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Assignment provisions in contracts
Author’s note, Nov. 22, 2014: For a much-improved update of this page, see the Common Draft general provisions article .
(For more real-world stories like the ones below, see my PDF e-book, Signing a Business Contract? A Quick Checklist for Greater Peace of Mind , a compendium of tips and true stories to help you steer clear of various possible minefields. Learn more …. )
Legal background: Contracts generally are freely assignable
When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor , has transferred its rights under the contract to someone else, known as the assignee , and also has delegated its obligations to the assignee.
Under U.S. law, most contract rights are freely assignable , and most contract duties are freely delegable, absent some special character of the duty, unless the agreement says otherwise. In some situations, however, the parties will not want their opposite numbers to be able to assign the agreement freely; contracts often include language to this effect.
Intellectual-property licenses are an exception to the general rule of assignability. Under U.S. law, an IP licensee may not assign its license rights, nor delegate its license obligations, without the licensor’s consent, even when the license agreement is silent. See, for example, In re XMH Corp. , 647 F.3d 690 (7th Cir. 2011) (Posner, J; trademark licenses); Cincom Sys., Inc. v. Novelis Corp. , 581 F.3d 431 (6th Cir. 2009) (copyright licenses); Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp. , 284 F.3d 1323 (Fed. Cir. 2002) (patent licenses). For additional information, see this article by John Paul, Brian Kacedon, and Douglas W. Meier of the Finnegan Henderson firm.
Assignment consent requirements
Model language
[Party name] may not assign this Agreement to any other person without the express prior written consent of the other party or its successor in interest, as applicable, except as expressly provided otherwise in this Agreement. A putative assignment made without such required consent will have no effect.
Optional: Nor may [Party name] assign any right or interest arising out of this Agreement, in whole or in part, without such consent.
Alternative: For the avoidance of doubt, consent is not required for an assignment (absolute, collateral, or other) or pledge of, nor for any grant of a security interest in, a right to payment under this Agreement.
Optional: An assignment of this Agreement by operation of law, as a result of a merger, consolidation, amalgamation, or other transaction or series of transactions, requires consent to the same extent as would an assignment to the same assignee outside of such a transaction or series of transactions.
• An assignment-consent requirement like this can give the non-assigning party a chokehold on a future merger or corporate reorganization by the assigning party — see the case illustrations below.
• A party being asked to agree to an assignment-consent requirement should consider trying to negotiate one of the carve-out provisions below, for example, when the assignment is connection with a sale of substantially all the assets of the assignor’s business {Link} .
Case illustrations
The dubai port deal (ny times story and story ).
In 2006, a Dubai company that operated several U.S. ports agreed to sell those operations. (The agreement came about because of publicity and political pressure about the alleged national-security implications of having Middle-Eastern companies in charge of U.S. port operations.)
A complication arose in the case of the Port of Newark: The Dubai company’s lease agreement gave the Port Authority of New York and New Jersey the right to consent to any assignment of the agreement — and that agency initially demanded $84 million for its consent.
After harsh criticism from political leaders, the Port Authority backed down a bit: it gave consent in return for “only” a $10 million consent fee, plus $40 million investment commitment by the buyer.
Cincom Sys., Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009) (affirming summary judgment)
A customer of a software vendor did an internal reorganization. As a result, the vendor’s software ended up being used by a sister company of the original customer. The vendor demanded that the sister company buy a new license. The sister company refused.
The vendor sued, successfully, for copyright infringement, and received the price of a new license, more than $450,000 as its damages. The case is discussed in more detail in this blog posting.
The vendor’s behavior strikes me as extremely shortsighted, for a couple of reasons: First, I wouldn’t bet much on the likelihood the customer would ever buy anything again from that vendor. Second, I would bet that the word got around about what the vendor did, and that this didn’t do the vendor’s reputation any good.
Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, No. 5589-VCP (Del. Ch. Apr. 8, 2011) (denying motion to dismiss).
The Delaware Chancery Court refused to rule out the possibility that a reverse triangular merger could act as an assignment of a contract, which under the contract terms would have required consent. See also the discussion of this opinion by Katherine Jones of the Sheppard Mullin law firm.
Assignment with transfer of business assets
Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party’s business.
Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party’s business to which this Agreement specifically relates.
Optional: The assignee must not be a competitor of the non-assigning party.
• A prospective assigning party might argue that it needed to keep control of its own strategic destiny, for example by preserving its freedom to sell off a product line or division (or even the whole company) in an asset sale.
• A non-assigning party might argue that it could not permit the assignment of the agreement to one of its competitors, and that the only way to ensure this was to retain a veto over any assignment.
• Another approach might be to give the non-assigning party, instead of a veto over asset-disposition assignments, the right to terminate the contract for convenience . (Of course, the implications of termination would have to be carefully thought through.)
Assignment to affiliate
[Either party] may assign this Agreement without consent to its affiliate.
Optional: The assigning party must unconditionally guarantee the assignee’s performance.
Optional: The affiliate must not be a competitor of the non-assigning party.
Optional: The affiliate must be a majority-ownership affiliate of the assigning party.
• A prospective assigning party might argue for the right to assign to an affiliate to preserve its freedom to move assets around within its “corporate family” without having to seek approval.
• The other party might reasonably object that there is no way to know in advance whether an affiliate-assignee would be in a position to fulfill the assigning party’s obligations under the contract, nor whether it would have reachable assets in case of a breach.
Editorial comment: Before approving a blanket affiliate-assignment authorization, a party should consider whether it knew enough about the other party’s existing- or future affiliates to be comfortable with where the agreement might end up.
Consent may not be unreasonably withheld or delayed
Consent to an assignment of this Agreement requiring it may not be unreasonably withheld or delayed.
Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are to be treated as direct damages.
Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are not subject to any exclusion of remedies or other limitation of liability in this Agreement.
• Even if this provision were absent, applicable law might impose a reasonableness requirement; see the discussion of the Shoney case in the commentary to the Consent at discretion provision.
• A reasonableness requirement might not be of much practical value, whether contractual or implied by law. Such a requirement could not guarantee that the non-assigning party would give its consent when the assigning party wants it. And by the time a court could resolve the matter, the assigning party’s deal could have been blown.
• Still, an unreasonable-withholding provision should make the non-assigning party think twice about dragging its feet too much, becuase of the prospect of being held liable for damages for a busted transaction. Cf. Pennzoil vs. Texaco and its $10.5 billion damage award for tortious interference with an M&A deal.
• Including an unreasonable-delay provision might conflict with the Materiality of assignment breach provision, for reasons discussed there in the summary of the Hess Energy case.
Consent at discretion
A party having the right to grant or withhold consent to an assignment of this Agreement may do so in its sole and unfettered discretion.
