and expressly, in the absence of a contract.
U.S. Contract Law: Basics A significant role in the emergence and development of the theory of the U.S. contract law belongs to the American jurists Langdell and Holmes.
English Law of Contract: Theory and Examples This means that the finding of the painting preludes the obligation for paying the reward without the necessity of proof of offer acceptance.
Contract Law: Alpha Bookstore’s Delivery Issues The area of law that this case relates to is contract law, and the bookstore has remedies for the problems with the contract and lost chance.
Contract and Agency Law: Restraint of Trade A typical restraint of trade clause on an employment contract will be: The employee agrees that he or she will not, after the termination of the employment contract with the employer, either directly or indirectly, […]
Contract and Agency Law: Overview and Analysis In the case of Carlill v Carbolic Smoke Ball Company, the court of appeal held that the advert made had all the requirements of an offer and was, therefore, an offer in itself.
Singapore Contract Law Analysis Therefore, D & D shopping mall would be exempted from the damage of the car because they had referred to the clause in red.
Contract Law: The Impossibility of Performance The paper will include a discussion of the elements of the impossibility of performance and the three situations where the defense can be used; and a discussion of commercial impracticability and its application to the […]
Contract Law: Selling Legal Encyclopedias Normally, a contract is established when the offeree and the offeror agree to the terms of their negotiation. In the above case, Carrie made an offer to sell a set of encyclopedias to Antonio.
Law of Contract: The Case of James and the Kitchen Wizard Even though this was not included in the contract, the fact that James was made to believe that he was purchasing the items that he had wanted by the salesperson gives validity to the feelings […]
Consideration of the Law of Contract In this case, John failed to fulfill his share of the contact thus Chen has this as a basis of not paying the high labor cost, the case says “John builds the extension but does […]
Contract Law: Huang vs. Bill the Builder The main purpose of seeking compensation of damages resulting from a breach is to put the innocent party in its initial position if the breach had not occurred in the first place. Huang had clearly […]
Contract Law and License: Review But there is also the matter of usage of already existing material and the contracts that are drawn up by companies to make a profit.
Contract Law: Case Brief on Fiona vs. Black Tie The elements of a contract were all present in the contract that was between the Black Tie Dry cleaning and Fiona and based on the arguments and explanations the company is not liable to any […]
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Different Types of Contracts in Law It is a defense in the sense that the two parties had agreed to perform the contract but had not factored in such other contingencies that could render the whole or part of the contract […]
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Contract Law in Business and Consumer Protection When the couple approached the hotel manager, they were referred to the terms and conditions form they had signed as they checked in and one of the terms and conditions read that the hotel will […]
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Law Illustrations, Legal Rights, Law of Contract At the same time, the customers of the company, and Thomas and Peter in particular, considered the advertisement to be an offer to the world at large.
Acting in Good Faith: Contract and Agency Law To start with the validity of the contract should be analyzed; and in this case, the two contracting parties had agreed mutually to reduce the amount to a nominal amount of $150.
Joint Liability Under English Contract Law If this is a case of common co-debtorship, D will have to sue A, B, and C jointly to claim the horse.
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Contract Law: Legally Binding Agreement With Minors However, the law allows a minor to enter into contracts for the supply of necessities if no adult can provide the necessities.
Contract Law: Offer in the Acorn Computers Case It is a general rule that when an offer is made as was done by B supermarkets, the contract becomes binding the moment an acceptance is made by the offeree.
Contract Law: Refund for Cancelled Trip Payments The problem was in the fact that Burt decided to cancel the vacation, and he needed to receive the refund related to the reservation payments.
English Contract Law: Gibson vs. Manchester City Council Rather, it merely stated that the house “may be prepared to sell” and that the letter was not a “firm offer of a mortgage”.
Contract Law: Foodmart Inc. vs. Masterpiece Construction The client will therefore have the right to repudiate the contract on the basis that the terms of the agreements have not been upheld.
Contract Law and Its Management Consideration means what is exchanged between the parties to a contract to make the agreement valid. The contractor agrees to do the work by the set date and the client promises to compensate him for […]
Contract Law: Main Line Pictures Inc. vs. Basinger In maximizing /minimizing the loss profit incurred, this amount should not be included because the film was not produced so the actual loss caused by Basinger not taking part in the film cannot be traced.
Promissory Estoppel in English Contract Law In regards to the case between Brian and Harry, Harry won the case in which he claims a breach of contract by Brian.
Business Ethics and Contract Law While analyzing the nature of relationships between the supplier and Don from the ethical perspective, it is necessary to support the cessation of doing business with Don.
Minors and Contract Law: Hallman vs. Lemke But if Jeremy’s actions and the act of entering into the contract was overseen with his parents or guardians in the presence of the sales personnel, the company will be able to sue for damages […]
Contract Law in the United Arabs Emirates To understand the contract law through the prism of the UAE legal system, it is important to discuss the principles of the laws and provisions of a contract.
UAE and UK Contract Law: Misrepresentation and Duress Contract law is the agreement that should clear identify the situation and help the parties be equal; misrepresentation and duress can influence the quality of the contract and have to be properly understood by the […]
Essential Contract Law: History and Theory The fundamental nature of a contract is a legally binding accord, that is, a reciprocal appreciation among the parties, in regard, to the essence of the contract.
Business Management Affairs: Contract Law This report highlights the requirements and content of the contract, as well as the consequences for breach of contract by the judges.
The English Contract Law: Terms and Classification To determine a legal contract, the courts look for the following into the contract; the transaction stage, which the transaction took, place, the importance that the representee connected to the declaration together with the skills […]
Contract and Sale of Goods Law It is clear that Blackboard was aware of the purpose that PostersPLUS intended to use the vinyl film at the time the contract was entered into between the two firms.
Contract Law: Breach of Contract and Remedies Available For any claim to contractual material breach to be successful, the injured party must establish that: indeed there was a contract; the defendant is indeed the right party to bring a claim, the contract was […]
Contract Law Dispute: Defendant’s Motion As the judge in the case, I would rule in favor of the plaintiff and oblige the defendant to pay for the damages as requested.
Rescission of a Contract in the Law of Contracts In the law of contracts, when a contract is rescinded, it means that the two parties to the contract have been relieved of their obligation in relation to the initial contract entered in the initial […]
Contract Law: PepsiCo and a Harrier Jet Contest Prize The theory of objectivity in a contract implies that for an offer and acceptance to take place, the reasonableness of the offer and acceptance should be considered, thus other than the mutual consent of the […]
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Faulty Goods and Unfair Contract Exclusions: Cases of English Contract Law
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Contract Law

