contract for the assignment of economic rights

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May 25, 2021 > Turkey > Intellectual Property

Erdem & Erdem Law Office | View firm profile

The author is the person creating the work and automatically becomes the owner of the economic rights on the work by the creation thereof. If the author does not have the resources to solely exercise the economic rights on the work, s/he may apply two different methods to benefit from the economic rights as regulated under Intellectual and Artistic Works Act numbered 5846 (“IAWC”). These methods assign the economic rights and assign the authority to exercise the economic rights; in other words, granting licenses for economic rights.

Assignment and License

The author has six economic rights, which are the right of adaptation, right of reproduction, right of distribution, right of performance, right to communicate a work to the public by devices enabling the transmission of signs, sounds and/or images, and right to payment of the sale of share proceeds, and pursue the same as designated under Articles 21 – 25 and 45 of the IAWC. If the author assigns an economic right, the assigned economic right leaves the assets of the author and becomes a value within the assets of the right holder who assigned the economic right. The assignee right holder becomes the owner of all rights attached to the assigned economic right, including the right to initiate an action. On the other hand, if the author grants a license on the economic right, such economic right remains under the assets of the licensor author. The licensee right holder only has the right to use and benefit from the licensed economic right.[1]

Assignment Agreement

Economic rights are assigned through a written assignment agreement. The rights to be assigned should be explicitly designated under the assignment agreement. Requirements of written form and explicit designation of the assigned economic rights are validity conditions; therefore, clauses, such as “all economic rights are assigned,” or “the right to reproduction etc. are assigned,” will not be deemed valid as per Article 52 of the IAWC.[2]

Economic rights may be assigned on a limited or unlimited basis with respect to location and duration. Economic rights may also be assigned with or without the requirement to pay any consideration for the assignment. Additionally, economic rights may be assigned to different persons by limiting the scope of the right. For instance, a photographer may assign the right of reproduction and right of distribution of his/her photographs only to be displayed within a certain catalogue. In this case, the assignee right holder may not use these photographs in any other environment, such as written press or the internet, except such catalogue as referred to herein.

The assignee right holder may not assign the economic rights to third parties without obtaining the written consent of the author or his/her heirs, unless the right to assign to third parties is set forth under the assignment agreement (IAWC Article 49/1). The reason why the consent of the author is required is to establish the connection with the author. The work is not severed, and the control of the author over the use of the work is established.[3]

License Agreement

The author may grant a license to exercise economic rights on the work without assigning economic rights (IAWC Article 48/2). Upon granting a license to exercise an economic right, such licensed economic right remains within the assets of the author (or the right holder), and the licensee will only be entitled to exercise such economic right.

The law regulates two different types of licenses, those being exclusive or non-exclusive license. A license is non-exclusive if it does not prohibit the holder of the economic right to grant the same license to others and is exclusive if it is granted to only one person. In the case of an exclusive license, unless otherwise determined, even the author (or the economic right holder) may not exercise such right. Unless to the contrary can be deduced from the law or agreement, all licenses are deemed to be non-exclusive. The provisions on usufructuary leases will apply to non-exclusive licenses, and those on usufruct leases shall apply to exclusive licenses. (IAWC Article 56)

The license to exercise an economic right is granted through a written license agreement in which all rights to license are explicitly specified. In the same manner, and with respect to assignment agreements, written form is a validity condition. Any vague expressions regarding licensed economic rights will be deemed invalid. The license right may also be assigned on a limited or unlimited basis with respect to location, duration and scope. Additionally, the license may be granted with or without the requirement to pay any consideration. For instance, an exclusive license on the right to reproduce the musical work of a symphony may be granted to a publishing house, a non-exclusive license on the right to perform the symphony may be granted to a concert organizer, and non-exclusive licenses on the right to communicate the work to the public may be granted to two different TV channels.[4]

Granting an exclusive license on an economic right does not create an obstacle for the assignment of such economic right, because the licensed economic right remains within the assets of the right holder; however, the rights of the exclusive licensee will be protected against the new right holder.[5]

The provision prohibiting the assignment of the assigned economic right by the right holder to third parties without obtaining the written consent of the author (or his/her heirs) also applies to license agreements. Accordingly, the exclusive or non-exclusive licensee may not grant a license to third parties without obtaining the written consent of the author (or his/her heirs), unless the right to grant a license to third parties is set forth under the license agreement (IAWC Article 49/1).

