Assignment of Future Rights: Everything You Need to Know
An assignment of future rights is when a person transfers his/her contractual rights and obligations to someone else.3 min read
An assignment of future rights is when a person transfers his/her contractual rights and obligations to someone else. This transfer completely confers all of the rights to receive benefits under the contract.
However, if at the time of the assignment there is only a mere possibility or expectation that a future right will arise, the assignment of the future interest will be invalid. The interest in the property assigned must exist and be vested at the time of the assignment. In order to make an assignment valid, the thing assigned must be the product, growth, or increase of property on which the assignor holds a present vested interest.
Money that has been substantially earned on a contract can be assigned. If the benefits, future earnings, or other future interest assigned has not yet accrued, or the assignor has not yet performed his/her part of the contract, the assignment may still be valid. Future earnings or crops may not be a mere possibility.
- An owner of farmland may sell the crops that will grow on his own land but may not sell the crops that will grow on someone else’s land. Unless he has a present vested interest in that land of another. A right which is expected to arise in the future upon a contract which existed at the time of assignment can be assigned.
- An anticipated future right under an executory contract can be assigned.
- An assignment of wages made in reference to a contract of employment not in existence at the time of assignment is not valid.
- An assignment of future wages where there is no contract for services is invalid.
- A person can assign his/her earnings under an existing contract for service.
- A contract to perform a personal skill cannot be assigned.
- The money due on a contract involving personal skill or service or a confidential relationship can be assigned.
- An assignment of future earnings from a certain employment or trade has been treated as an assignment of wages under an existing contract of employment. This is because the possibility of future earnings is coupled with an interest. There is the existence of a vested right.
- Chose in action, except in torts, is assignable. a. A chose in action is the right to bring an action to recover a debt, money, or thing.
An assignment of wages to be earned in the future under an existing employment agreement, even though the employment is for an indefinite time, is not against public policy and is valid if made for valuable consideration, in good faith, and without fraud.
According to Restatement of the Law, Second, Contracts, “[a]n assignment of a right to payment expected to arise out of an existing employment or other continuing business relationship is effective in the same way as an assignment of an existing right.”
However, “a purported assignment of a right expected to arise under a contract not in existence, operates only as a promise to assign the right when it arises and as a power to enforce it.”
Although an executory contract is not assignable, once the contract has been executed to the extent that nothing remains to be done except the payment of money by one of the parties to the other, the claim becomes a chose in action which is assignable.
What happens when you have a present assignment (or at least a contractual obligation to assign) of invention rights that don’t exist at the time of the assignment (aka “future invention rights”)?
The Supreme Court suggests it is the factual record that will answer this question. They look to:
- The chronological order in which the assignment and the activities occurred
- When a party received funding for the research completed
- When the research activities were carried out after signing anything
- Relative to the invention rights at issue, how much were those rights based on the federally funded research
- How much were they based on the research activities carried out by the other party
If the factual record is complex or unclear, it will be difficult for a court to make a decision.
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