Validity of a Contract Assignment

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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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Implied Covenant Laws
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Personal Property Contracts
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Fixed-Price Contract Laws
Cost Plus Fixed Fee Contracts
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Boilerplate Language in Contracts
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FAQ: Contract Law
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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.

Contracts: assignment

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General Contract and Boilerplate
Substantive Law
General contract and boilerplate
1 Scope of this note
2 What is an assignment?
3 Effect of assignment
4 When is assignment used?
5 Types of assignment
6 Assignment formalities
Personal contracts
Assignments prohibited by public policy
Construing non-assignment provisions
Requirements for consent
Circumventing restrictions on assignment
Legal restrictions on non-assignment provisions
"Conditional benefit" exception discredited for assigning contractual obligations
Creating a legal assignment
When are legal assignments used?
Who must consent?
Must a legal assignment be in writing?
Who must sign the assignment?
Is consideration required?
Notice of assignment
Notice must be in writing
Must the notice take any particular form?
Does the notice need to state the date of the assignment?
When should notice be given?
Who can give notice?
To whom can notice be given?
Can notice be given in advance of assignment?
Can the other contracting party demand sight of the assignment agreement?
Which methods of giving notice are valid?
Effect of non-assignment provision on a notice of assignment
What happens if notice of assignment is not given to the other contracting party?
Creating an equitable assignment
When are equitable assignments used?
Must an equitable assignment be in writing?
Is notice of assignment required?
Subject to equities
Recovery of loss by assignee
14 Assignment of a third party right
Conditional fee agreements
Construction agreements
Consumer contracts
Security arrangements
General reading
Assignment of other choses in action
17 Drafting assignment provisions
18 Section 136 of the Law of Property Act 1925

Assignment Law: Everything You Need to Know

In legal terms, the meaning of an assignment is a contractual obligation to transfer a property title or right from one party to another. 3 min read updated on February 01, 2023

The term assignment law is used in the law of real estate and in the law of contracts. In both instances, it relates to the transfer of rights held by one party (the assignor) to another party (the assignee).

Assignment Law

In legal terms, the meaning of an assignment is a contractual obligation to transfer a property title or right from one party to another. Generally, the assignment is transferred based on an entire interest in the property, chattel, estate, or other item assigned.

A grant is different from an assignment in that an assignment refers to the right to transfer the property. This is considered an intangible right. On the other hand, the grant is concerned about the physical transfer of property. This is a tangible right. For example, a payee can assign their rights to collect a note payment to a bank.

The terms of the contract must be analyzed to determine if the right of assignment is prohibited. For example, a property owner may allow a lease to be assigned, ordinarily along with an assumption agreement, where the new tenant is now responsible for the payments and duties of the lease.

