Key Takeaways

  • A legal assignment involves transferring rights or interests from one party (assignor) to another (assignee).
  • Assignments must meet certain legal standards to be valid, such as clarity of intent, notice, and lawful subject matter.
  • Some assignments are prohibited by contract, law, or public policy.
  • Anti-assignment clauses and delegation limitations are important legal safeguards in contracts.
  • Assignments are used across contexts including intellectual property, real estate, and commercial transactions.

A legal assignment occurs when a party assigns their contractual rights to a third party. The benefit that 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.

Assignment of Contract

A legal assignment occurs when:

  1. The rights in personal or real property are transferred from one party to another
  2. The transfer also gives the new owner the rights to the property that the prior owner held prior to the transfer occurring

In the Purman Estate case, the court stated that a legal assignment is a transfer of property, or of some right or interest, from one person to another. It also stated that it must be the proper transfer of one whole interest in that property.

An assignment of rights occurs when an assignor gives up or transfers their rights of a future benefit to another party. In other words, an assignment is the act of one party transferring, vesting, or causing to vest their interest in a property to another party. A valid legal assignment only occurs when all underlying elements of a lawfully binding contract are included in it, including intent. A trial court can determine if an assignment has occurred. To prevent disputes or miscommunications, it's important that the subject matter is clearly identified in the assignment.

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. 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.

Types of Legal Assignment

Legal assignments generally fall into two categories:

  1. Equitable Assignment – This does not require a written document and can be created through words or conduct. It is recognized in equity rather than at law, meaning it may not confer the full legal title but still gives the assignee certain enforceable rights.
  2. Statutory (Legal) Assignment – This must meet specific statutory criteria, such as being in writing, signed by the assignor, and with notice given to the obligor. When properly executed, it allows the assignee to sue in their own name.

These distinctions are crucial in determining the assignee’s legal standing and enforcement rights.

How Assignments Work

The specific language used in the contract will determine how the assignment plays out. For example, one contract may prohibit assignment, while another contract may require that all parties involved agree to it before proceeding. Remember, an assignment of 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 that the assignee will achieve the desired goal.

When Assignments Will Not Be Enforced

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

  • The contract specifically prohibits assignment
  • The assignment drastically changes the expected outcome
  • The assignment is against public policy or illegal

Assignments That Require Caution or May Be Limited

While many contracts are assignable, assignments may be limited or require extra caution in the following scenarios:

  • Personal Service Contracts – These typically cannot be assigned due to the unique skill or trust involved (e.g., artist commissions or personal care agreements).
  • Assignments That Increase Obligor’s Burden – If the assignment materially alters the duty or risk of the obligor, courts are unlikely to enforce it.
  • Public Policy Concerns – Assignments that interfere with public welfare or statutory prohibitions will be deemed unenforceable.
  • Bankruptcy Proceedings – Assignments involving bankrupt estates may require court approval.

Delegation vs. Assignment

Occasionally, one party in a contract will desire to pass on or delegate their responsibility to a third party without creating an assignment contract. Some duties are so specific in nature that they cannot be delegated. Adding a clause in the contract to prevent a party from delegating their responsibilities and duties is highly recommended.

Legal Consequences of Improper Assignment

Improperly executed or unauthorized assignments can have significant legal consequences:

  • Breach of Contract – Assigning in violation of a contract’s terms may expose the assignor to a breach of contract claim.
  • Invalid Assignment – If statutory requirements are not met (e.g., missing written agreement or notice), the assignment may be invalid, and the assignee cannot enforce rights.
  • Third-Party Liability – If a third party detrimentally relies on a defective assignment, legal liability may arise under doctrines such as estoppel.

Three Steps to Follow if You Want to Assign a Contract

There are three main steps to take if you're looking to assign a contract:

  1. Make sure the current contract does not contain an anti-assignment clause
  2. Officially execute the assignment by transferring the parties' obligations and rights
  3. Notify the obligor of the changes made

Once the obligor is notified, the assignor will effectively be relieved of liability.

Anti-Assignment Clauses

If you'd prefer not to allow the party you're doing business with to assign a contract, you may be able to prevent this from occurring by clearly stating anti-assignment clauses in the original contract. The three most common anti-assignment clauses are:

  1. Consent required for assignment
  2. Consent not needed for new owners or affiliates
  3. Consent not unreasonably withheld

Based on these three clauses, no party in the contract is allowed to delegate or assign any obligations or rights without prior written consent from the other parties. Any delegation or assignment in violation of this passage shall be deemed void. It is not possible to write an anti-assignment clause that goes against an assignment that is issued or ordered by a court.

Common Uses of Legal Assignments

Legal assignments are commonly used in various contexts, including:

  • Business Contracts – Assigning the right to receive payment or performance.
  • Intellectual Property – Transferring rights in trademarks, patents, or copyrights.
  • Real Estate – Assigning a lease or purchase agreement.
  • Debt Instruments – Assigning promissory notes or claims to debt collectors or buyers.

Each use case may involve specific rules, so it's important to tailor the assignment language accordingly.

Frequently Asked Questions

  1. What is a legal assignment in contract law?
    A legal assignment in contract law is the transfer of contractual rights from one party to another, making the assignee the new holder of those rights.
  2. Can any contract be legally assigned?
    No, some contracts include anti-assignment clauses or are restricted by the nature of the obligations (e.g., personal services).
  3. What’s the difference between a legal and equitable assignment?
    A legal assignment complies with statutory formalities and allows the assignee to sue in their own name, while an equitable assignment does not necessarily meet these requirements and may limit legal recourse.
  4. Do assignments need to be in writing?
    For statutory (legal) assignments, yes. The assignment must be in writing, signed, and notified to the other party involved.
  5. What happens if I assign a contract in breach of an anti-assignment clause?
    The assignment may be void, and the assignor could face a breach of contract claim.
     

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