Assignment of Rights Agreement: Everything You Need to Know
An assignment of rights agreement refers to a situation in which one party, known as the assignor, shifts contract rights to another party, known as assignee.3 min read
2. Rules of Assignments
3. Exceptions Where a Contract Cannot be Assigned
4. Delegations and Novations
5. Contract Assignment
6. Creating an Assignment Agreement
An assignment of rights agreement refers to a situation in which one party, known as the assignor, shifts contract rights to another party. The party taking on the rights is known as the assignee.
An Assignment of Rights Agreement
The following is an example of an assignment of rights agreement. Dave decides to buy a bicycle from John for $100 and after agreeing on the price, Dave and John draw up a written agreement. Let's suppose that there will be a one week wait before the bicycle is ready for delivery to Dave and before anything is passed between them.
Meanwhile, John accepts that he will transfer his right to be paid $100 from Dave to Rob, in exchange for Rob paying John $90 immediately. Let's assume that John's motivation is an immediate need for cash. In this context, John is regarded as the assignor and Rob is the assignee.
John is the assignor as he is giving the assignment to Rob and Rob is the assignee because he is acquiring the assignment from John. To put it simply, the assignee is the party who gets something. In this case, Rob will receive $100.
Rules of Assignments
Assignments frequently occur in contracts. It's important to note the following points:
- The assignor (e.g. John) is accountable according to the contract unless the parties make an agreement that states otherwise.
- This means that if Dave does not receive the bicycle, he can sue John for it.
- Assignments are allowed in almost every type of agreement unless the contract includes an explicit ban on assignments or unless a specific exception is applicable.
- The assignor does not need to speak to the other contract party in order to create the assignment. For example, John would not need to ask Dave if John can transfer his right to be paid to Rob.
Exceptions Where a Contract Cannot be Assigned
- Some exceptions dictate that a contract cannot be assigned.
- Unenforceable assignments include the following: a personal services agreement, changing the contract duties, changing the material provisions of the agreement (e.g. time, amount, location, etc.).
- An example of a personal services agreement, which cannot be assigned, would be if you decided to employ a particular professional writer to write a book for you.
- That writer would not be allowed to take your payment and then give the work to another writer because you employed that particular writer to write the book, rather than someone else.
- Some kinds of assignments have to be in writing in order to be enforceable such as assignments of actual property (e.g. selling your house), loans, or debts.
- It's best to look at the statute of frauds for more information on the kinds of agreements that must be in writing.
Delegations and Novations
A delegation is very similar to an assignment in terms of what it involves. A delegation takes place when a party moves his or her obligations (or liabilities) under an agreement to a different party. Assignments, on the other hand, involve the transfer of rights.
If the parties in our previous example had created a novation, Rob would be entirely accountable to Dave and John would be clear of responsibility. A novation replaces the earliest party with a new party.
An Assignment Agreement can also be called a Contract Assignment. Another example of this would be if you're a contractor who needs assistance finishing a job. You could give those tasks and rights to a subcontractor, but only if the original agreement does not prohibit the assignment of these rights and responsibilities.
Creating an Assignment Agreement
In an Assignment Agreement, it is important to include details such as:
- The name of the person assigning the responsibilities (known as the assignor)
- The name of the of the party who is taking the rights and responsibilities (the assignee)
- The other party to the first agreement (known as the obligor)
- The name of the agreement and its expiration date
- Whether the first contract necessitates the obligor's approval before assigning rights
- The date of the obligor's consent
- When the contract will be put into effect
- Which state's laws will regulate the contract
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