The holder of a trademark may transfer it, either by giving or selling their interest in the trademark to another party. This is referred to as an assignment. The party that receives the benefit is called the assignee. Once transferred, the assignee has the ability to exclude others from using their trademark.

In order for the assignment to be enforceable, it must be in writing and have the goodwill of the company attached to the mark. For an assignment to be effective, it must contain the fundamental aspects of a contract, such as:

Parties with legal capacity
Legality of object
Consideration consent

A contract assignment occurs when a party assigns their contractual rights to a third party. The benefit 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. Essentially, 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.

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

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 that they cannot be delegated. Adding a clause in the contract to prevent a party from delegating their responsibilities and duties is highly recommended.

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 assignment law, 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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12: Writing Contracts

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Melissa Randall and Community College of Denver Students

Melissa Randall and Community College of Denver Students
Community College of Denver

12.1 Writing Contracts

Learning objectives.

Learn how to write valid contracts.
Understand strategies for drafting contracts.

Knowing how to write legally enforceable contracts that protect their interests is a vital skill for businesses. In fact, most contracts are not written by attorneys. Individuals and businesses write contracts without legal help because they are trying to save time, money, and tension with others. However, hiring an attorney to write or review a contract to protect personal or business interests is sometimes necessary and worthwhile.

There are no magic words that a contract must have to be enforceable. Some are short and informal, while others are long and formal. No one style, format, or approach will always serve the parties’ needs. The only legal requirement that contracts must have are the elements of a contract: offer, acceptance, and consideration. This chapter offers some guidelines for business people to consider when writing their own contracts.

Counselor’s Corner It has been said that a poorly drafted contract will work if everyone gets the benefit of their bargain. This may be true, but it does not excuse sloppy drafting. Address all essential matters, clearly, succinctly, and at once. Non-essential terms, inconsistent use of defined terms, and repetition create fertile ground for disputes. You cannot control how the other party will perform. However, you put yourself in the best position possible by ensuring that the intent, obligations and rights of all parties are stated clearly and unambiguously. ~Kathy K., attorney

12.2 Structure of Contracts

Written contracts can be organized in many different ways. However, having a structure can help keep information organized, clear, and easy to find. The best contracts have clear headings that accurately describe what is contained in that section. Using emphasis, such as bold and underlining , work better than italics alone for capturing the reader’s eye.

In general, contracts often contain a structure like this:

Introduction of Parties and Purpose

Definitions of material terms, covenants and promises of performance, breach and its consequences, representations and warranties.

Procedure to Modify Contract
Rights of Assignment and Delegation

Alternative Dispute Resolution

Choice of law and forum, integration, severability, exculpatory clause, force majeure, attorney fees.

Signature Block

Not all contracts will contain all these elements and provisions. The parties’ needs and the purpose of the contract drive the structure of the document.

Contracts have a title, often in bold or CAPITAL letters, at the top of the page. Titles should be as descriptive as possible. “Contract” or “Agreement” are not useful because they require the reader to read through the contract to know what it is about. The best contracts capture the nature of the document in the title. For example, “Employment Agreement Between Jane Doe and Stanford University.”

The introduction should name the parties and describe the nature of the contract. If background information is useful in explaining the parties’ interests and objectives, then it should be included here.

Most business contracts contain some definitions, unless the subject matter and parties are clear. Definitions are useful because it is an area readers can reference to ensure compliance with the contract. For example, did the seller provide the specific goods as defined by the contract?

Definitions are not necessary for every term, though. If not defined, legal terms are given their legal meaning. And ordinary words are given their common, ordinary meaning. Therefore, businesses should define the material terms of the transaction: goods, services, quantity, quality, price, etc. Definitions that are specific to the industry are also helpful to include.

A covenant is a formal promise to perform. This is the section of the contract where the parties state exactly how they will perform the contract. Buyer will pay a specific amount for the goods or service. Seller will deliver a specific item at a particular location.

To ensure clarity, the best contracts use active verbs in this section. For example, “Buyer will pay Seller ten dollars.” It is clear who will be paying whom, and how much is owed. Passive voice injects ambiguity, which can be problematic. For example, “Seller shall be paid ten dollars.” Will Buyer pay Seller the money or will someone else tender payment? If payment is not made, is Buyer in breach of contract?

As discussed in Chapter 10, conditions are things that must occur before performance is due. Usually conditions must be expressly stated in a contract to be legally enforceable. The best contracts identify any conditions and delineate a timeline for when performance is due after the condition is met. For example, if an inspection of a property is a condition precedent of purchasing it, how long after the inspection is completed must the buyer perform?

To constitute a violation of the contract, a breach must be material. A material breach is a substantial breach of contract that excuses aggrieved parties from further performance and affords them the right to sue for damages.

