Key Takeaways

  • An assignment of contract legally transfers rights and obligations from one party (assignor) to another (assignee).
  • Assignments require proper notice and may require consent from the remaining contract party (obligor).
  • Contracts with anti-assignment clauses or those materially altering duties often cannot be assigned.
  • Assignment agreements can include intellectual property, income streams, and real estate rights, but some areas—like future wages or personal injury claims—are restricted.
  • Delegation and assignment differ: assignment transfers rights/obligations; delegation only assigns duties.
  • UpCounsel connects clients with top-rated attorneys to assist in contract assignments or disputes.

What Is Assignment of Contracts?

Assignment of contracts is the legal transfer of the obligations and benefits of a contract from one party, called the assignor, to another, called the assignee. The assignor must properly notify the assignee so that he or she can take over the contractual rights and obligations. This can be done using a document called an assignment agreement, which allows you to protect your legal rights while transferring the contract.

An assignment agreement is appropriate for your needs if the following are true:

  • You want to transfer your contractual rights, responsibilities, and obligations to another individual or company.
  • You or your business is taking over a contract from another person or business.

The assignment agreement includes the names of the assignor and assignee, the name of the other party to the contract in question (known as the obligor), the contract's title and expiration date, whether the obligor needs to consent to the rights transfer based on the original terms of the contract, when the obligor consented, when the assignment agreement takes effect, and what state will govern the transferred contract. The assignment agreement may also be called the contract assignment, assignment contract, or assignment of contract.

While assignment contracts are typically only used for amounts of less than $5,000, you can assign a higher profit contract when both the buyer and seller agree. You cannot assign a contract if the original contract prohibits doing so. 

If you are assigning a contract, you may want to ask the obligor to sign a release, or waiver, agreement that releases you from contract liability. In addition to transferring rights and obligations, you can also use an assignment agreement to transfer an income stream to an assignee. However, when transferring rights to intellectual or personal property, it's best to instead use a trademark assignment, bill of sale, or assignment of trade name.

Common Types of Contract Assignments

Assignments of contract occur across many industries. Common types include:

  • Real Estate Assignments: A wholesaler assigns their purchase rights in a property to an end buyer for a profit.
  • Business Contracts: Companies assign service agreements, lease rights, or supply contracts during mergers or acquisitions.
  • Sales Contracts: A seller may assign a supply agreement to another vendor to fulfill obligations.
  • Loan Assignments: Lenders may assign promissory notes or loan agreements to another financial institution.
  • Intellectual Property Licensing: Rights to use copyrighted works, patents, or trademarks may be assigned in licensing arrangements.

Each type may involve unique consent, notification, and legal obligations depending on the contract and jurisdiction.

How Do Assignments Work?

The procedure for assigning a contract depends on the language of that contract. For example, some contracts may disallow assignment, while others may allow it only when the obligor consents.  In some cases, the assignor is not relieved of contract liability. This occurs when the original contract has a clause that guarantees performance regardless of assignment.

If you want to buy a contract, look for sellers in newspaper ads, online marketing, and direct mail. In most cases, it makes the most sense to use multiple strategies. For real estate contracts, make sure you conduct a title search on the property in question to make sure there are no liens. You can hire a title company or real estate attorney to ensure that a title is clean before signing an assignment contract.

After you sign the assignment contract, you have interest in the property and can sell it to an end buyer. Market the property through a dedicated website. Once you find a potential buyer, require an earnest money deposit. This is nonrefundable and allows you to make a profit whether or not the deal is successfully completed. If the deal is completed, the end buyer wires funds to cover the sale price of the property along with your stated fee. 

In some cases, you can make a profit just by referring a buyer to an appropriate property and taking a finder's fee. With this strategy, you assign your rights to the buyer, allowing them to close on the property, after which you receive your fee. This is a low-risk endeavor if you have detailed information on exactly what each buyer is looking for. You'll also need to  have the resources to locate great properties before they hit the market. With those two components, you'll be able to make money as a real estate investor without risking your own capital.You can also close on the property yourself and immediately flip it to another investor.

Delegation vs. Assignment

It's important to distinguish between assignment and delegation:

  • Assignment transfers contractual rights (such as the right to receive payment).
  • Delegation transfers duties (such as delivering goods or services).

In many cases, both happen together—but they are legally distinct. A party may assign rights without delegating duties unless explicitly stated. Some duties, especially those involving unique personal services, cannot be delegated at all.

Example: If a contract is for a celebrity performance, the performer cannot delegate that duty to someone else without violating the contract.

Steps to Execute an Assignment of Contract

Here’s a general overview of how to assign a contract:

  1. Review the Original Contract
    Check for clauses that prohibit or limit assignments.
  2. Obtain Consent (if required)
    If the contract requires the obligor's consent, secure it in writing.
  3. Draft an Assignment Agreement
    Include:
    • Names of assignor, assignee, and obligor
    • Description of the contract
    • Effective date
    • Any required representations or warranties
  4. Notify the Obligor
    Provide formal written notice of the assignment.
  5. Obligor Response (if applicable)
    Some assignments require acknowledgment or a release of liability.
  6. Record and Store
    Keep a signed copy of the assignment agreement and any correspondence.

When Are Assignments Not Enforced?

An assignment agreement is not enforced if the original contract contains a clause that prohibits assignment. If performance is affected, value is decreased, or risk is increased for the obligor, few courts will enforce the assignment. These circumstances are referred to as a material alteration in the contract.

Contract assignments are also prohibited by some state laws. In many states, an employee is prohibited from assigning future wages. Certain claims against the federal government are also prohibited from an assignment. Some assignments violate public policy rather than law, such as assignment of personal injury claims. This is not allowed because it could encourage litigation.

Anti-Assignment Clauses and Their Legal Impact

An anti-assignment clause is a contractual provision that restricts one or both parties from assigning the agreement to another party. These are commonly found in:

  • Service agreements
  • Employment contracts
  • Commercial leases
  • IP licensing contracts

Some clauses outright ban assignment, while others allow it only with prior written consent. Even if there's no clause, a court may still void an assignment if it materially changes the nature or value of the original agreement or increases risks for the obligor.

Example clause:“Neither party may assign or delegate its rights or obligations under this Agreement without prior written consent from the other party.”

Violating such clauses can render the assignment void or trigger penalties.

Legal Limitations and Public Policy Restrictions

Aside from contract language, certain types of assignments are restricted by law or public policy:

  • Future Wages: Most states prevent employees from assigning their future wages to creditors.
  • Government Claims: Claims against the federal government often can’t be assigned without permission.
  • Personal Injury Claims: Typically cannot be assigned because they are closely tied to the injured individual and to prevent profit-driven litigation.

These restrictions exist to protect individuals, prevent fraud, and preserve fairness in the legal system.

Frequently Asked Questions

Can a contract be assigned without the other party knowing? Not usually. While some contracts allow assignment without consent, proper notice must be given to ensure the assignee can enforce the contract.

What happens if a contract prohibits assignment? An assignment that violates an anti-assignment clause may be void and unenforceable, and the assigning party could face legal liability.

Does an assignment release the assignor from liability? Only if the contract or obligor explicitly releases them. Otherwise, the assignor may remain liable for performance.

Is consent always required for an assignment of contract? Not always. It depends on the original contract terms. Some contracts permit assignments without consent, while others require written approval.

When should I use a different agreement instead of a contract assignment? Use a trademark assignment, bill of sale, or IP transfer agreement when transferring intellectual property or physical goods, as these are more appropriate for those asset types.

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