Consent to Assignment: Everything You Need to Know
Consent to assignment refers to allowing a party of a contract (the assignor) to assign a contract and move the obligations to another party (the assignee).3 min read
2. Unenforceable Assignments
3. Delegation vs. Assignment
4. How to Assign a Contract
5. Anti-Assignment Clause
Consent to assignment refers to allowing a party of a contract to assign a contract and move the obligations to another party. The party of the existing contract, known as the assignor, will pass on the contract to another party, known as the assignee. The goal is for the assignee to take over the rights and obligations of the contract. For a contract to be assigned, the other party must be aware of what is happening.
The assignment of a contract differs depending on the type of contract and the language in the original agreement. Some contracts contain a clause that doesn't allow assignment at all, while other contracts have clauses that require the other party to consent before assignment can be finalized.
Consider the following scenario. A business owner contracts with a computer company to have a processor delivered every time a new model is released. The computer company assigns the business owner's contract to another provider. As long as the business owner is aware of the changes and still receives the processors as scheduled, his contract is now with the new computer company.
However, assigning a contract doesn't always exempt the assignor from their duties and responsibilities. Some contracts include a clause that states that even if the agreement is assigned to another party, the original parties guarantee that the terms of the contract will be fulfilled.
There are a number of situations where a contract assignment won't be enforced, including:
- The contract has an anti-assignment clause that can stop or invalidate any assignments.
- The assignment changes the nature of the contract. An assignment that changes what is expected or impacts the performance of the contract isn't allowed. This also applies if the assignment lowers the value one party will receive or adds risk to the deal that the other party didn't originally agree to.
- The assignment is against the law. In some cases, laws or public policies don't allow assignment. Many states forbid employees to assign future wages. The federal government doesn't allow the assignment of particular claims against the government. Some assignments violate public policy. For example, a personal injury claim cannot be assigned because it could lead to litigation against a party who was not responsible for the injury.
Delegation vs. Assignment
It is common for a party to sign a contract and have someone else actually fulfill his duties and do the work required by the contract. However, some contracts can't be delegated, such as when a party agrees to service done by a particular person or company. If a company contracted with Oprah Winfrey to be a keynote speaker, Oprah wouldn't be permitted to delegate her performance duties to anyone else.
If both parties agree that the work can't be delegated, they should include specific language in the original contract. This can be as simple as a clause that states, “Neither party shall delegate or assign its rights.” Both parties should agree to this clause.
How to Assign a Contract
Assigning a contract is a three-step process. First, check to see if the contract has an anti-assignment clause or if there are limitations around assignments. Sometimes clauses are straightforward with language like, “This agreement may not be assigned,” and while other times, the language is less obvious and hidden in another clause. If there is language in the contract that states it can't be assigned, the other party must consent to an assignment before you can proceed.
Second, the parties must execute an assignment. Create an agreement that transfers the rights and obligations of one party to the assignee.
Third, notify the other party of the contract. Once the contract rights have been assigned to the new party, you should notify the other party of the original contract. Providing written notice removes you from being responsible for any part of the contract unless there is language in the contract that says differently or the assignment is illegal.
As you are negotiating and writing a contract, consider whether you want the contract to be able to be assigned. If you don't want assignment to be a legally viable option, that needs to be clearly stated in the contract.
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