In contracts that require performance over a period of time, or payments in installments, it is helpful to define what constitutes a material breach. This clarifies when the non-breaching party can seek a remedy. The best contracts anticipate reasons for breach and identify consequences for them.

Acceleration Clause

An acceleration clause makes all future payments due immediately under the contract. Acceleration clauses often exists in contracts where periodic payments occur. For example, a contract to purchase a vehicle may require payment of all remaining money owed under the contract if the buyer misses a monthly payment. This allows the business that sold the vehicle or the bank that issued the loan to sue for breach of contract once, rather than filing a new lawsuit for each month.

Liquidated Damages

A liquidated damages clause allows parties to determine the amount of damages in the event of a material breach. Agreeing to the value of the contract before any breach occurs often saves time and money should the case be litigated. To be enforceable, the liquidated damages must apply to all parties equally, and be based on the value of the contract rather than act as a penalty.

Representations are statements of fact made to induce someone to enter into a contract. Common representations by businesses include:

They are properly licensed;
They are insured;
Their financial statements are accurate;
They own all relevant assets;
They have legal authority to enter into contracts.

Warranties in a contract are express promises that guarantee something in furtherance of the contract by one of the parties. For example, a seller warrants that the object being sold is as represented or promised.

Warranties differ from representations in four ways:

A warranty is an essential part of a contract, while a representation is usually only a collateral inducement;
A warranty is written in a contract; while a representation may be written or oral;
A warranty is conclusively presumed to be material, while a representation must be proven to be material by the party claiming breach; and
A warranty must be strictly complied with, while a representation must be substantially true.

Please note that express contract warranties are different from implied warranties under the Uniform Commercial Code (UCC). A party may disavow implied warranties under the UCC through a written contract.

Modification

Often with contracts that require an extended period for performance, modification becomes a concern. What happens if prices or deadlines need to be altered? Does that require a new contract or can the existing contract be modified? Good contracts often include a procedure for how to modify a contract. This may be as informal as writing changes directly on the original contract with the parties’ initials and date. Or it could be through a formal addendum procedure.

Regardless of the chosen procedure, it is a best practice for businesses to discuss modification procedures when entering into a contract. If the procedure is clear, less friction occurs when a party seeks modification.

Assignment and Delegation

In general, parties are free to assign and delegate their rights and duties under a contract. Parties can limit those rights or they can request notice if an assignment or delegation occurs. This is a provision that is often not needed unless a party has a concern about assignment, such as in the insurance industry.

As discussed in Chapter 4, many businesses want to reduce their risk of litigation by participating in alternative dispute resolution (ADR). Mandatory arbitration clauses are common in consumer and employment contracts. Before including an ADR provision in a contract, parties should be fully comfortable with the option that they choose. If a party agrees to mediation or arbitration, a court will enforce that choice even if the parties change their mind.

Choice of law provisions determine which state’s laws will be used to interpret the contract. Choice of forum provisions determine the state in which any litigation will take place.

This provision is often unnecessary for contracts involving individuals and entities in the same state. If the parties do not select that state law or location for litigation, the courts look to:

Where the contract was signed;
Where the contract is performed;
Where the parties are residents; and
The court’s jurisdictional rules.

An integration clause is a provision stating that the contract represents the parties’ complete and final agreement and supersedes all informal understandings and oral agreements relating to the subject matter of the contract. In other words, it is the agreement.

The purpose of an integration clause is to prevent the parties from later claiming that they agreed to additional or different terms than what the contract states. This means that any statements made before the parties signed the contract are not part of the contract and they will not be used to interpret the meaning of the contract.

A severability clause is a provision that keeps the remaining provisions of a contract in force if any portion of the contract is declared unenforceable by the court. It is also known as a savings clause because it “saves” the whole contract from being declared unenforceable.

For example, if a non-compete clause in an employment contract is declared unenforceable by a court, then the rest of the employment contract remains in effect.

An exculpatory clause is a provision relieving a party from any liability resulting from a negligent or wrongful act. They are often employed when the risk of injury exists. Exculpatory clauses cannot limit liability when a party acts with gross negligence, commits an intentional tort, or when public policy or state laws prohibit them. Exculpatory clauses have been struck down by courts in some cases where parties to a contract have greatly unequal bargaining power, especially when the party with greater power acts unethically or with gross negligence.

A force majeure clause is a provision allocating risk to a certain party if performance becomes impossible as a result of an event that the parties could not have anticipated or controlled. Force majeure events are big, disruptive events such as natural disasters, war, terrorist attacks, and fires.

For example, if the subject matter of an international sales contract is destroyed by a hurricane, does the buyer or seller lose the money in the sale?