• If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include that in the contract language. Otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law (see the next bullet). On the other hand, asking for such language but not getting it could be fatal to the party’s case that it was implicitly entitled to withhold consent in its discretion.
• If a commercial- or residential lease agreement requires the landlord’s consent before the tentant can assign the lease, state law might impose a reasonableness requirement. I haven’t researched this, but ran across an unpublished California opinion and an old law review article, each collecting cases. See Nevada Atlantic Corp. v. Wrec Lido Venture, LLC, No. G039825 (Cal. App. Dec. 8, 2008) (unpublished; reversing judgment that sole-discretion withholding of consent was unreasonable); Paul J. Weddle, Pacific First Bank v. New Morgan Park Corporation: Reasonable Withholding of Consent to Commercial Lease Assignments , 31 Willamette L. Rev. 713 (1995) (first page available for free at HeinOnline ).
Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)
In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a proposed sublease. The supreme court noted that the contract specifically gave Shoney’s the right, in its sole discretion , to consent to any proposed assignment or sublease.
Significantly, prior case law from Alabama was to the effect that a refusal to consent would indeed be judged by a commercial-reasonableness standard. But, the supreme court said, “[w]here the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be construed as written.” Shoney’s LLC v. MAC East, LLC , No. 1071465 (Ala. Jul. 31, 2009) (on certification by Eleventh Circuit), cited by MAC East, LLC v. Shoney’s [LLC] , No. 07-11534 (11th Cir. Aug. 11, 2009), reversing No. 2:05-cv-1038-MEF (WO) (M.D. Ala. Jan. 8, 2007) (granting partial summary judgment that Shoney’s had breached the contract).
Termination by non-assigning party
A non-assigning party may terminate this Agreement, in its business discretion , by giving notice to that effect no later than 60 days after receiving notice, from either the assigning party or the assignee, that an assignment of the Agreement has become effective.
Consider an agreement in which a vendor is to provide ongoing services to a customer. A powerful customer might demand the right to consent to the vendor’s assignment of the agreement, even in strategic transactions. The vendor, on the other hand, might refuse to give any customer that kind of control of its strategic options.
A workable compromise might be to allow the customer to terminate the agreement during a stated window of time after the assignment if it is not happy with the new vendor.
Assignment – other provisions
Optional: Delegation: For the avoidance of doubt, an assignment of this Agreement operates as a transfer of the assigning party’s rights and a delegation of its duties under this Agreement.
Optional: Promise to perform: For the avoidance of doubt, an assignee’s acceptance of an assignment of this Agreement constitutes the assignee’s promise to perform the assigning party’s duties under the Agreement. That promise is enforceable by either the assigning party or by the non-assigning party.
Optional: Written assumption by assignee: IF: The non-assigning party so requests of an assignee of this Agreement; THEN: The assignee will seasonably provide the non-assigning party with a written assumption of the assignor’s obligations, duly executed by or on behalf of the assignee; ELSE: The assignment will be of no effect.
Optional: No release: For the avoidance of doubt, an assignment of this Agreement does not release the assigning party from its responsibility for performance of its duties under the Agreement unless the non-assigning party so agrees in writing.
Optional: Confidentiality: A non-assigning party will preserve in confidence any non-public information about an actual- or proposed assignment of this Agreement that may be disclosed to that party by a party participating in, or seeking consent for, the assignment.
The Delegation provision might not be necessary in a contract for the sale of goods governed by the Uniform Commercial Code, because a similar provision is found in UCC 2-210
The Confidentiality provision would be useful if a party to the agreement anticipated that it might be engaging in any kind of merger or other strategic transaction.
Materiality of assignment breach
IF: A party breaches any requirement of this Agreement that the party obtain another party’s consent to assign this Agreement; THEN: Such breach is to be treated as a material breach of this Agreement.
A chief significance of this kind of provision is that failure to obtain consent to assignment, if it were a material breach, would give the non-assigning party the right to terminate the Agreement.
If an assignment-consent provision requires that consent not be unreasonably withheld , then failure to obtain consent to a reasonable assignment would not be a material breach, according to the court in Hess Energy Inc. v. Lightning Oil Co. , No. 01-1582 (4th Cir. Jan. 18, 2002) (reversing summary judgment). In that case, the agreement was a natural-gas supply contract. The customer was acquired by a larger company, after which the larger company took over some of the contract administration responsibilities such as payment of the vendor’s invoices. The vendor, seeking to sell its gas to someone else at a higher price, sent a notice of termination, on grounds that the customer had “assigned” the agreement to its new parent company, in violation of the contract’s assignment-consent provision. The appeals court held that, even if the customer had indeed assigned the contract (a point on which it expressed considerable doubt) without consent, the resulting breach of the agreement was not material, and therefore the vendor did not have the right to terminate the contract.
See also (list is generated automatically) :
- Notebook update: Reverse triangular merger might be an assignment of a contract, requiring consent Just updated the Notebook with a citation to a case in which the Delaware Chancery Court refused to rule out the possibility that a reverse...
- Assignment-consent requirements can cause serious problems in future M&A transactions A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a...
- SCOTX rejects implied obligation not to unreasonably withhold consent to assignment of contract In a recent Texas case, two sophisticated parties in the oil and gas business — let’s call them Alpha and Bravo — were negotiating a contract....
- Ken Adams and the marketplace of ideas I (used to) comment occasionally at Ken Adams’s blog. Recent examples: Here, here, here, here, and here. Ken and I disagree on a number of issues; some...
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February 28, 2018 Section of Litigation
Non-assignability of contracts without counterparty consent, if you value the identity of a vendor as much as you value the vendor’s products, then you need to include a non-assignment provision in your contract., by yvette v. mishev.
What Is a Non-Assignment Provision and Why Do You Need It? Generally speaking, contracts can be freely assigned to third parties. Non-assignment provisions are designed so that contracts cannot be as freely assigned to third parties; or at least, not without first obtaining the contracting counterparty’s consent. The purpose of a non-assignment provision is to ensure that the identities of the original two contracting parties remain the same throughout the term of the contract. A basic non-assignment provision reads something like the following:
- “This contract cannot be assigned to anyone without the written consent of both parties.”
A non-assignment provision is highly recommended if the service or product contracted for is unique to the party being contracted with and/or if the identity of the service or product provider is valued as much as the service or product being provided.
For example, if Layla contracts Monique Lhuillier to make a dress for her wedding, a part of the benefit Layla is bargaining for is a dress designed by Monique Lhullier. Consequently, if Monique Lhuillier assigned the design and making of the dress to a third party, Wal-Mart, even if the final product was on par with a Monique Lhullier gown in every way, Layla would nonetheless be deprived of the benefit she bargained for when she contracted Monique Lhullier—having a wedding dress designed by Monique Lhuillier. A non-assignment provision safeguards the contracting parties’ exclusive relationship under the contract; it ensures that Monique Lhullier designs Layla’s dress.