Acts of Disposal on Incomplete Works

Only the completed works may be the subject of an assignment or license agreement (i.e. acts of disposal), and assignment or license agreements with regard to incomplete works are invalid. However, commitments regarding the acts of disposal are valid even if they are made prior to the creation of the work[6] (IAWC Article 48/3, 50/1).

In the case of a commitment regarding the acts of disposal, assigning or granting a license on the economic rights of the work following the completion of the work constitutes the subject matter of the commitment. Thus, the right holder may request the assignment or license of the economic right on the work once the work is created. For instance, an artist may undertake to grant a gallery with a license, or assigning the right of performance, on the painting s/he is then painting by executing a contract with the gallery. Once the work is completed, the gallery is entitled to request the transfer of the economic right, for which the artist and gallery must conclude a second agreement, whereby the terms and provisions of the assignment and/or license are indicated.

As assignment and license agreements, commitments regarding the acts of disposal on incomplete works are also concluded in writing, and the economic rights that are subject to a commitment should be explicitly indicated thereby. A written form requirement is a validity condition.[7]

Although concluding an assignment and license agreement on the economic rights of an incomplete work is deemed invalid by law, such assignment and license agreements are frequently encountered in practice in Turkey, due to the impact of Anglo-Saxon law. In the events where the economic rights on the incomplete work are assigned or licensed, the Supreme Court, by considering the facts of the concrete cases, has either resolved that such assignment or license agreement is deemed to be considered as a commitment to assign or grant license on the incomplete work within the scope of Article 50/1 of the IAWC, or is deemed to be invalid due to Article 48/3 of the IAWC. Therefore, if the economic rights of the incomplete works are to be assigned or licensed, such agreement should be drafted as an undertaking to assign or license, rather than an assignment or license agreement. Furthermore, as the economic rights will not be automatically transferred to the right holder during the commitment period, a second agreement on the assignment or license should be executed after the work is created.

Right of Rescission

If the acquirer of an economic right or a license exercises his/her rights and authorities, insufficiently, within the agreed period, or where no period is determined within a reasonable time, and if thereby the author’s interests are significantly violated, the author may rescind the agreement (IAWC Article 58). The right to rescind is a formative right, and the economic right returns to the author by exercising the right to rescind.[8]

In order for an author to exercise the right to rescind, the statutory requirements as to form must be fulfilled. Accordingly, the author wishing to exercise the right to rescind must grant the other party, upon notifying him/her through a notary public, a period of time adequate to exercise its contractual rights. The notice issued by the notary public gives effect to the rescission of the agreement, if the expiration date for the granted period is exceeded, or if it is not necessary to grant such period. The granting of such a period is not necessary, if it is impossible for the other party to exercise such right, or if he/she refuses to exercise it, or if the granting of such period would significantly jeopardize the author’s interests.

The other party does not have to be at fault in order for the author to exercise the right to rescind. However, if the other party is at fault, then the author may request compensation in accordance with the provisions of Turkish Code of Obligations numbered 6098. On the other hand, if fault is attributable to the author, he/she may not exercise the right to rescind.

