Key Takeaways

  • The assignment of rights transfers contractual benefits to a new party (the assignee), but duties may still remain with the original party unless also delegated.
  • Not all rights are assignable—some are restricted by contract language, statutory law, or if the assignment materially alters the obligor's duties.
  • Valid assignments require clear intent, mutual consent (if required by the contract), and proper notice to avoid disputes.
  • The Uniform Commercial Code (UCC) imposes specific rules on assignment and delegation of performance in the sale of goods.
  • Written agreements, particularly for significant or high-value rights, help clarify the terms of the assignment and avoid enforceability issues.

The assignment of contract rights happens when one party assigns the obligations and rights of their part of a legal agreement to a different party. 

What Is an Assignment of Contract?

The party that currently holds rights and obligations in an existing contract is called the assignor and the party that is taking over that position in the contract is called the assignee. When assignment of contract takes place, the assignor usually wants to hand all of their duties over to a new individual or company, but the assignee needs to be fully aware of what they're taking on. 

Only tangible things like property and contract rights can be transferred or assigned. Most contracts allow for assignment or transfer of contract rights, but some will include a clause specifying that transfers are not permitted. 

If the contract does allow for assignments, the assignor isn't required to have the agreement of the other party in the contract but may transfer their rights whenever they want. Contract assignment does not affect the rights and responsibilities of either party involved in the contract. Just because rights are assigned or transferred doesn't mean that the duties of the contract no longer need to be carried out. 

Even after the assignor transfers their rights to another, they still remain liable if any issues arise unless otherwise noted in an agreement with the other party. 

The purpose for the assignment of contract rights is to change the contractual relationship, or privity, between two parties by replacing one party with a new party. 

Types of Rights That Can and Cannot Be Assigned

While most contractual rights can be assigned, there are key exceptions. Assignable rights typically include the right to receive payment, delivery of goods, or other clear entitlements under a contract. However, some rights cannot be assigned, such as:

  • Rights that would significantly change the obligor’s duty or risk
  • Personal service contracts (e.g., contracts based on a specific individual’s skill)
  • Rights explicitly restricted by an anti-assignment clause
  • Rights prohibited from transfer by law (e.g., certain government benefits or licenses)

Understanding these limitations is essential to ensure that the assignment of rights does not result in legal disputes or unenforceable arrangements.

How Do Contract Assignments Work?

Contract assignments are handled differently depending on certain aspects of the agreement and other factors. The language of the original contract plays a huge role because some agreements include clauses that don't allow for the assignment of contract rights or that require the consent of the other party before assignment can occur.

For example, if Susan has a contract with a local pharmacy to deliver her prescriptions each month and the pharmacy changes ownership, the new pharmacy can have Susan's contract assigned to them. As long as Susan continues to receive her medicine when she needs it, the contract continues on, but now Susan has an agreement with a new party. 

Some contracts specify that the liability of the agreement lies with the original parties, even if assignment of contract takes place. This happens when the assignor guarantees that the assignee will continue to perform the duties required in the contract. That guarantee makes the assignor liable. 

Key Steps to Properly Assign Contract Rights

A valid assignment of rights should follow a structured process:

  1. Review the Original Contract – Check for anti-assignment clauses or consent requirements.
  2. Draft the Assignment Agreement – Clearly outline the rights being assigned and the effective date.
  3. Notify the Other Party – Although not always legally required, providing notice helps avoid confusion and disputes.
  4. Execute the Assignment in Writing (if required) – Especially important for high-value or regulated contracts.
  5. Confirm Consideration – While not always necessary, including consideration can strengthen the enforceability of the assignment.

Assignments done informally or without notice may be challenged, particularly if multiple assignments occur or if the obligor performs incorrectly.

Are Assignments Always Enforced?

Assignments of contract rights are usually enforceable, but will not be under these circumstances:

  • Assignment is prohibited in the contract language, which is called an anti-assignment clause.
  • Assignment of rights changes the foundational terms of the agreement.
  • The assignment is illegal in some way.

If assignment of contract takes place, but the contract actually prohibits it, the assignment will automatically be voided. 

When a transfer of contract rights will somehow change the basics of the contract, assignment cannot happen. For instance, if risks are increased, value is decreased, or the ability for performance is affected, the assignment will probably not be enforced by the court. 

Legal Standards Governing Assignment of Rights

Assignments are generally favored under contract law, but enforceability depends on the context. According to UCC § 2-210, in contracts for the sale of goods, a party may assign rights unless it materially alters the other party’s expected performance or risks.

Courts will not enforce an assignment if:

  • It materially increases the burden or risk to the obligor
  • It violates statutory prohibitions or public policy
  • The contract explicitly prohibits assignment

In some cases, partial assignments may be recognized, but they can complicate enforcement if the obligor isn’t properly notified or disputes the division of duties.

Basic Rights of Contract Assignments

Most contracts allow for assignments, but you'll want to double check a contract before signing if this is something you anticipate happening during the lifespan of your agreement. Contract law does impose strict rules and regulations regarding the assignment of contract rights, so it's important to be sure that any transfers of rights are fully legal before acting on them. 

Any business agreements should always outline provisions for contract assignments and be well-drafted to be sure that the agreement is effective and enforceable. 

Importance of Written Assignment Agreements

Although many assignments can be made orally, a written agreement is recommended, especially for:

  • Complex contracts involving multiple parties
  • Intellectual property or financial rights
  • Assignments where proof may be required in court

A written assignment of rights agreement should include:

  • Identification of the assignor and assignee
  • Description of the rights being assigned
  • Effective date of the assignment
  • Representations and warranties
  • Indemnity or liability clauses

This document serves as a legal record and can protect both parties in the event of a dispute or audit.

Why Use Contract Assignments?

When an assignor hands over their contracts rights to an assignee, they are signing away their obligation to perform and putting that obligation on a new party. The other party involved in the contract should see no difference in how the agreement plays out. If performance is negatively affected by the assignment of rights, something is wrong. 

If a party in a contract can no longer perform their duties, it is better to assign their contractual rights to a party who can carry out the duties rather than breach contract. 

Common Use Cases for Assignment of Rights

Assignments of rights are widely used in business and legal transactions. Some common scenarios include:

  • Mergers and Acquisitions – Transfer of customer contracts to the acquiring company
  • Real Estate Transactions – Assignment of purchase rights to another buyer or investor
  • Debt Collection or Factoring – Assignment of receivables to a third party
  • Franchise Agreements – Assigning contractual obligations from one franchisee to another
  • Licensing and IP Transfers – Transfer of usage rights or royalties

These examples show how assignment of rights can be a strategic tool for managing obligations and maximizing flexibility in commercial operations.

Frequently Asked Questions

  1. What is the difference between assignment and delegation?
    Assignment transfers rights or benefits under a contract, while delegation transfers duties. Only the original party remains liable unless explicitly released.
  2. Can you assign a contract without consent?
    Only if the contract does not include an anti-assignment clause or if consent is not legally required. Always check contract terms before assigning.
  3. Is a written assignment required by law?
    Not always. However, a written agreement is highly recommended, especially for significant rights or when disputes may arise.
  4. What happens if an assignment violates the contract?
    The assignment may be void or unenforceable. The assignor may also be held liable for breach of contract.
  5. Are all rights under a contract assignable?
    No. Rights involving personal judgment, skills, or duties that would materially alter the contract for the other party are typically non-assignable.

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