Which Contractual Rights Are Assignable? There are two types of rights one can assign under a contract—the right to receive performance under the contract, and the right to delegate performance. If a contract contains a basic non-assignment provision like the illustration above, a contracting party may still be able to assign its rights to receive performance under the contract, without acquiring its counterparty’s consent. In some states, a party that has fully performed under a contract can freely assign its right to enforce the other party’s liability despite the existence of a non-assignment provision in the governing contract, because the right to money is not considered personal in nature. E.g. Mail Concepts, Inc. v. Foote & Davies, Inc., 409 S.E.2d 567 (Ga. Ct. App. 1991); Kenneth D. Corwin, Ltd. v. Missouri Medical Service, 684 S.W.2d 598, 600 (Mo. App. 1985).
For example, in some states, if Monique Lhullier designs Layla’s wedding dress but, in turn, Layla does not perform her end of the contract—payment for the dress—Monique Lhullier may be able to assign her right to payment to a third party-despite the contract having a non-assignment provision. And when rights to payment under a contract are assigned, the assignee not only gets a right to the outstanding balance owed but is also entitled to pursue any and all default remedies provided for in the contract.
To further assure that neither contracting party can assign its rights to payment under the contract without first obtaining the counterparty’s consent, the non-assignment provision should explicitly address the issue. Courts will give effect to contract provisions that specifically prohibit the assignment of one's right to receive money due under a contract. See Raytown Consol. Sch. Dist. No. 2 v. Am. Arbitration Assoc. , 907 S.W.2d 189, 191 (Mo. Ct. App. 1995).
The following is an example of a non-assignment provision encompassing the right to payment:
- “This contract cannot be assigned to anyone without the written consent of both parties. No party to this contract has the power to sell, mortgage, encumber, or anticipate the future payments by assignment or otherwise.”
See, e.g. In re Kaufman , 37 P.3d 845 (Okla. 2001).
All Non-Assignment Provisions Are Not Created Equal Like any contract provision, a non-assignment provision must contain clear and unambiguous language. It is important to anticipate the circumstances you wish to avoid and include language to reflect that. A non-assignment provision should be clear about the consequences of the counterparty’s breach.
In some jurisdictions, assignment of rights under a contract containing a non-assignment provision without the counterparty’s consent would qualify as a breach and would entitle the non-breaching party to damages, but all other obligations under the contract would remain intact and enforceable against the non-breaching party and assignee.
For example, the Supreme Court of Connecticut has held that without express contractual language providing otherwise, a provision restricting the assignment of a contract will be construed to be a covenant like any other contractual covenant, so that a breach will render the breaching party liable in damages but will not make the contract a nullity. David Caron Chrysler Motors, LLC v. Goodhall’s, Inc., 43 A.3d 164 (Conn. 2012) (collecting cases from other jurisdictions). Once assigned, the contract is voidable—it has been breached but the burden is on the original counterparty to sue the assignor for damages. The assignee would still be entitled to his assigned rights. Wheelabrator Techs. of N. Am., Inc. v. Fin. Sec. Assur. of Oklahoma, Inc. , No. 88 CIV. 7623 (LMM), 1990 WL 180552, at *3 (S.D.N.Y. Nov. 15, 1990) (New York law).
In other jurisdictions, however, the contract becomes void upon assignment. Physicians Neck & Back Clinics, P.A. v. Allied Ins. Co. , No. A05-1788, 2006 WL 2053142, at *4 (Minn. Ct. App. July 25, 2006). Applied to the dressmaking illustration from before—Layla contracts with Monique Lhullier to make her wedding dress in exchange for money and widgets. Monique Lhullier then assigns the contract to Wal-Mart. Wal-Mart makes the dress and Layla accepts but does not deliver the widgets to Wal-Mart. Wal-Mart then sues Layla for breach of the contract. Wal-Mart could not sue Layla for breach of contract because Monique Lhullier’s assignment to Wal-Mart, without Layla’s consent rendered the contract void.
There are also jurisdictions where the effect of assignment in the face of a non-assignment provision requires a fact sensitive inquiry. Bank of America, N.A. v. Mogila, 330 F.3d 942 (7th Cir. 2003) (“the question whether breach of the promise discharges the obligor’s duty depends on all the circumstances.”) citing to Restatement (Second) of Contracts § 322(2).
To avoid surprises and ensure that assignment without your consent renders the contract void, the contract must explicitly provide that “assignment without consent will result in the assignment (or contract) being null and void.”
“Assignment” Should Be Defined A non-assignment provision should also make clear whether it applies to change of control transactions where assignment of ownership of the contracting party occurs, either through a merger or a sale. For example, in some jurisdictions, where a non-assignment provision in a contract does not explicitly prohibit a transfer of property rights to a new entity by merger, the general rule is that the court should not presume the parties intended to prohibit the merger. Tenneco Auto. Inc. v. El Paso Corp. , 2002 WL 453930, at *3–4 (Del. Ch. Mar. 20, 2002) (noting that the Court looks to whether the nonmerging party would suffer “any adverse consequences” as a result of the merger).
Consent Must Be Withheld in Good Faith But even if the contract has a clear, explicit non-assignment provision requiring a counterparty’s consent does not mean that consent can be freely withheld. In numerous jurisdictions, if the non-assignment provision itself does not account for circumstances under which consent may be withheld, the provision is interpreted in accordance with the implied covenant of good faith and fair dealing which requires the exercise of reasonableness and good faith in deciding whether to consent to a proposed assignment. Dick Broad. Co. of Tennessee v. Oak Ridge FM, Inc. 395 S.W.3d 653, 662 (Tenn. 2013) (collecting cases).
For example, in Alabama, consent cannot be withheld merely because doing so would be financially rewarding. The Alabama Supreme Court held that it was unreasonable to deny consent to an assignment of a lease just so the landlord may charge a higher rent than was originally contracted. The Pantry, Inc. v. Mosley, 126 So. 3d 152 (Ala. 2013). It reasoned that the landlord’s desire for a better bargain than it contracted for had nothing to do with the permissible purposes of the restraint on alienation—to protect the landlord’s interest in the preservation of the property and the performance of the contract.
Conclusion Non-assignment provisions are governed by contract law, which generally varies state by state, but the end goal is always the same—to give effect to the parties’ intent. Thus, a non-assignment provision should clearly and explicitly set forth the contracting parties’ intent and anticipate all possibilities.
Yvette V. Mishev – February 28, 2018
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
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.
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Understanding an assignment and assumption agreement by Belle Wong, J.D.
Understanding an assignment and assumption agreement
Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.
by Belle Wong, J.D. updated February 08, 2023 · 3 min read
While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.
If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.
The assignment and assumption agreement
An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.