The right of rescission may not be waived in advance, and limitations precluding its exercise for more than two years are null and void (IAWC Article 58/5). Action of objection may be pursued in the four weeks following the service of the rescission notification. If no action of objection is initiated within the four weeks, it should be concluded that the rescission was just.[9]

When the author does not have the financial resources to benefit from the economic rights on his/her work, he/she may assign or grant a license on the economic rights to third parties. Economic rights may be assigned or licensed on a limited or unlimited basis in terms of location, duration and scope. Also, there is no legal requirement to pay any consideration for the assignment or license. Assignment or license agreements regarding incomplete works are deemed invalid. However, an undertaking may be given for the assignment or licensing of the economic rights to have arisen from the creation of the work. If the author assigns or grants a license on the economic rights, and the assignee or licensee fails to exercise these economic rights as designated under the agreement during the term of the agreement and, thus, the interests of the author are materially violated, the author may use the statutory right of rescission to terminate the assignment or license agreement.

(Authored by Hazel Coskun Baylan and first published by Erdem & Erdem, April 2021)

[1] Bozbel, Savaş: Fikri Mülkiyet Hukuku. On İki Levha Yayıncılık, 2015, p. 198-199.

[2] Tekinalp, Ünal: Fikir ve Sanat Eserleri Hukuku, Vedat Kitapçılık, 2012, p. 232.

[3] Karahan, Sami; Suluk, Cahit; Saraç, Tahir; Nal, Temel : Fikri Mülkiyet Hukukunun Esasları, Seçkin Yayıncılık, 2012, p. 117.

[4] Tekinalp: p. 232.

[5] Karahan; Suluk; Saraç; Nal : p. 117.

[6] Commitments regarding the acts of disposal may also be given if the work is completed.

[7] Tekinalp: p. 232.

[8] Bozbel: p. 220.

[9] Bozbel: p. 220.

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Assignment of Contract Rights: Everything You Need to Know

The assignment of contract rights happens when one party assigns the obligations and rights of their part of a legal agreement to a different party. 3 min read updated on February 01, 2023

The assignment of contract rights happens when one party assigns the obligations and rights of their part of a legal agreement to a different party.

What Is an Assignment of Contract?

The party that currently holds rights and obligations in an existing contract is called the assignor and the party that is taking over that position in the contract is called the assignee. When assignment of contract takes place, the assignor usually wants to hand all of their duties over to a new individual or company, but the assignee needs to be fully aware of what they're taking on.

Only tangible things like property and contract rights can be transferred or assigned . Most contracts allow for assignment or transfer of contract rights, but some will include a clause specifying that transfers are not permitted.

If the contract does allow for assignments, the assignor isn't required to have the agreement of the other party in the contract but may transfer their rights whenever they want. Contract assignment does not affect the rights and responsibilities of either party involved in the contract. Just because rights are assigned or transferred doesn't mean that the duties of the contract no longer need to be carried out.

Even after the assignor transfers their rights to another, they still remain liable if any issues arise unless otherwise noted in an agreement with the other party.

The purpose for the assignment of contract rights is to change the contractual relationship, or privity , between two parties by replacing one party with a new party.

How Do Contract Assignments Work?

Contract assignments are handled differently depending on certain aspects of the agreement and other factors. The language of the original contract plays a huge role because some agreements include clauses that don't allow for the assignment of contract rights or that require the consent of the other party before assignment can occur.

For example, if Susan has a contract with a local pharmacy to deliver her prescriptions each month and the pharmacy changes ownership, the new pharmacy can have Susan's contract assigned to them. As long as Susan continues to receive her medicine when she needs it, the contract continues on, but now Susan has an agreement with a new party.

Some contracts specify that the liability of the agreement lies with the original parties, even if assignment of contract takes place. This happens when the assignor guarantees that the assignee will continue to perform the duties required in the contract. That guarantee makes the assignor liable.

Are Assignments Always Enforced?

Assignments of contract rights are usually enforceable, but will not be under these circumstances:

Assignment is prohibited in the contract language, which is called an anti-assignment clause.
Assignment of rights changes the foundational terms of the agreement.
The assignment is illegal in some way.

If assignment of contract takes place, but the contract actually prohibits it, the assignment will automatically be voided.

