Partial Assignment of Contract: Everything You Need to Know
A partial assignment of contract occurs when the assignor of a contract is assigning a portion of his or her contractual right.3 min read
A partial assignment of contract occurs when the assignor of a contract is assigning a portion of his or her contractual right. This can only occur if the other involved party can perform that portion of the contractual obligation separately from the rest of the obligations.
Under a legally enforceable contract, an assignment is the transfer of rights to receive a specific performance in return. When a contract is assigned, the obligee, or the party who holds the right to receive a benefit from a contract, chooses to transfer his or her right to receive that benefit from the obligor, or the party who has the duty to perform on the action. This right is transferred to the assignee, who is a third party in the arrangement. By doing so, the obligee then becomes an assignor, or someone who is issuing an assignment.
Any and all rights are assignable, except:
- Those that alter the material obligations or risks of the other contracted party.
- Those under a contract that prohibits assignment. If this occurs, the resulting action is a breach not a nullification of the contract.
- Those in which the obligor has an interest in transferring the performance to the party holding the right to receive the benefit, rather than a third party.
Assignments can be made in any form and do not require consideration for validation. An oral or written act or statement indicating the intention to transfer a right can act as an assignment. However, in some cases, those involved in a contract cannot go through the process of assignment.
Method of Assignment: Manifesting Assent
To make an assignment, the assignor must understand it clearly and intend to make the assignment at that exact time. The assignor cannot promise to make an assignment at a future date. Additionally, the assignor must express his or her intention to make the transfer of rights to the third party. This action puts the assignment into effect. The intention of an assignor must indicate an effective assignment that doesn't require any further manifestation of intention or further action.
The assignor of a contract can legally assign a portion of a contractual right. However, this action can only be taken if the contract obligor is able to perform that portion of the obligation separately from the other obligations included in the agreement.
Additionally, if an assignment is created in exchange for value, the assignor is making three implied warranties, according to the Restatement (Second) of Contracts. These implied warranties are:
- The assignor will not take action to impair or impact the assignment's value and has no knowledge of any information that would impair or impact the value.
- The right being assigned is not subject to any defenses or limitations against the assignor and actually exists.
- Any documentation shown or given as evidence to the assignee is genuine, accurate, and what it promises to be.
An assignor of a contract does not guarantee any type of payment. The action of assignment doesn't provide any type of warranty on its own that the obligor is agreeing to perform.
Method of Assignment: Notice
When going through the process of assignment, it is not required to provide notice to the obligor. However, if an obligor renders performance to an assignor without notifying the involved parties of that assignment, it can be discharged. In this case, the performance of that contract would be transferred to the assignee.
Effect of Assignment: Exceptions
In some cases, defenses may be asserted. These allowed defenses are called real defenses and include fraud in the execution, duress, infancy, and others.
When Are Assignments Ineffective: Material Change in Duties of the Obligor
If an assignment effectively changes the obligor's required duties, it is ruled ineffective.
When Are Assignments Ineffective: Assignment of Personal Rights
When an obligor receives the benefit of the duty to perform as assigned under a contract, receiving that benefit becomes a personal right that no one can assign.
When Are Assignments Ineffective: Future Contracts
Contract laws distinguish between assigning rights arising from a future contract and assigning future rights from a current contract.
An exception to the assignment rules relates to making successive assignments. If a subsequent assignee in good faith provides consideration for that assignment and holds to prior knowledge, the assignee takes precedence for obtaining payment, judgment, or performance from the assignor.
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