In order for an assignment and assumption agreement to be valid, the following criteria need to be met:
- The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
- The assignor must agree to assign their rights and duties under the contract to the assignee.
- The assignee must agree to accept, or "assume," those contractual rights and duties.
- The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.
A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.
The basics of assignment and assumption
When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:
- First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
- All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
- Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.
Filling in the assignment and assumption agreement
Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:
- Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
- The effective date of the assignment and assumption agreement
- Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
- Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
- Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
- A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same
In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.
Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.
About the Author
Belle Wong, J.D.
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- Assignment Clause
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Assignment clause defined.
Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.
In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.
Here’s an article about assignment clauses.
Assignment Clause Explained
Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.
Here’s another article about assignment clauses.
Purpose of Assignment Clause
The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.
Assignment Clause Examples
Examples of assignment clauses include:
- Example 1 . A business closing or a change of control occurs
- Example 2 . New services providers taking over existing customer contracts
- Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
- Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger
Here’s an article about the different types of assignment clauses.
Assignment Clause Samples
Sample 1 – sales contract.
Assignment; Survival . Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.
Reference :
Security Exchange Commission - Edgar Database, EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.
Sample 2 – Purchase and Sale Agreement
Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.
Security Exchange Commission - Edgar Database, EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.
Sample 3 – Share Purchase Agreement
Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.
Security Exchange Commission - Edgar Database, EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.
Sample 4 – Asset Purchase Agreement
Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.
Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.
Sample 5 – Asset Purchase Agreement
Assignment; Binding Effect; Severability
This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.
Security Exchange Commission - Edgar Database, EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.
Common Contracts with Assignment Clauses
Common contracts with assignment clauses include:
- Real estate contracts
- Sales contract
- Asset purchase agreement
- Purchase and sale agreement
- Bill of sale
- Assignment and transaction financing agreement
Assignment Clause FAQs
Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:
What is an assignment clause in real estate?
Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.
What does no assignment clause mean?
No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.
What’s the purpose of the transfer and assignment clause in the purchase agreement?
The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.
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- Legal Dictionary
Assignment is a legal definition that refers to the transfer of rights, property, or other benefits between two parties. The party allocating the rights is known as the “assignor”, while the one receiving them is called the “assignee”. The other original party to the contract is known as the “obligor”.
A burden, duty, or detriment cannot be transferred as an assignment without the agreement of the assignee . Furthermore, the assignment can be carried out as a gift, or it may be paid for with a contractual consideration .
Keep reading to learn how this important legal term is used both in contract and property law and to see relevant examples.
- Assignment Examples
A common example of assignment within property law can be seen in rental agreements between landlords and tenants. For example, a tenant may be renting from a landlord but wants another party to take over the property . In this scenario, the tenant may be able to choose between assigning the lease to a new tenant or subleasing it.
If assigning it, the new tenant will be given the entire balance of the term, with no reversion to anyone else being possible. In other words, the new tenant would have a legal relationship with the landlord. On the other hand, if subleasing the property, the new tenant would be given a limited term and no legal responsibility towards the property owner, only towards the original tenant.
Another example of assignment can be seen within contract law . Let’s say that a school hires a piano teacher for a monthly employment contract with a salary of $2000 per month. As long as there is consent from all parties, the teacher could assign their contract to another qualified piano instructor.
This would be an assignment both of the piano teacher’s rights to receive $2000 per month, and a delegation of their duty to teach piano lessons. This illustrates the fact that under contract law, assignment always includes a transfer of both rights and duties between the parties. If a breach of contract is made by either party, for example for defective performance, then the new teacher or the school can sue each other accordingly.
- Legal Requirements for Assignment
For an assignment to be legally valid, it must meet certain requirements . If these are not met, a trial court can determine that the transfer of rights did not occur. The legal requirements for assignment are as follows:
- All parties must consent and be legally capable to carry out the assignment.
- The objects, rights, or benefits being transferred must be legal.
- The assignment is not against public policy or illegal.
- Some type of consideration is included if necessary.
- The contract in question must already be in place and doesn’t prohibit assignment.
- If a duty is being transferred, and it requires a rare genius or skill, then it cannot be delegated.
- The assignment doesn’t significantly change the expected outcome of a contract.
- Assignment Steps
To successfully assign a contract, certain steps must be followed to ensure the process is legally valid. The necessary assignment steps are listed below:
- Ensuring there is no anti-assignment clause in the contract.
- Executing the assignment by transferring the obligations and rights to a third party.
- Notifying the obligor of the transfer, which in turn relieves the assignor of any liability.
- Avoiding Assignment
In certain situations, one of the two parties may not want to allow their counterpart to assign the contract. This can be prevented by setting anti-assignment clauses in the original contract. An example of this is making it necessary for prior written consent to be attained from the other parties before the assignment is approved. Nevertheless, an anti-assignment clause cannot be included in an assignment that was issued or ordered by a court.
- Assignment vs. Novation
Novation occurs when a party would like to transfer both the benefits and burden of a contract to another party. This is similar to assignment in the sense that the benefits are transferred, but in this case, the burden is also passed on. When novation is finalized, the original contract is deleted and a new one is created, in which a third party becomes responsible for all the obligations and rights of the original contract.
- Assignment vs. Delegation
Although delegation and assignment are similar in purpose, they are two different concepts. Delegation refers to transferring the obligation to a third party without an assignment contract . While in assignment an entire contract and its rights and benefits can be passed on, in delegation only a particular contractual task or activity is transferred.
Let’s look at an example . Lisa is a homeowner that wants to hire Michael with an independent contractor agreement to remodel her garage. He plans to do all the work himself, but he’s not a painter, so he wants to delegate the painting work to his friend Valentina.
In this example, the contract is between Lisa, the obligor, and Michael, the delegator. Valentina would then be known as a delegatee, she doesn’t assume responsibility for the contract nor does she receive the contractual benefits, which in this case would be monetary compensation. However, Michael may have a separate agreement with Valentina to pay her in return for her work.
It’s also important to note that some duties are so specific in nature that it’s not possible to delegate them. In addition, if a party wants to avoid delegation , it’s recommended to add a clause to prevent the other party from delegating their duties.
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Assignment is a legal term whereby an individual, the “assignor,” transfers rights, property, or other benefits to another known as the “ assignee .” This concept is used in both contract and property law. The term can refer to either the act of transfer or the rights /property/benefits being transferred.
Contract Law
Under contract law, assignment of a contract is both: (1) an assignment of rights; and (2) a delegation of duties , in the absence of evidence otherwise. For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C. That is, this assignment is both: (1) an assignment of A’s rights under the contract to the $50; and (2) a delegation of A’s duty to teach guitar to C. In this example, A is both the “assignor” and the “delegee” who d elegates the duties to another (C), C is known as the “ obligor ” who must perform the obligations to the assignee , and B is the “ assignee ” who is owed duties and is liable to the “ obligor ”.