When a transfer of contract rights will somehow change the basics of the contract, assignment cannot happen. For instance, if risks are increased, value is decreased, or the ability for performance is affected, the assignment will probably not be enforced by the court.

Basic Rights of Contract Assignments

Most contracts allow for assignments, but you'll want to double check a contract before signing if this is something you anticipate happening during the lifespan of your agreement. Contract law does impose strict rules and regulations regarding the assignment of contract rights, so it's important to be sure that any transfers of rights are fully legal before acting on them.

Any business agreements should always outline provisions for contract assignments and be well-drafted to be sure that the agreement is effective and enforceable.

Why Use Contract Assignments?

When an assignor hands over their contracts rights to an assignee, they are signing away their obligation to perform and putting that obligation on a new party. The other party involved in the contract should see no difference in how the agreement plays out. If performance is negatively affected by the assignment of rights, something is wrong.

If a party in a contract can no longer perform their duties, it is better to assign their contractual rights to a party who can carry out the duties rather than breach contract.

If you need help with the assignment of contract rights, 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.

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When Should Contractual Rights be Transferable? A Legal and Economic Analysis

Paul MacMahon Assistant Professor of Law at the London School of Economics

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A contractual right can be treated as an asset and transferred to a non-party. But when are contractual rights transferable? The answer to this question is mainly provided by the law of assignment. In two articles published this year, I argue that Anglo-American law on the question of assignability is affected by dubious assumptions, tending mainly to make rights assignable that should be non-assignable. The first article, ‘ Contract Law’s Transferability Bias ,’ surveys US law on the question. The other, ‘ Rethinking Assignability ,’ covers the equivalent body of English law.

Modern law reverses the common law’s historic position that contractual rights were personal to the original parties and hence non-assignable. And where the parties have chosen to make rights assignable, there should generally be no objection to respecting their wishes. But contemporary law goes much further than that. The details of English law and US law are different, but they share a general presumption that contractual rights should be assignable even where the parties have not expressly made them so. This presumption of assignability, moreover, is often hard or impossible to shift. It is especially strong with respect to claims for payment. A claim for payment is treated as a form of ‘property’ and is hence thought by courts and scholars to be subject to the policy against restraints on the alienation of tangible property.

Contemporary law, the articles contend, has swung too far, embracing a policy in favour of assignability that transcends and sometimes overrides party intention. A patient accounting of costs and benefits shows that there is no general reason for the law to favour assignability over non-assignability (or vice versa). In many circumstances, making a right assignable does not serve the parties’ joint interests. In theory, it does not matter to the duty-holder who holds a contractual right. But, in reality, the identity of the right-holder is often crucial. Legally enforceable contracts are, to a greater or lesser extent, embedded in a broader set of relations between the parties. It is not feasible, or even possible, to make precise provisions for all contingencies. A party to a contract often expects that the terms of the exchange will be adjusted and renegotiated during performance. Knowing that a court will not necessarily be able to protect her interests, the duty-holding party wants the right-holder to be disposed towards cooperative behavior. Contracting parties thus choose their partners carefully. The significance of a right-holder’s identity is a major motivation for making rights non-assignable—as contracting parties often attempt to do.

The law’s pro-transferability policy is based on an intuitive idea that making contractual rights assignable, even against the parties’ wishes, serves economic efficiency. Yet Grant Gilmore, who was largely responsible for the original rules of Article 9 of the Uniform Commercial Code (UCC) invalidating non-assignment clauses, was candidly unable to justify the policy. ‘To rehearse social and economic arguments designed to prove that the position is sound would not be helpful. On propositions of so fundamental an order, belief is instinctive and irrational, not logical and reasoned.’ Gilmore did gesture towards an instrumental argument, stating that ‘[t]he social or economic utility of permitting creditors to transfer rights is believed to outweigh the utility of permitting obligors to forbid the transfer.’ But, he said, the claim that the utility of transferability outweighed the utility of promisors being able to prevent it ‘lies beyond demonstration and proof’ (Security Interests in Personal Property (Little, Brown 1965), vol. 1, 211-12). Gilmore, however, wrote before the advent of serious economic analysis of law. In light of advances since then, the articles argue that the economic benefits of transferability are typically adequately factored into the initial contractual negotiation. If transferability serves overall social welfare, then we can expect parties to bargain for it, or, at least, to leave in place a default rule of assignability.