Business contracts often have an attorney fees clause that entitles a party successful in litigation over the contract to be reimbursed its attorney fees. This clause often has the effect of limiting frivolous lawsuits because it becomes more expensive for parties to litigate weaker claims. It may also give leverage to a winning party to prevent or end appeals of a court judgment.

Courts will usually enforce an attorney fees provision in a contract. However, courts review attorney fee awards for reasonableness. Therefore, the amount of fees usually must be deemed reasonable by a court or arbitrator before a party can collect under a contract.

12.3 Common Mistakes

Four of the most common mistakes when writing a contract are not understanding the content, vagueness, ambiguity, and typographical errors.

Not Understanding the Content

One common mistake is using free online resources without ensuring that they are appropriate for the circumstances. Just because it sounds official, a document generated by a computer algorithm may not be helpful. Better to read the contract and ensure that it accurately reflects the parties’ agreement.

Courts presume that parties have read a contract before signing it. Any mistakes in drafting go against the party who wrote the contract. In other words, if the contract is unclear, the party who did not write it gets the benefit of the doubt. The idea is that the party who wrote it should have done a better job, and the party who read and signed it should not be penalized as a result of someone else’s error. When writing a contract, better to keep it simple and clear.

It is also important to exclude provisions that are irrelevant to the contract. Contracts that are too long and contain irrelevant and contradictory terms are hard to understand. The best contracts are used as a reference between the parties during the period of performance. If a contract is too broad, too confusing, or contains too much irrelevant information, it hinders the effectiveness of the document.

In the context of contracts, vagueness means the language is imprecise, uncertain, and not clearly expressed. Vagueness is problematic because it could mean that the parties did not have a meeting of the minds because they were not talking about the same things.

Some business people think that keeping the contract “general” will facilitate a business transaction and that the details can be worked out later. However, if the parties are not in agreement up front, it is uncommon that things will work out smoothly later.

Another risk with vagueness is that it is not clear how a court will interpret the contract. If there are two or more reasonable interpretations, it is possible that the court will decide another interpretation is more reasonable. Again, mistakes in drafting are held against the drafter so if a court concludes that the vague term was a mistake, then it is hard to win in litigation.

In contracts, ambiguity means an uncertainty of meaning or intention. Ambiguities can be either patent or latent. A patent ambiguity is where the language of the contract itself creates uncertainty because it is contradictory. For example, a contract states two different sale prices.

A latent ambiguity exists where the uncertainty arises during the performance of the contract. For example, the contract states that goods will ship via a carrier that has a common name and could be referring to different carriers.

Typographical Errors

Typographical errors are common in contracts. Some are harmless, some are embarrassing, and others are harmful. Although some typos are easy to ignore because they do not carry legal consequences, some can be fatal to the agreement.

Minor errors are called scrivener’s errors . The scrivener’s error doctrine permits typographical errors in a written contract to be corrected when clear and convincing evidence exists that the mistake does not reflect the intent of the parties.

However, errors related to dates, price, quantity, legal names of individuals and entities, and property descriptions (such as addresses and lot numbers) may not qualify as scrivener’s errors. Such errors may be fatal to the contract or may be enforced with adverse consequences against one of the parties.

12.4 Tips for Writing a Contract

Regardless of the purpose of the contract, some tips for writing good contracts include:

Naming the Parties

Be sure to use the correct name of the business entity or individual who is a party to the contract. This may seem obvious, but people often write the name of a representative of the entity rather than the legal name of the entity.

For sole proprietorships, it is appropriate to identify the party as Ling Chen doing business as Chen Bookkeeping. If the business is a Limited Liability Company (LLC), identifying an individual in the contract by name may remove any personal liability protection that a LLC provides. Similar issues may arise with a partnership if each individual is identified as a party to the contract.

Except for sole proprietors who do not have a separate business name, use the business entity’s name and not a personal name as a party to the contract. Otherwise, parties may lose the benefit of limited liability. There may also be tax consequences.

Define the Scope of the Work

Clearly define the scope of work or service being provided, and the proposed timeline to complete the work. Be specific. For example, instead of a broad “renovate the kitchen,” provide details of the cabinet designs, counter tops, and other materials and work to be provided.

If applicable, a time frame for each phase of the project is useful, along with procedures to follow if there are delays. This is especially helpful when delays occur as a result of a supply shortage or a third party. Breach of contract may not always be the fault of the parties. Having procedures in place in the case of delay often saves business relationships when things go wrong.

Specify Time and Amounts of Payments

Entering an hourly rate and projected time for completion, or the total amount of payment for a project, may be insufficient. Depending on the nature of the goods or services, the contract should include:

Who is paying whom;
How much is being paid;
The method of payment (such as check, cashier’s check or bank transfer);
Any portion of fees to be paid upfront;
Any fees to be paid at project milestones;
Payment for work completed if contract is canceled;
Any late fees; and
Hourly/per diem rate for time due to delays caused by the other party.