(1) Assignment of Rights/Duties Under Contract Law
There are a few notable rules regarding assignments under contract law. First, if an individual has not yet secured the contract to perform duties to another, he/she cannot assign his/her future right to an assignee . That is, if A has not yet contracted with B to teach B guitar, A cannot assign his/her rights to C. Second, rights cannot be assigned when they materially change the obligor ’s duty and rights. Third, the obligor can sue the assignee directly if the assignee does not pay him/her. Following the previous example, this means that C ( obligor ) can sue B ( assignee ) if C teaches guitar to B, but B does not pay C $50 in return.
(2) Delegation of Duties
If the promised performance requires a rare genius or skill, then the delegee cannot delegate it to the obligor. It can only be delegated if the promised performance is more commonplace. Further, an obligee can sue if the assignee does not perform. However, the delegee is secondarily liable unless there has been an express release of the delegee. That is, if B does want C to teach guitar but C refuses to, then B can sue C. If C still refuses to perform, then B can compel A to fulfill the duties under secondary liability.
Lastly, a related concept is novation , which is when a new obligor substitutes and releases an old obligor. If novation occurs, then the original obligor’s duties are wiped out. However, novation requires an original obligee’s consent .
Property Law
Under property law, assignment typically arises in landlord-tenant situations. For example, A might be renting from landlord B but wants to another party (C) to take over the property. In this scenario, A might be able to choose between assigning and subleasing the property to C. If assigning , A would be giving C the entire balance of the term, with no reversion to anyone whereas if subleasing , A would be giving C for a limited period of the remaining term. Significantly, under assignment C would have privity of estate with the landlord while under a sublease, C would not.
[Last updated in May of 2020 by the Wex Definitions Team ]
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Out-law / your daily need-to-know, assignment and novation.
Out-Law Guide | 19 Aug 2011 | 4:40 pm | 4 min. read
Assignment involves the transfer of an interest or benefit from one person to another. However the 'burden', or obligations, under a contract cannot be transferred.
Assignment in construction contracts
As noted above only the benefits of a contract can be assigned - not the burden. In the context of a building contract:
- the employer may assign its right to have the works constructed, and its right to sue the contractor in the event that the works are defective – but not its obligation to pay for the works;
- the contractor may assign its right to payment of the contract sum - but not its obligation to construct the works in accordance with the building contract or its obligation to meet any valid claims, for example for defects.
After assignment, the assignee is entitled to the benefit of the contract and to bring proceedings against the other contracting party to enforce its rights. The assignor still owes obligations to the other contracting party, and will remain liable to perform any part of the contract that still has to be fulfilled since the burden cannot be assigned. In practice, what usually happens is that the assignee takes over the performance of the contract with effect from assignment and the assignor will generally ask to be indemnified against any breach or failure to perform by the assignee. The assignor will remain liable for any past liabilities incurred before the assignment.
In construction contracts, the issue of assignment often arises in looking at whether collateral warranties granted to parties outside of the main construction contract can be assigned.
Funders may require the developer to assign contractual rights against the contractor and the design team as security to the funder, as well as the benefit of performance bonds and parent company guarantees. The developer may assign such rights to the purchaser either during or after completion of the construction phase.
Contractual assignment provisions
Many contracts exclude or qualify the right to assignment, and the courts have confirmed that a clause which provides that a party to a contract may not assign the benefit of that contract without the consent of the other party is legally effective and will extend to all rights and benefits arising under the contract, including the right to any remedies. Other common qualifications on the right to assign include:
- a restriction on assignment without the consent of the other party, whether or not such consent is not to be unreasonably withheld or delayed;
- only one of the parties may assign;
- only certain rights may be assigned – for example, warranties and indemnities may be excluded;
- a limit on the number of assignments - as is almost always the case in respect of collateral warranties;
- a right to assign only to a named assignee or class of assignee.
Note that in some agreements where there is a prohibition on assignment, it is sometimes possible to find the reservation of specific rights to create a trust or establish security over the subject matter of the agreement instead.
Legal and equitable assignment
The Law of Property Act creates the ability to legally assign a debt or any other chose in action where the debtor, trustee or other relevant person is notified in writing. If the assignment complied with the formalities in the Act it is a legal assignment, otherwise it will be an equitable assignment.
Some transfers can only take effect as an equitable assignment, for example:
- an oral assignment;
- an assignment by way of charge;
- an assignment of only part of the chosen in action;
- an assignment of which notice has not been given to the debtor;
- an agreement to assign.
If the assignment is equitable rather than legal, the assignor cannot enforce the assigned property in its own name and to do so must join the assignee in any action. This is designed to protect the debtor from later proceedings brought by the assignor or another assignee from enforcing the action without notice of the earlier assignment.
Security assignments
Using assignment as a way of taking security requires special care, as follows:
- if the assignment is by way of charge, the assignor retains the right to sue for any loss it suffers caused by a breach of the other contract party;
- if there is an outright assignment coupled with an entitlement to a re-assignment back once the secured obligation has been performed, it is an assignment by way of legal mortgage.
Please see our separate Out-Law guide for more information on types of security.
Restrictions on assignment
There are restrictions on the assignment of certain types of interest on public policy grounds, as follows:
- certain personal contracts – for example, a contract for the employment of a personal servant or for the benefit of a motor insurance policy cannot be assigned;
- a bare cause of action or 'right to sue' where the assignee has no commercial interest in the subject matter of the underlying transaction cannot be assigned;
- certain rights conferred by statute – for example, a liquidator's powers to bring wrongful trading proceedings against a director – cannot be assigned;
- an assignment of a contract may not necessarily transfer the benefit of an arbitration agreement contained in the contract;
- the assignment of certain rights is regulated – for example, the assignment of company shares or copyright.
If you want to transfer the burden of a contract as well as the benefits under it, you have to novate. Like assignment, novation transfers the benefits under a contract but unlike assignment, novation transfers the burden under a contract as well.
In a novation the original contract is extinguished and is replaced by a new one in which a third party takes up rights and obligations which duplicate those of one of the original parties to the contract. Novation does not cancel past rights and obligations under the original contract, although the parties can agree to novate these as well.
Novation is only possible with the consent of the original contracting parties as well as the new party. Consideration (the 'price' paid, whether financial or otherwise, by the new party in return for the contract being novated to it) must be provided for this new contract unless the novation is documented in a deed signed by all three parties.
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What is an Assignment Clause?
Jennifer Tsai • January 12, 2023 • 8 minute read
Anti-assignment clauses are common because without them, generally, contracts are freely assignable. (The exceptions are (i) contracts that are subject to statutes or public policies prohibiting their assignment, such as intellectual property contracts, or (ii) contracts where an assignment without consent would cause material and adverse consequences to non-assigning counterparties, such as employment agreements and consulting agreements.) For all other contracts, parties may want an anti-assignment clause that allows them the opportunity to review and understand the impact of an assignment (or change of control) before deciding whether to continue or terminate the relationship.
