Contract Assignment: Everything You Need to Know
A contract assignment, also called an assignment agreement, assignment of contract, assignment contract, or assignment and assumption agreement, consists of an individual, the assignor, passing on the duties and benefits of a current contract to a different individual, the assignee. 3 min read
A contract assignment, also called an assignment agreement, assignment of contract, assignment contract, or assignment and assumption agreement, consists of an individual, the assignor, passing on the duties and benefits of a current contract to a different individual, the assignee.
What Is a Contract Assignment?
The purpose of a contract assignment is to assign the duties and benefits imposed by the contract to another party by notifying the individual at the other end of the agreement that another assignee has been appointed.
For instance, provided the initial contract does not prohibit the action, a contractor can hire a subcontractor to complete certain jobs.
The act of assigning contracts to another individual or group is quite common in many types of contract law cases.
What Information Should Be Included in a Contract Assignment?
The following information should be included in a contract assignment:
- The assignor's name.
- The assignee's name.
- The individual or group to the initial contract, known as the obligor.
- The title and expiration date of the contract.
- Whether or not the initial contract demands the obligor's permission before the contract can be assigned.
- The time permission was given by the obligator.
- The date the agreement becomes effective.
- The state that is governing the agreement.
Who Are the Parties in a Contract Assignment?
The assignor is the group or individual in the initial contract choosing to transfer their duties and benefits to another group or individual; therefore, the new party receives both the obligations and rights previously held by the assignor. Comparatively, an assignment of rights only transfers the benefits or rights to the new party.
The assignee is the individual or group that acquires the duties and benefits of the initial contract from the assignor. These benefits and duties are usually obtained through a party that was a part of the initial contract.
An additional party may also be present if another individual or group was involved with the initial contract.
Who Are Obligors and Obligees?
Obligors are individuals or groups that are obliged to commit to an action based on a contract.
Occasionally, a borrower or a debtor is described as being an obligor.
While a lot of contracts are debt contracts, it is important to note that not all obligations of contracts will be to pay back debt.
Aside from repaying debt, obligors can be required to do the following contractual duties:
- Carry out a specific job.
- Abstain from a specific action.
Obligees are the individuals or groups that profit from the actions of the obligors.
How Do Contract Assignments Work?
The type of language used for a contract strongly impacts the manner in which a contract assignment is executed.
Barriers or hurdles to establishing a contract assignment could be:
- A clause in the contract forbidding a contract assignment.
- A requirement to receive approval from the other individual or group prior to the assignment.
If an individual established a contract with a company to deliver the local newspaper every morning, and that company then assigns the contract to another company making sure that the individual is informed of the switch and the paper continues to be delivered daily, the individual would now have a contract with the new company. This is an example of a simple contract assignment.
Contract assignments are not a guaranteed way of freeing the assignor of his or her obligations.
In some circumstances, a contract may require that one or both of the initial groups or individuals remain obligated to perform specific actions required by the contract.
When Will a Contract Assignment Not Be Enforced?
A contract assignment will fail to be enforced under the following circumstances:
- The contract includes an anti-assignment clause voiding or forbidding the assignment.
- The contract assignment changes the type or quality of work to be done, lowers the expected benefit or return, causes the other individual or group to be at greater risk, or changes any other obligations or expectations provided by the initial contract.
- The law establishes limits or forbids contract assignments.
- The contract assignment defies public policy.
What Are Some Uses of a Contract Assignment?
One reason for administering a contract assignment is to receive freedom from the duties and benefits held in place by the contract; however, it is important to refer to the initial contract to verify that the individual or group won't remain under contract after the contract assignment is in place.
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