1. Delegation and Assignment Overview
2. Assignment
3. When Is Assignment Permissible?
4. Delegation

Delegation vs. assignment: What's the difference? Delegation occurs when a party to a contract transfers the authority and responsibility for fulfilling a particular contractual duty to another party. Delegation is not concerned with the transfer of contractual rights. An assignment occurs when the original party to a contract transfers the rights and duties of the contract to another party.

Delegation and Assignment Overview

The clause in an agreement that indicates a party's ability to designate their duties or rights is known as an assignment and delegation provision. This provision is most commonly seen in the general or miscellaneous sections of a contract. However, it should not be considered standard contract language that never changes.

A clause of transferability for an assignment should be carefully considered and precisely drafted. Please note that a party assigns their rights and delegates their duties.

Unless the contract states it, consent is not needed for assignment or delegation. Make sure to review the language in the contract to figure out if the other party's approval is needed before proceeding with assignment rights or delegation duties. The rules governing assignment and delegation will vary from state to state. Attorneys with experience in business contracts or contract law may be able to assist in determining whether an assignment or delegation is allowed in your current contract.

Assignment

The process of transferring accountability and responsibility is referred to as an assignment. There is no need to get a third party to approve a contact in an assignment. The rights within a contract are related to an assignment. All contracts contain rights, which are held by one of the involved parties.

A contract assignment occurs when a party assigns their 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. 

For example, assume you're a plumber and have contracted with a homeowner to fix their plumbing for $100. As the plumber, you have the right to collect these funds from the homeowner. You also have the ability to transfer this right to collect to another party, which means you may assign contract rights. In an assignment, you may transfer the rights but not the obligations.

Remember, through the process of assignment, it is possible to transfer the benefits but not the obligations. You can prohibit an assignment from occurring by explicitly stating this in the contract.

The outcome from an assignment includes:

  1. The assignee having the ability to sue the obligor. The obligor is the party that's culpable for carrying out the duties included in the contract.
  2. The obligor has the same safeguards against the assignor as those with the assignee.
  3. The obligor is required to pay the assignor until the assignment is known by the assignor.
  4. Any modification agreements between the assignor and obligor are effective and in place until the obligor is notified of changes.
    • Determine if assignments should be allowed.
    • Determine whether the entire contract or only specific sections should be open for assignment.
    • When an assignment is permitted, specifically state what duties and rights are eligible to be assigned.
    • Will the assigning party need to get approval from the non-assigning party, or will a notice be sufficient?
    • State the resolution process for assignments that have occurred but are prohibited by an anti-assignment clause.
    • State the process for handling changes in control, such as:
      • Divested entities
      • Acquisitions
      • Mergers

When Is Assignment Permissible?

Generally, parties are able to assign their rights, but some exceptions still apply:

  • The assignment may not increase the obligations of another party
  • Parties do have the ability to state in the contract that assignments are not allowed

Delegation

In contract law, delegation is the act of giving another party the responsibility of carrying out the performance agreed to in a contract. The party receiving the responsibility must accept the responsibility and authority. Some of the consequences of a delegation include:

  • The liability is transferred to the delegator from the delegatee
  • The delegatee is only liable to the obligee if the delegatee receives consideration from the delegator
    • Please note, the obligee is the party to whom an obligation is owed.

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