In the mergers and acquisitions context, an assignment of a contract from a target company entity to the relevant acquirer entity is needed whenever a contract has to be placed in the name of an entity other than the existing target company entity after consummation of a transaction. This is why reviewing contracts for assignment clauses is so critical.
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Why Do Assignment Clauses Matter?
How do you review assignment clauses in contracts.
After locating all the assignment language in each agreement, the following variables should be noted as part of the review: (1) Scope of assignment provision, (2) Consequences of failure to obtain consent, (3) Standard for refusing consent, and (4) Differences among counterparties in rights to assign.
1. Scope. Assignment provisions may provide exclusions or inclusions to a counterparty’s right to approve an assignment of a contract. See the examples in the following section below.
2. Consequences of Failure to Obtain Consent. Assignment provisions may specify that, if one party attempts to assign the agreement without the required consent of the counterparty:
- The purported assignment is null and void; and/or
- The applicable contract is void and terminated.
Contracts should be carefully reviewed to determine which of the foregoing scenarios may apply.
3. Standard for Refusing Consent. Assignment provisions frequently include limitations stating that any counterparty’s consent that is required shall not be “unreasonably withheld,” although the reasonableness standard is rarely defined more specifically in the contract.
In an M&A context, the effect of this language is that it provides a target company with some opportunity to challenge a counterparty that withholds its consent to an assignment. Winning this challenge is far from guaranteed, and this opportunity generally comes at a cost of time and expense since it usually involves a legal challenge to the counterparty’s refusal to grant a consent. Consequently, a target company is incentivized to undertake this challenge only when the applicable contract is material to its post-acquisition business or to the consummation of its proposed transaction. Still, undertaking such a challenge may buy the target company time and provide it with some negotiating leverage in seeking a reversal of a counterparty’s refusal to consent to an assignment.
Determining whether consent has been unreasonably withheld is specific to the facts and circumstances underlying each request for consent. For example, in Athar v. Hudson Serv. Mgmt., Inc., 853 N.Y.S.2d 170 (N.Y. App. Div. 2008), a New York appellate court held that this standard requires the non-consenting party to show some reasonable and objective basis for withholding consent. The withholding of consent cannot be arbitrary or based on unique and personal preferences of the non-consenting party. Generally, the burden of proof to show an unreasonable withholding of consent is on the party requesting consent. Also, the party requesting consent is responsible for providing all information required or necessary to determine whether consent should be granted.
4. Differences Among Counterparties in Rights to Assign. It is important to note any differences in assignment rights between and among contracting parties and the consequences of those differences, as parties with greater negotiating power often have broader assignment rights. These differences can become important if there is a lag of time between signing and closing an M&A transaction. If a target company is required to obtain consent in order to assign an agreement, but the counterparty has rights to freely assign, care should be taken to ensure that any consent granted to a target company to assign a contract does not become subject to review or alteration by any parties to whom the counterparty may freely assign its rights after it has granted its consent to assignment. This is particularly relevant to consents that may lapse or lose their effectiveness if transactions do not close within a certain period of time. For example, if (i) a landlord or licensor subsequently transfers the contract after granting its initial consent, and (ii) such consent lapses pursuant to its terms, the target company might have to re-submit consent requests to completely different parties.
Software that uses AI to identify and extract Assignment clauses can accelerate the work of finding these clauses, and enables a more comprehensive review than can otherwise be done manually.
Examples of Common Exclusions and Inclusions in Assignment Clauses
A simple anti-assignment provision provides that a party may not assign the agreement without the consent of the other party. Assignment provisions may also provide specific exclusions or inclusions to a counterparty’s right to consent to the assignment of a contract. Below are five common occurrences in which assignment provisions may provide exclusions or inclusions.
Exclusion for Change of Control Transactions
In negotiating an anti-assignment clause, a company would typically seek the exclusion of assignments undertaken in connection with change of control transactions, including mergers and sales of all or substantially all of the assets of the company. This allows a company to undertake a strategic transaction without worry. If an anti-assignment clause doesn’t exclude change of control transactions, a counterparty might materially affect a strategic transaction through delay and/or refusal of consent. Because there are many types of change of control transactions, there is no standard language for these. An example might be:
In the event of the sale or transfer by [Party B] of all or substantially all of its assets related to this Agreement to an Affiliate or to a third party, whether by sale, merger, or change of control, [Party B] would have the right to assign any or all rights and obligations contained herein and the Agreement to such Affiliate or third party without the consent of [Party A] and the Agreement shall be binding upon such acquirer and would remain in full force and effect, at least until the expiration of the then current Term.
Exclusion for Affiliate Transactions
A typical exclusion is one that allows a target company to assign a contract to an affiliate without needing the consent of the contract counterparty. This is much like an exclusion with respect to change of control, since in affiliate transfers or assignments, the ultimate actors and responsible parties under the contract remain essentially the same even though the nominal parties may change. For example:
Either party may assign its rights under this Agreement, including its right to receive payments hereunder, to a subsidiary, affiliate or any financial institution, but in such case the assigning party shall remain liable to the other party for the assigning party’s obligations hereunder. All or any portion of the rights and obligations of [Party A] under this Agreement may be transferred by [Party A] to any of its Affiliates without the consent of [Party B].
Assignment by Operation of Law
Assignments by operation of law typically occur in the context of transfers of rights and obligations in accordance with merger statutes and can be specifically included in or excluded from assignment provisions. An inclusion could be negotiated by the parties to broaden the anti-assignment clause and to ensure that an assignment occurring by operation of law requires counterparty approval:
[Party A] agrees that it will not assign, sublet or otherwise transfer its rights hereunder, either voluntarily or by operations of law, without the prior written consent of [Party B].
while an exclusion could be negotiated by a target company to make it clear that it has the right to assign the contract even though it might otherwise have that right as a matter of law:
This Guaranty shall be binding upon the successors and assigns of [Party A]; provided, that no transfer, assignment or delegation by [Party A], other than a transfer, assignment or delegation by operation of law, without the consent of [Party B], shall release [Party A] from its liabilities hereunder.
This helps settle any ambiguity regarding assignments and their effects under mergers statutes (particularly in forward triangular mergers and forward mergers since the target company ceases to exist upon consummation of the merger).
Direct or Indirect Assignment
More ambiguity can arise regarding which actions or transactions require a counterparty’s consent when assignment clauses prohibit both direct and indirect assignments without the consent of a counterparty. Transaction parties will typically choose to err on the side of over-inclusiveness in determining which contracts will require consent when dealing with material contracts. An example clause prohibiting direct or indirect assignment might be:
Except as provided hereunder or under the Merger Agreement, such Shareholder shall not, directly or indirectly, (i) transfer (which term shall include any sale, assignment, gift, pledge, hypothecation or other disposition), or consent to or permit any such transfer of, any or all of its Subject Shares, or any interest therein.