Termination Clause

Few contracts go on forever, so including an end date for the agreement or procedures for a party to cancel the contract are helpful. For example, parties often want to end the agreement if the other party fails to pay or misses too many important deadlines.

Termination procedures should be as specific as possible and include how much notice needs to be given, the type of notice required, and whether there is a time period where the other party may cure the deficiency.

Termination clauses should anticipate termination by all parties and address the parties’ rights based on which party requests termination and why.

Sign and Date the Contract

The signature block should name the business entity, then under the signature, the name and title of the person signing.

Figure 12.1 Signature Block Example

graphic of typical signature block in a contract

For example, Ahmad’s Construction, LLC By: __________ Khalid Ahmad, President

Each person signing the contract should date it next to his or her signature.

For partnerships, only general partners can sign a contract on the partnership’s behalf. For corporations, the president or chief executive officer is presumed to have authority to sign. For an organization or association, a board president would have authority, but it may require a vote of the governing board to approve the contract.

Minor Changes

Minor changes can be made directly to the contract. Both parties need to initial and date beside the changes to show that both parties agree to the change.

This is common when people buy property and the amount held in escrow changes (usually based on interest accrued) from the time the contract was prepared to the time it was signed.

Legal Terms

Courts interpret legal terms to have their legal meaning, regardless of the parties’ intent. Avoid using legal terminology unless all parties fully understand the legal definition and how it will be applied by the court. Again, simple and clear language is more effective than confusing legal jargon.

Allow for Flexibility

Contracts are usually the result of negotiation and the majority of them never end up in court. Contracts cannot cover every possible future situation but serve as a working document for the parties’ business relationship. When writing contracts, it is best to think of them as an agreement between parties that need some flexibility for the transaction(s) to take place. Life is dynamic and the best contracts give structure without being too rigid.

12.5 Concluding Thoughts

Writing valid contracts is an essential skill to be successful in business. Most contracts are not written by attorneys but they are critical to capturing an agreement between parties. Successful business people see contracts not just as a way to protect their interests, but also as a document that governs their business relationships with others. A well-written contract can be used throughout a transaction to guide the parties in their interactions and responsibilities.

Primary tabs

Assign is the act of transferring rights , property , or other benefits to another party (the assignee ) from the party who holds such benefits under contract (the assignor). This concept is used in both contract and property law .

Contract Law

Under contract law, when one party assigns a contract , the assignment represents both: (1) an assignment of rights; and (2) a delegation of duties .

For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C.
Here, A has both: (1) assigned A’s rights under the contract to the $50; and (2) delegated A’s duty to teach guitar, to C.
In this example, A is both the “assignor” and the “delegee” who delegates 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.

Assigning 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, they cannot assign their future right to an assignee.

That is, if A has not yet contracted with B to teach B guitar, A cannot assign their 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 them.

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.

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.

Meaning 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. 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 another party (C) to take over the property.
In this scenario, A might choose between assigning and subleasing the property to C.
If assigning , A would give C the entire balance of the term , with no reversion to anyone; whereas if subleasing , A would give C the property for a limited period of the remaining term.
Under assignment, C would have privity of estate with the landlord while under a sublease, C would not.

[Last updated in June of 2022 by the Wex Definitions Team ]

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14.1 Assignment of Contract Rights

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 The passing or delivering by one person to another of the right to a contract benefit. , an obligee One to whom an obligation is owed. (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor One who owes an obligation. (the one who has a duty to perform) to a third person ( assignee One to whom the right to receive benefit of a contract is passed or delivered. ); the obligee then becomes an assignor One who agrees to allow another to receive the benefit of a contract. (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 A person who pays money to receive another’s executory contractual benefits. 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 An assignee takes no greater rights than his assignor had. 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 Surrender by a party of legal rights otherwise available to him or her. 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 A contract for household or domestic purposes, not commercial purposes. . 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 The right or duty of a particular person to perform or receive contract duties or benefits; cannot be assigned. 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 33 "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 Promises, express or implied, made by an assignor to the assignee about the merits of the assignment. 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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What is a contract assignment definition.

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

What is a contract assignment?

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

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

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

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

What are the benefits of a contract assignment?

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

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

What are the risks of a contract assignment?

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

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

How to assign a contract

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

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

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

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

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

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

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

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

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The Assignment of Commercial Contracts in Legal Practice

Contracts are a prime example of intangible property. Parties to commercial contracts, like other property owners, frequently want to transfer their property to a third party. The transfer of a contract refers to the assignment of some or all of a party’s rights or the delegation of some or all of a party’s performance, or both, to a non-party to the agreement.

