Key Takeaways

  • A consent to assignment clause governs whether and how one party can transfer its contractual rights and obligations to another.
  • Most contracts require written consent before an assignment is valid, and withholding that consent must generally be reasonable unless the contract states otherwise.
  • Assignments that materially change the nature, value, or risk of the contract, or that violate law or public policy, are typically unenforceable.
  • Delegation differs from assignment: delegation transfers performance duties, while assignment transfers rights and benefits.
  • Drafting a clear anti-assignment clause or defining what constitutes “reasonable consent” helps prevent disputes.
  • In commercial contexts (e.g., leases or business sales), the consent decision may hinge on the assignee’s financial stability, capability, and potential impact on the relationship.

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.

Contract Assignments

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.

Importance of Obtaining Consent to Assignment

In most contracts, obtaining consent to assignment is a crucial step before transferring any rights or obligations. Many agreements explicitly require that the non-assigning party provide written consent before an assignment becomes valid. This is designed to protect parties from being forced into contractual relationships with unknown or undesirable third parties.

If the contract is silent on assignment, most jurisdictions allow assignment unless the nature of the contract suggests otherwise — such as when the agreement involves unique skills, trust, or personal services. However, even when consent is required, courts often expect that consent not be unreasonably withheld unless the contract specifically grants absolute discretion.

In commercial settings, especially in lease or service agreements, parties commonly include detailed consent clauses specifying how consent must be requested (e.g., in writing, with financial statements of the proposed assignee) and the timeframe within which it must be granted or denied. This clarity helps avoid disputes and reduces the risk of claims for breach of contract.

Unenforceable Assignments

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.

What Constitutes “Reasonable” Consent

The concept of reasonableness plays a central role in consent to assignment disputes. Unless a contract clearly allows a party to withhold consent at its sole discretion, courts often require that consent decisions be based on legitimate, objective reasons rather than arbitrary or self-serving motives.

Examples of reasonable grounds for withholding consent include:

  • Doubts about the financial stability or creditworthiness of the proposed assignee.
  • Concern that the assignment will increase risk or materially alter the obligations under the agreement.
  • Evidence that the assignee lacks the experience, resources, or qualifications to perform the contract.
  • The assignment could dilute the value of the contract or harm existing business relationships.

However, withholding consent simply to extract concessions, renegotiate terms, or gain a financial advantage is often deemed unreasonable. Many commercial landlords, for example, cannot refuse consent solely because they want to reclaim property for a higher-paying tenant.

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.

Drafting Effective Consent Clauses

To minimize ambiguity and potential litigation, contracts should include clear and specific consent provisions. These clauses should address:

  • Scope of assignment: Define whether all or part of the agreement can be assigned and under what conditions.
  • Consent procedure: Outline how consent must be requested (e.g., written notice, timeline, required documentation).
  • Standards of reasonableness: State whether consent may be withheld solely at the discretion of the non-assigning party or must be reasonable.
  • Deemed consent: Include a provision stating that if consent is not provided within a specified period, it is automatically deemed granted.

In complex transactions like mergers, asset sales, or lease transfers, these clauses are essential for protecting all parties’ interests and ensuring a smooth transition.

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.

Assignment and Assumption Agreements

When an assignment occurs, the parties often execute an assignment and assumption agreement — a separate legal document that formally transfers the assignor’s rights and obligations to the assignee.

This agreement typically includes:

  • Identification of parties involved.
  • A clear description of the original contract being assigned.
  • A statement of the assignor’s transfer of rights and duties.
  • The assignee’s assumption of those duties and obligations.
  • Any conditions precedent, such as obtaining required consents.

Having this standalone agreement not only formalizes the transfer but also provides legal clarity and protection if disputes arise later over who is responsible for performance under the contract.

Anti-Assignment Clause

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.

Negotiating Anti-Assignment Provisions

Anti-assignment clauses are among the most heavily negotiated terms in commercial agreements. They can range from an absolute prohibition on assignment to a conditional prohibition requiring prior written consent. When drafting or negotiating these provisions, parties should consider:

  • Whether assignments related to corporate restructurings, mergers, or affiliate transfers should be exempted.
  • Whether the non-assigning party’s consent must be reasonable or if they retain sole discretion.
  • Whether notice requirements or specific approval procedures should be included.

Businesses should also evaluate how strict anti-assignment language might impact future flexibility, especially if they anticipate potential mergers, acquisitions, or strategic partnerships.

Frequently Asked Questions

  1. What does “consent to assignment” mean in a contract?
    It refers to permission from the non-assigning party before one party can transfer its rights and obligations to another. Without this consent, the assignment may be invalid.
  2. Can a party refuse consent to assignment for any reason?
    Not always. If the contract is silent on discretion, consent must typically be reasonable and based on legitimate business concerns, such as risk or performance ability.
  3. What happens if consent is withheld unreasonably?
    The withholding party may face legal consequences, including breach of contract claims, and the assignment might be enforced by a court despite the refusal.
  4. Is an assignment and assumption agreement necessary?
    While not always legally required, it is strongly recommended. It provides clear documentation of the rights and duties being transferred and helps avoid disputes.
  5. How can I prevent assignment without my approval?
    Include a well-drafted anti-assignment clause that either prohibits assignment entirely or specifies conditions under which consent must be obtained.

If you need help with consent to assignment, you can post your legal need 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.