Key Takeaways

  • A future assignment involves the transfer of rights that have not yet materialized but are anticipated to arise under an existing or future agreement.
  • These rights can be validly assigned if linked to a current contract or interest—mere expectations are not enough.
  • Courts distinguish between present assignments and promises to assign future rights.
  • Assignment clauses in contracts often limit or condition future assignments.
  • Future assignments commonly appear in employment agreements, IP licensing, and commercial contracts.
  • The validity and enforceability of future assignments often depend on the clarity of contract terms and the assignor's existing interest.

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.

Examples:

  1. 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.
  2. An anticipated future right under an executory contract can be assigned.
  3. An assignment of wages made in reference to a contract of employment not in existence at the time of assignment is not valid.
  4. An assignment of future wages where there is no contract for services is invalid.
  5. A person can assign his/her earnings under an existing contract for service.
  6. A contract to perform a personal skill cannot be assigned.
  7. The money due on a contract involving personal skill or service or a confidential relationship can be assigned.
  8. 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.
  9. 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.

Conditions for Valid Future Assignment

For a future assignment to be valid, certain legal conditions must be met. These include:

  • Existing Legal Framework: There must be a current, enforceable contract or property interest that serves as the basis for the assignment.
  • Not Just Expectation: Courts generally hold that a future assignment must be tied to something more than a speculative future event. It must relate to a vested or reasonably expected right.
  • Clarity of Intent: The assigning party must clearly intend to transfer the rights when they arise, typically documented in writing.
  • Consideration and Good Faith: Assignments must be made for valuable consideration and without elements of fraud, particularly in wage or earnings assignments.
  • Legality: Assignments that contravene statutes, public policy, or contractual limitations may be invalid.

These requirements ensure that a future assignment has legal standing and is not merely a speculative or unenforceable promise.

Supreme Court

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:

  1. The chronological order in which the assignment and the activities occurred
  2. When a party received funding for the research completed
  3. When the research activities were carried out after signing anything
  4. Relative to the invention rights at issue, how much were those rights based on the federally funded research
  5. 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.

Future Assignment vs. Mere Promise to Assign

It’s important to distinguish between:

  • Present Assignment of Future Rights: Immediately transfers any future rights as they arise, binding upon occurrence. This is typically enforceable.
  • Promise to Assign in the Future: Indicates intent to assign later but does not effectuate transfer at present. This often functions as a contract to assign, rather than an actual assignment.

For enforceability, courts look at the language used and whether the right in question existed or was tied to an existing relationship at the time the agreement was made.

Future Assignment in Employment and IP Agreements

Future assignments are particularly relevant in:

  • Employment Agreements: Employers often include clauses that automatically assign rights to future inventions created during employment, provided they are related to company work.
  • Intellectual Property Licenses: These may include language that transfers rights to future patents or trademarks developed under the agreement.
  • Commercial Transactions: Parties may agree to assign future receivables or revenue streams from an ongoing business operation.

However, enforcement of these clauses may depend on the nature of the invention, when it was created, and whether it was directly tied to the scope of employment or contractual obligation.

Common Contractual Clauses on Future Assignment

Future assignment clauses often appear in business, IP, and employment contracts. These clauses may:

  • Require Prior Consent: A contract might state that no future assignment is valid without written approval from the original party.
  • Limit Assignment Scope: The clause may restrict assignment to specific circumstances, such as bankruptcy, sale of business, or internal restructuring.
  • Define Scope of Assignable Rights: Parties can specify which future rights may or may not be assigned, helping avoid ambiguity or litigation.

For example, many IP agreements contain provisions that assign future inventions or developments made during the course of employment, even if those inventions are not yet known at the time of signing.

Frequently Asked Questions

  1. What is a future assignment in contract law?
    A future assignment is the transfer of rights that are expected to arise in the future under an existing or anticipated contract.
  2. Are future assignments legally enforceable?
    Yes, but only if they relate to a present contract or interest and meet legal conditions such as clarity, consideration, and absence of fraud.
  3. Can future wages be assigned?
    Future wages can be assigned if there is an existing employment contract. Without one, such an assignment is generally invalid.
  4. What’s the difference between a future assignment and a promise to assign?
    A future assignment conveys rights as they arise; a promise to assign requires a separate act when the rights materialize and is not immediately enforceable.
  5. Do future assignment clauses require consent from all parties?
    Often, yes. Many contracts include provisions that require the assignor to obtain consent from the counterparty before a future assignment can take effect.

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