Some common instances in which a contracting party in a commercial context may desire to assign contractual rights, performance responsibilities, or both are as follows:

In an asset sale, a corporation sells parts or all of its company.
A contractor who subcontracts its work under certain projects.
A business conglomerate that is going through an internal corporate reorganization.
The borrower who offers its lender a security interest in its assets.
A manufacturer who sells its receivables to a third party.

In any of these cases, the non-transferring party may object to assignment or delegation for a variety of grounds, including:

The desire to choose the party with whom it does business.
Concern that a different obligor or obligee may jeopardize the non-transferring party’s capacity to benefit from the contractual deal

To decide whether the transferring party (also known as the transferor) can execute the proposed transfer without gaining the non-transferring party’s approval, the transferring party must turn to relevant legislation and the plain text of the contract. If consent is necessary and not obtained, the transferring party faces the following risks:

Violation of the contract.
Making an ineffective and invalid transfer.

The Definitions of Assignment and Delegation

Each party to a contract is an:

Obligee in terms of its contractual rights; and
Obligor in terms of its contractual performance responsibilities.

Contract “assignability” is a term frequently used by contracting parties and practitioners. While they may expressly address the assignment of a party’s rights under the contract in some contexts, they frequently use the term “assignment” to refer to both:

The delegation of duty to perform.
The assignment of rights to obtain performance.

However, assignment and delegation are two distinct legal concepts that must be treated individually due to the fact that they might have different outcomes.

What is an Assignment?

Assignment is the transfer of some or all of an obligee’s (assignor’s) rights to receive performance under a contract, generally but not always to a non-party (assignee). A contract benefit is a right (a chose in action) that, in theory, may be delegated by the benefiting party to a non-party. For clarity purposes, this informative piece will assume that the assignee is a non-party, although the rights and responsibilities of the parties addressed apply equally to an assignee who is also a party to the agreement. When these rights are assigned, the assignor no longer has any claim to the advantages of the given rights, which are completely passed to the assignee.

Technically, a contract’s burden cannot be assigned under the law (see National Trust Co. v. Mead [i] and Irving Oil Ltd. v. Canada [ii] ). Transferring performance responsibilities under a contract requires the approval of all parties, making such a transfer a novation.

In practice, parties frequently refer to “assigning a contract” or “allowing the assignment of a contract,” which is actually an inaccurate representation of their intentions. For example, the parties may plan for some or all of the following:

The contract’s rights or benefits may be assigned.
The contract’s burdens or performance duties may be transferred.
Rights and burdens may be transferred.

The Effects of Assignment

The assignor is no longer entitled to any benefits from the assigned rights, which have all been passed to the assignee; nonetheless, even if the assignor is stripped of its contractual rights, assignment does not decrease or remove the assignor’s duties to the non-assigning party. As previously stated, a contract’s burden may only be assigned to a third party with the approval of all parties. As a result, the assignor is still obligated to fulfill its contractual commitments. The non-assigning party retains the following:

Its entitlement to get performance from the assignor; and
Its remedies against the assignor in the event of non-performance.

The ordinary rule is that a party can only assign its benefits without the consent of the other party to the contract and will remain liable to the other party for its performance obligations (see National Trust Co. v. Mead [iii] and Rodaro v. Royal Bank [iv] ). If the assignor intends to transfer its obligations and both the non-transferring party and the potential assignee agree, the parties should enter into a novation agreement, which results in a new contract between the assignee and the old contract’s remaining (non-transferring) party. In practice, the assignee often undertakes the contract’s performance responsibilities as of the date of assignment, and the assignor gets an indemnity from the assignee in the event of a breach or failure to perform.

A clear, present, purpose to transfer the assigned rights without needing any additional action by the assignee is required for an assignment to be effective, which means that a promise to assign in the future is ineffective as an actual transfer. Otherwise, no special terminology is necessary to draft an effective assignment.

What is Delegation?

Delegation is the transfer of some or all of an obligor’s (delegating party’s) performance responsibilities (or conditions demanding performance) under a contract to a non-party (delegatee). To be effective, a delegation requires the delegatee to agree to take on the delegated performance; however, unless the non-delegating party has consented to a novation, the delegating party remains accountable for the delegated performance, whether or not it has also transferred its contractual rights.

This is distinct from an assignment of rights, in which the assignor relinquishes its contractual claims upon assignment. As a result, even if the delegating party can effectively delegate its actual performance to the delegatee (such that the delegatee’s actual performance discharges the delegating party’s duty), the delegating party cannot be relieved of its obligation to perform and liability for non-performance unless the non-delegating party agrees to a novation.

