Assignment of Rights Example and How It Works

Key Takeaways

• An assignment of rights transfers one party’s contractual benefits to another.
• It can apply to many scenarios, including intellectual property, real estate, and business contracts.
• Assignments typically require a written agreement specifying the parties, scope, and governing law.
• Not all rights are assignable—restrictions may be legal, contractual, or related to the nature of the service.
• Sample clauses and real-world examples illustrate how these agreements are structured and applied.
• An assignment does not always relieve the assignor from liability unless a novation occurs.
• Parties must consider the difference between an assignment and delegation when transferring duties versus rights.

A good assignment of rights example is if a party was entitled to collect $100 for painting, they can transfer the right to receive payment to another party. An assignment contract takes place when one party to an existing contract (the assignor) transfers the contract's obligations and benefits to another party (the assignee). 

What Is an Assignment Agreement?

A contract assignment occurs when a party assigns its contractual rights to a third party. The benefit the issuing party would have received from the contract is now assigned to the third party. The party appointing their rights is referred to as the assignor, while the party obtaining the rights is the assignee. Essentially, the assignor prefers that the assignee reverses roles and assumes the contractual rights and obligations as stated in the contract.

Before this can occur, all parties to the original contract must be notified. The party creating the assignment usually does so with the motive of profit. Generally, assignments are perfectly legal. In specific situations, they may be illegal when they have been prohibited by a clause in the contract or prohibited by law.

Types of Assignable Rights Content

Assignment agreements can be used across various industries and legal contexts. Common examples include:

• Intellectual Property Rights: Creators often assign copyright, patent, or trademark rights to businesses or licensees.
• Loan or Financial Agreements: A lender may assign their right to collect a debt to another party (e.g., a collections agency).
• Real Estate Transactions: Buyers sometimes assign their purchase rights in real estate contracts to third parties.
• Employment or Contractor Agreements: Employers may assign benefits of a service contract to a new entity in a corporate restructuring.
• Business Contracts: Vendors may assign payment rights to a financial institution for invoice factoring.

These examples demonstrate how widely applicable the concept of assignment is, with the key factor being the transfer of a legal right, not just an obligation.

Use of an Assignment Agreement

In situations where you don't have the staff to perform a task, it may be necessary to outsource the work to another party. Assignment agreements are created to formally transfer the contractual responsibilities and rights to a third party, while also making sure to preserve your own obligations and legal rights. The use of an assignment agreement is appropriate when you're:

• Handing over your contractual responsibilities to a third party
• Taking over contracts or responsibilities held by another party

A contract assignment may also be referred to as an assignment agreement. An assignment agreement should include the:

• Name of the party transferring their contractual duties
• Name of the party receiving the contractual obligations and rights
• Third-party, or obligor, to the original contract
• Name of the actual contract, along with the expiration date
• If and when the obligor's approval has been received
• Specific date the contract will take effect
• State laws that govern the contract

Key Clauses in an Assignment Agreement Content

An effective assignment agreement should include several key clauses to ensure clarity and enforceability:

• Assignment of Rights Clause: Clearly states the specific rights being transferred.
• Effective Date: Identifies when the assignment becomes legally binding.
• Consideration: Details any compensation exchanged for the assignment.
• Governing Law: Specifies which jurisdiction’s laws will apply in disputes.
• Warranties and Representations: The assignor may affirm they own the rights and have the authority to assign them.
• No Modification Without Consent: Prevents one party from altering the agreement unilaterally.

Each of these elements protects both the assignor and assignee and reduces the likelihood of future disputes.

Parties Involved in a Contract Assignment

Generally, a contract assignment is made up of the following parties:

1. Obligor: The party that is committed to transferring benefits or rights to the party specified in the contract. The obligor is most likely the party that initially makes the contract.
2. Assignor: The party that is the initial beneficiary of the benefits or rights. They are responsible for making the assignment. In other words, they will be handing over the rights they were initially going to receive.
3. Assignee: The party that will be accepting the benefits and rights from the assignor. A transfer may have multiple assignees.

The steps in an assignment are:

1. The obligor creates a contract with the assignor.
2. The rights are transferred from the assignor to the assignee.
3. The assignee is paid the benefits from the obligor.

How Is a Contract Assignment Created?

In most cases, it is not necessary to notify the obligor of an assignment. The assignor needs to definitively establish their intent in assigning rights to the assignee. Generally speaking, assignment contracts can be both written and oral. However, it is recommended that the contract is written. 

It is important that the contract is written in the present tense. If any past or future tense is used, it will make the contract legally nonbinding.

Assignment of Rights Example Content

A straightforward assignment of rights example would be a painter contracted to receive $5,000 upon completing a job. If the painter needs cash earlier, they might assign their right to receive that payment to a third party (like a lender). The lender would then collect the $5,000 directly from the client once the work is done.

Another example involves a tech company assigning its rights to a patent to another firm in exchange for royalties. This allows the assignee to develop products based on the patent while compensating the assignor over time.

These real-world applications illustrate how businesses leverage assignment agreements to generate value or delegate contractual relationships.

How Assignments Work

The specific language used in the contract will determine how the assignment plays out. For example, one contract may prohibit an assignment, while another contract may require that all parties involved agree to it before proceeding. Remember, an assignment of a contract does not necessarily alleviate an assignor from all liability. Many contracts include an assurance clause guaranteeing performance. In other words, the initial parties to the contract guarantee the assignee will achieve the desired goal.

Assignment vs. Delegation Content

While assignments and delegations often occur in tandem, they are not the same:

• Assignment involves transferring rights (like receiving payment).
• Delegation refers to transferring obligations (like performing services).

A party can assign rights without delegating duties, or vice versa, but many contracts include both. For example, a construction firm might assign its payment rights to a financier while also delegating part of its work to a subcontractor. However, the original party remains liable unless a novation is signed by all involved, explicitly releasing them.

When Assignments Will Not Be Enforced

The following situations indicate when an assignment of a contract is not enforced:

• The contract specifically prohibits the assignment.
• The assignment drastically changes the expected outcome.
• The assignment is against public policy or illegal.
• The contract contains a no-assignment clause.
• The assignment is for a future right that would only be attainable in a contract in the future.
• The contract hasn't been finalized or written yet.

Common Restrictions on Assignments Content

Assignments may be restricted or prohibited in several scenarios:

• Personal Service Contracts: These often involve unique skills or relationships that cannot be transferred (e.g., artist contracts).
• Non-Assignment Clauses: Many commercial contracts contain express prohibitions on assignment.
• Statutory Restrictions: Certain government contracts or licenses may prohibit assignment without approval.
• Material Change in Risk: Courts may reject assignments if they significantly alter the obligor's burden or risk under the contract.

Understanding these limitations is crucial before attempting to assign any rights. Legal advice can help determine the enforceability of a specific assignment.

Frequently Asked Questions

1. What is an assignment of rights in contract law?
   It’s a legal transfer of benefits from one party (assignor) to another (assignee) under an existing agreement.
2. Can all contractual rights be assigned?
   No. Rights related to personal services, contracts with non-assignment clauses, or rights restricted by law typically cannot be assigned.
3. Is an assignment agreement the same as a sale?
   Not necessarily. While both transfer value, a sale usually involves ownership transfer, while an assignment transfers specific rights under a contract.
4. Does the assignor remain liable after assignment?
   Yes, unless a novation is executed that explicitly releases the assignor from future obligations.
5. Where can I get legal help drafting an assignment agreement?
   You can find experienced attorneys to assist with drafting or reviewing assignment agreements on UpCounsel.

If you need help with an assignment of rights example, 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.