The articles’ main critical bite is directed against legal rules that override decisions by the parties to prohibit assignment. In the United States, pro-assignability canons of interpretation rules mean that clauses aiming to prohibit assignment are often construed to permit it. English law is less reliant on aggressive forms of interpretation but allows a promisee to override a non-assignment clause using a declaration of trust . The article criticizes these practices and also scrutinizes statutory rules that explicitly override party autonomy. The American article calls into question the cogency of UCC Article 9’s long-standing rules invalidating many non-assignment clauses. I do not, however, argue for unbridled freedom of contract. The English article shows that the Business Contract Terms (Assignment of Receivables) Regulations 2018 , were, to some extent, justified by reference to a generic pro-assignability policy. In their final form, however, the Regulations may be justifiable on another ground: the need to protect small and medium-sized suppliers from the economic power of their big-business customers.

Paul MacMahon is an Assistant Professor of Law at the London School of Economics .

EVENT ANNOUNCEMENT AND CALL FOR PAPERS: 'Corporations, Contracts, and Corporate Law'

27 November 2023

by Casimiro A Nigro

Singapore Acts to Temporarily Suspend the Enforcement of Certain Contracts During the Economic Storm Caused by the Coronavirus Outbreak

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14.2: Assignment of Contract Rights

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Learning Objectives

Understand what an assignment is and how it is made.
Recognize the effect of the assignment.
Know when assignments are not allowed.
Understand the concept of assignor’s warranties

The Concept of a Contract Assignment

Contracts create rights and duties. By an assignment , an obligee (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor (the one who has a duty to perform) to a third person ( assignee ); the obligee then becomes an assignor (one who makes an assignment).

The Restatement (Second) of Contracts defines an assignment of a right as “a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires the right to such performance.”Restatement (Second) of Contracts, Section 317(1). The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring. A factor is one who purchases the right to receive income from another.

Figure 14.1 Assignment of Rights

Screen Shot 2020-03-26 at 2.35.54 PM.png

Method of Assignment

Manifesting assent.

To effect an assignment, the assignor must make known his intention to transfer the rights to the third person. The assignor’s intention must be that the assignment is effective without need of any further action or any further manifestation of intention to make the assignment. In other words, the assignor must intend and understand himself to be making the assignment then and there; he is not promising to make the assignment sometime in the future.

Under the UCC, any assignments of rights in excess of $5,000 must be in writing, but otherwise, assignments can be oral and consideration is not required: the assignor could assign the right to the assignee for nothing (not likely in commercial transactions, of course). Mrs. Franklin has the right to receive $750 a month from the sale of a house she formerly owned; she assigns the right to receive the money to her son Jason, as a gift. The assignment is good, though such a gratuitous assignment is usually revocable, which is not the case where consideration has been paid for an assignment.

Acceptance and Revocation

For the assignment to become effective, the assignee must manifest his acceptance under most circumstances. This is done automatically when, as is usually the case, the assignee has given consideration for the assignment (i.e., there is a contract between the assignor and the assignee in which the assignment is the assignor’s consideration), and then the assignment is not revocable without the assignee’s consent. Problems of acceptance normally arise only when the assignor intends the assignment as a gift. Then, for the assignment to be irrevocable, either the assignee must manifest his acceptance or the assignor must notify the assignee in writing of the assignment.