There is no precise wording necessary to create an effective delegation, just as there is not for the assignment of rights. When performance is effectively delegated, the delegatee assumes liability for the delegating party’s performance obligations (under an assumption agreement), even if the delegating party retains liability to the non-delegating party for the delegatee’s failure to adequately perform the delegated obligations in the absence of a novation. Under an assumed agreement, the delegating party may have recourse against the delegatee, which is frequently addressed through a contractual indemnity right.

If the delegating party wishes to entirely exclude itself from liability for non-performance, it must get the non-delegating party’s approval to the contract (novation). In the majority of novations, the delegating party, the delegatee, and the non-delegating party all agree on the following:

The delegatee replaces the delegating party as a party to the contract.
The delegating party is no longer liable for contract performance.
The delegatee is directly and solely liable for the delegating party’s contract fulfillment.

Types of Assignment – Legal (Statutory) Assignment vs. Equitable Assignment

Legal (Statutory) Assignment: An assignment that satisfies the provisions of the appropriate province or territory laws (for example, the Conveyancing and Law of Property Act [v] )
Equitable Assignment: An equitable assignment may be enforced even if it does not fulfill the statutory requirements for a legal assignment.

Requirements for a Legal (Statutory) Assignment

All of Canada’s common law provinces have enacted legislation allowing the transfer of contract rights. Notably, the legislation for Ontario is the Conveyancing and Law of Property Act .

These statutory assignments are enforceable if the parties comply with the following procedures:

The assignment is absolute.
The assignment is in writing, signed by the assignor
the non-assigning obligor is given express written notice.

A statutory assignment does not need consideration, and no precise words or form are necessary. They can be made as gifts and be valid.

Requirements for an Equitable Assignment

An assignment may be enforceable as an equitable assignment even if it does not fulfill the formality criteria of a statutory assignment. An equitable assignment does not necessitate the use of any specific terms or form. However, in order to comply with any provincial statutes of frauds regulations, the assignment must be in writing. The phrasing must clearly indicate that the assignee is to benefit from the rights being assigned. In contrast to a statutory assignment, consideration is required until there is a full transfer, such as a gift. It is not necessary to provide the non-assigning obligor with express written notification (except in the case of a transfer of land). However, notification is often given largely to assure that:

The obligor ceases to pay the assignor.
The assignee has priority over subsequent encumbrances.

Contractual Anti-Assignment & Anti-Delegation Clauses

Rather than relying on relatively uncertain legal rules, most commercial contract parties handle transferability issues in the written agreement. As a result, most commercial contracts include a negative covenant that restricts one or both parties’ rights to assign.

These clauses frequently include specific exceptions that allow one or more of the parties to assign and delegate rights and duties, often to designated non-parties such as affiliates and successors-in-interest to the transferring party’s business.

Courts frequently uphold provisions that prevent assignment because they favor the rights of parties to freely contract. However, subject to specific limitations, there is a broad assumption that contractual rights are assignable. As a result, the case law on anti-assignment provisions is a little erratic. Some courts have upheld anti-assignment clauses and declared the agreement unenforceable. Others have argued that an anti-assignment provision cannot preclude assignment.

Overall, contractual anti-assignment and anti-delegation provisions are commonly included in many types of business contracts. If not, transferability is determined by the contract’s subject matter and the nature of the rights and obligations to be transferred. It is important to stay knowledgeable the existence of such contractual terms when dealing with various commercial contracts…such as contracts for the sale of goods, personal service contracts, commercial real estate leases and various other types of contracts.

If you have any questions about your business’s contractual assignment or delegation needs, contact Cactus Law today to speak with a lawyer specializing in commercial law.

Disclaimer:

The information presented above is solely for general educational and informational purposes. It is not intended to be, and should not be taken as, legal advice. The information given above may not be applicable in all cases and may not even reflect the most recent authority after the date of its publication. As a result, please refer to all updated legislation, statutes, and amendments. Nothing in this article should be relied on or acted upon without the benefit of legal advice based on the specific facts and circumstances described, and nothing in this article should be interpreted otherwise.

About the Author:

Kanwar Gujral is entering his third year at Osgoode Hall Law School in Toronto, Ontario. He has a dedicated interest in real estate, business, and corporate law.

[i] National Trust Co. v. Mead , 1990 CarswellSask 165 (S.C.C.).

[ii] Irving Oil Ltd. v. Canada , 1984 CarswellNat 137 (Fed. C.A.).

[iii] Supra note 1.

[iv] Rodaro v. Royal Bank , 2002 CarswellOnt 1047 (Ont. C.A.).

[v] Conveyancing and Law of Property Act , R.S.O. 1990, c. C.34.

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