“Transfer” of Agreement vs. “Assignment” of Agreement
In some instances, assignment provisions prohibit “transfers” of agreements in addition to, or instead of, explicitly prohibiting “assignments”. Often, the word “transfer” is not defined in the agreement, in which case the governing law of the contract will determine the meaning of the term and whether prohibition on transfers are meant to prohibit a broader or narrower range of transactions than prohibitions on assignments. Note that the current jurisprudence on the meaning of an assignment is broader and deeper than it is on the meaning of a transfer. In the rarer case where “transfer” is defined, it might look like this:
As used in this Agreement, the term “transfer” includes the Franchisee’s voluntary, involuntary, direct or indirect assignment, sale, gift or other disposition of any interest in …
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What is an Automatic Renewal Clause?
An automatic renewal clause is a contractual provision that automatically extends the term for a specified period of time.
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An arbitration clause is a contractual provision that establishes arbitration as a mechanism for resolving contract-related disputes.
Published by a LexisNexis Property expert
- Landlord's consent to assign or underlet
The following Property practice note provides comprehensive and up to date legal information covering:
Form of covenant
No covenant, absolute covenant, hybrid covenants.
- Qualified covenant—Landlord and Tenant Act 1927, s 19
- Fully qualified covenant: the landlord's duty to give consent under the Landlord and Tenant Act 1988
- Landlord and tenant may agree when consent can be withheld and conditions for consent
- Application for consent
- How long is the reasonable time for the landlord’s response?
- When is it reasonable to withhold consent?
- The purpose of a covenant against assignment without consent is to protect the landlord from having his premises used or occupied in an undesirable way or by an undesirable assignee
- It may be reasonable to refuse consent on the ground of the proposed use of the premises even if that use is not prohibited by the lease
- A landlord usually only needs to consider his own interests and not those of the tenant
- Underletting
- Collateral advantage
- Enfranchisement
- Specific circumstances where a landlord may be acting unreasonably
- Bad reasons and good reasons
- Giving consent and waiving the right to forfeit
- Inadvertently giving consent—use of ‘subject to licence’
Landlord's consent to assign or underlet
The tenant’s ability to assign or underlet will depend on the form of covenant in the lease. It is important to properly analyse the covenant, to decide whether it restricts assignment or underletting and, if so, to what extent.
This is rare in modern leases, but some long residential leases may not impose any restriction on assignment or underletting beyond giving notice to the landlord. In the absence of any restriction, the tenant is free to assign or underlet as it pleases.
A covenant that prohibits entirely any assignment or underletting (as the case may be) is often described as an absolute covenant. There is no statutory modification of absolute covenants, so they constitute a complete bar. However, the covenant should still be analysed, to check precisely what is prohibited.
If there is an absolute covenant, the landlord has complete discretion about whether to grant consent and, if so, on what terms. The landlord should be aware, however, that granting licence to do something that is prohibited by the lease may put it in breach of any obligation in other leases to enforce that covenant.
Many covenants will consist of aspects of an absolute prohibition, together with qualified or fully qualified covenants (explained below). For example, there may be an absolute covenant against assignment of part, but assignment and
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Practice notes 1
- Lease variations—surrender and re-grant issues
Precedents 2
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- An unlawful assignment of a registered lease takes place, but the assignee/occupier is not registered at the Land Registry, so the leasehold interest remains registered in the name of the assignor. The landlord accepts rent from the occupier for some time. If the occupier fails to pay rent, can the landlord recover it from the occupier?
- Can a tenant under a year-to-year tenancy grant a sublease with a fixed term of more than 12 months if there is a 12-month termination provision in the sublease?
- If a group company pays rent due under a lease, would this amount to the sharing of the premises with that company or an assignment of the tenant's interest?
- If a lease provides an obligation on the tenant to provide an authorised guarantee agreement (AGA) on assignment and there is no reasonable element, are there any circumstances in which the tenant can argue that an AGA is not needed because it is unreasonable for the landlord to request one?
- In a lease granted by a local authority to a registered provider, if there are no conditions requiring an assignment to be to another registered provider only (ie the lease can be assigned to any suitable party), is there anything in statute that can be relied upon to refuse consent to an assignment to any party that is not a registered provider of affordable housing? There is a condition in the underletting covenant to state that this must be on affordable rent terms but no such condition on assignments.
Key definition:
Public authority definition, what does public authority mean.
A body substantially publicly funded which performs statutory duties, objectives and other activities consistent with central or local governmental functions.
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How Is a Contract Assigned?
(page 2 of 2 of what is an assignment of contract).
There are three steps to follow if you want to assign a contract.
Step 1: Examine the contract for any limitations or prohibitions. Check for anti-assignment clauses. Sometimes the prohibition is not a separate clause but is included in another provision. Look for language that states, "This agreement may not be assigned." If you find such language, you may not be able to assign the agreement unless the other party consents.
Step 2: Execute an assignment. If you are not prohibited from assigning the contract, prepare and enter into an assignment of contract: an agreement that transfers the parties' rights and obligations.
Step 3: Provide notice to the obligor. After you have assigned your contract rights to the assignee, you should provide notice to the other original contracting party (referred to as the obligor). This notice will effectively relieve you of any liability under the contract, unless the contract says differently (for instance, if the contracts says that the assignor guarantees the performance of the assigned contract or the contract prohibits an assignment) or the assignment is prohibited by law.
Anti-Assignment Clauses
If you're making a contract and you don't want assignment to be an option, you need to clearly state that in your agreement. Below are three variations of anti-assignment clauses that can be used in a contract.
EXAMPLE 1: Consent Required for Assignment
Assignment. Neither party may assign or delegate its rights or obligations pursuant to this Agreement without the prior written consent of the other. Any assignment or delegation in violation of this section shall be void.
EXAMPLE 2: Consent Not Needed for Affiliates or New Owners
Assignment. Neither party may assign or delegate its rights or obligations pursuant to this Agreement without the prior written consent of the other. However, no consent is required for an assignment that occurs (a) to an entity in which the transferring party owns more than 50% of the assets, or (b) as part of a transfer of all or substantially all of the assets of the transferring party to any party. Any assignment or delegation in violation of this section shall be void.
EXAMPLE 3: Consent Not Unreasonably Withheld
Assignment. Neither party may assign or delegate its rights or obligations pursuant to this Agreement without the prior written consent of other. Such consent shall not be unreasonably withheld. Any assignment or delegation in violation of this section shall be void.
Anti-assignment clauses can also be modified to prohibit only one of the parties from assigning rights. Also, when preparing an anti-assignment clause, keep in mind that you can prevent only "voluntary" assignments; you cannot prevent assignments that are ordered by a court or that are mandatory under law--for example, in a bankruptcy proceeding.
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In recent months, Dylan Mulvaney has skyrocketed to the forefront of the radical transgender movement. Through his video series, “Days of Girlhood,” Mulvaney became an international social media superstar, documenting his supposed journey as “a girl.”
In the days and weeks that have followed, the former unemployed actor has partnered with Ulta Beauty, met with President Joe Biden in the White House, and even engaged in a feud with Caitlyn Jenner.
However, despite Mulvaney and the media engaging in a real-life version of "The Emperor’s New Clothes," reality has refused to play ball(s).
Even after undertaking drastic “feminization” surgery in order to look more like a biological woman, Mulvaney recently complained to People that even though the social media star feels like “somebody who should not be single,” men seem spectacularly disinterested.
“I’m getting a little impatient because, especially when you’re feeling yourself and even looking at that Grammys picture, I’m like that’s somebody who should not be single,” Mulvaney told People . “But then you’re like, wait, why is no one in the DMs?”
Call me crazy, but it might have something to do with the fact that Mulvaney has argued that “women can have bulges.” Yes, they can, but not where Dylan has one.
The idea that society should wholeheartedly embrace the biological delusion that men and women are interchangeable — bits and all — is obviously absurd.
But there’s another issue here that is in danger of flying beneath the radar: the issue of consent.
Let’s consider another example. During an episode of the dating podcast Whatever , one host was asked whether they would rather have sex with “the hottest trans woman in the world or the oldest woman in the world.”
The answer — “The oldest woman in the world because then I wouldn’t be gay” — sparked fury and accusations of transphobia.
But why is the existence of any sexual preference an exhibition of bigotry, let alone the most primary preference that exists: biological sex?
In the aftermath of #MeToo, no concept has been more important than consent — and understandably so. But the argument that those who find transgender people unattractive are transphobic — even when they’ve gone through vast levels of surgery to achieve a certain look — erases the foundation of consent.
Every one of us has the right to say no without judgment, but now, judgment is all around us.
It doesn’t matter how many facial surgeries Dylan Mulvaney puts himself through; he remains a biological man. And it is not hateful or bigoted for heterosexual men to want to have sexual relationships with women, rather than with men with bulges who believe they’re women.
Setting transgenderism aside, this notion is about as uncontroversial as possible. Heterosexual men are attracted — by definition — to biological women, and within that category, these men have a broad range of preferences. The same is true of heterosexual women with biological men, homosexual men with biological men, and homosexual women with biological women.
Outside of transgenderism, would a man — for example — be taken seriously as a victim because women of his choosing refused to sleep with him? No, of course not. In fact, the empathetic Left would likely do nothing except declare him an “incel.”
But because Dylan Mulvaney believes he’s a woman, the fact that heterosexual men aren’t into his bulge is no longer the outcome of sexual preference we’ve accepted as our species' obvious reality for the entirety of our existence. No, it’s because these men are transphobic!
Suddenly, who cares about consent?
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Ian Haworth ( @ighaworth ) is the host of Off Limits with Ian Haworth .
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Japan OKs bill to reform sexual offense charge and raise age of consent
- Mar 14, 2023
The Cabinet on Tuesday approved a bill to recognize sexual violation even in the absence of physical violence or coercion, and raise the age of sexual consent from 13 to 16, as part of reforms to the country's Penal Code.
The amendments, which will see a sexual offense charge renamed to make clearer the illegality of nonconsensual intercourse, will also make upskirting and producing images of genitalia without consent crimes punishable under the Penal Code.
The government aims to pass the bill during the current parliamentary session. The revisions will take effect 20 days after promulgation.
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IMAGES
VIDEO
COMMENTS
Consent to assignment refers to allowing a party of a contract to assign a contract and move the obligations to another party. The party of the existing contract, known as the assignor, will pass on the contract to another party, known as the assignee. The goal is for the assignee to take over the rights and obligations of the contract.
Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party's business. Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party's business to which this Agreement specifically relates.
The purpose of a non-assignment provision is to ensure that the identities of the original two contracting parties remain the same throughout the term of the contract. A basic non-assignment provision reads something like the following: "This contract cannot be assigned to anyone without the written consent of both parties."
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.
An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.
Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party. In other words, an assignment clause can reassign contracts to another party.
Assignment is a legal definition that refers to the transfer of rights, property, ... A burden, duty, or detriment cannot be transferred as an assignment without the agreement of the assignee. Furthermore, ... An example of this is making it necessary for prior written consent to be attained from the other parties before the assignment is ...
Assignment is a legal term whereby an individual, the "assignor," transfers rights, property, or other benefits to another known as the " assignee .". This concept is used in both contract and property law. The term can refer to either the act of transfer or the rights /property/benefits being transferred.
Assignment Without Consent. Nothing in this Agreement shall be construed as an attempt to assign any leasehold or contract rights without the consent of the other party thereto if the attempted assignment thereof without such consent would constitute a breach thereof or adversely affect the rights of the parties thereunder.
a restriction on assignment without the consent of the other party, whether or not such consent is not to be unreasonably withheld or delayed; only one of the parties may assign; only certain rights may be assigned - for example, warranties and indemnities may be excluded;
What is an Assignment Clause? Anti-assignment clauses are common because without them, generally, contracts are freely assignable. (The exceptions are (i) contracts that are subject to statutes or public policies prohibiting their assignment, such as intellectual property contracts, or (ii) contracts where an assignment without consent would cause material and adverse consequences to non ...
The purpose of a covenant against assignment without consent is to protect the landlord from having his premises used or occupied in an undesirable way or by an undesirable assignee. It may be reasonable to refuse consent on the ground of the proposed use of the premises even if that use is not prohibited by the lease.
An assignment [1] is a legal term used in the context of the law of contract and of property. In both instances, assignment is the process whereby a person, the assignor, transfers rights or benefits to another, the assignee. [2] An assignment may not transfer a duty, burden or detriment without the express agreement of the assignee.
The transfer of a right from one party to another. For example, a party to a contract (the assignor) may, as a general rule and subject to the express terms of a contract, assign its rights under the contract to a third party (the assignee) without the consent of the party against whom those rights are held.
Below are three variations of anti-assignment clauses that can be used in a contract. EXAMPLE 1: Consent Required for Assignment. Assignment. Neither party may assign or delegate its rights or obligations pursuant to this Agreement without the prior written consent of the other. Any assignment or delegation in violation of this section shall be ...
In the aftermath of #MeToo, no concept has been more important than consent — and understandably so. But the argument that those who find transgender people unattractive are transphobic — even ...
Among other things, the bill will make upskirting and producing images of genitalia without consent crimes punishable under the Penal Code. It looks like you're using an ad blocker.