Notice to the obligor is not required, but an obligor who renders performance to the assignor without notice of the assignment (that performance of the contract is to be rendered now to the assignee) is discharged. Obviously, the assignor cannot then keep the consideration he has received; he owes it to the assignee. But if notice is given to the obligor and she performs to the assignor anyway, the assignee can recover from either the obligor or the assignee, so the obligor could have to perform twice, as in Exercise 2 at the chapter’s end, Aldana v. Colonial Palms Plaza . Of course, an obligor who receives notice of the assignment from the assignee will want to be sure the assignment has really occurred. After all, anybody could waltz up to the obligor and say, “I’m the assignee of your contract with the bank. From now on, pay me the $500 a month, not the bank.” The obligor is entitled to verification of the assignment.

Effect of Assignment

General rule.

An assignment of rights effectively makes the assignee stand in the shoes of the assignor. He gains all the rights against the obligor that the assignor had, but no more. An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee. Likewise, under UCC Section 9-318(1), the assignee of an account is subject to all terms of the contract between the debtor and the creditor-assignor. Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 per month and the car is warranted for 50,000 miles. If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, $250 and deduct that $250 from the amount owed Dealer on the next installment (called a setoff). Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments. First, it is inapplicable to the sale of a negotiable instrument to a holder in due course. Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor.Uniform Commercial Code, Section 9-206. While a waiver of defenses makes the assignment more marketable from the assignee’s point of view, it is a situation fraught with peril to an obligor, who may sign a contract without understanding the full import of the waiver. Under the waiver rule, for example, a farmer who buys a tractor on credit and discovers later that it does not work would still be required to pay a credit company that purchased the contract; his defense that the merchandise was shoddy would be unavailing (he would, as used to be said, be “having to pay on a dead horse”).

For that reason, there are various rules that limit both the holder in due course and the waiver rule. Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted. Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective. Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such consumer transactions . Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them. Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.

When Assignments Are Not Allowed

The general rule—as previously noted—is that most contract rights are assignable. But there are exceptions. Five of them are noted here.

Material Change in Duties of the Obligor

When an assignment has the effect of materially changing the duties that the obligor must perform, it is ineffective. Changing the party to whom the obligor must make a payment is not a material change of duty that will defeat an assignment, since that, of course, is the purpose behind most assignments. Nor will a minor change in the duties the obligor must perform defeat the assignment.

Several residents in the town of Centerville sign up on an annual basis with the Centerville Times to receive their morning paper. A customer who is moving out of town may assign his right to receive the paper to someone else within the delivery route. As long as the assignee pays for the paper, the assignment is effective; the only relationship the obligor has to the assignee is a routine delivery in exchange for payment. Obligors can consent in the original contract, however, to a subsequent assignment of duties. Here is a clause from the World Team Tennis League contract: “It is mutually agreed that the Club shall have the right to sell, assign, trade and transfer this contract to another Club in the League, and the Player agrees to accept and be bound by such sale, exchange, assignment or transfer and to faithfully perform and carry out his or her obligations under this contract as if it had been entered into by the Player and such other Club.” Consent is not necessary when the contract does not involve a personal relationship.

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right that cannot be assigned. For example, a student seeking to earn pocket money during the school year signs up to do research work for a professor she admires and with whom she is friendly. The professor assigns the contract to one of his colleagues with whom the student does not get along. The assignment is ineffective because it matters to the student (the obligor) who the person of the assignee is. An insurance company provides auto insurance covering Mohammed Kareem, a sixty-five-year-old man who drives very carefully. Kareem cannot assign the contract to his seventeen-year-old grandson because it matters to the insurance company who the person of its insured is. Tenants usually cannot assign (sublet) their tenancies without the landlord’s permission because it matters to the landlord who the person of their tenant is. Section 14.4.1 "Nonassignable Rights" , Nassau Hotel Co. v. Barnett & Barse Corp. , is an example of the nonassignability of a personal right.

Assignment Forbidden by Statute or Public Policy

Various federal and state laws prohibit or regulate some contract assignment. The assignment of future wages is regulated by state and federal law to protect people from improvidently denying themselves future income because of immediate present financial difficulties. And even in the absence of statute, public policy might prohibit some assignments.

Contracts That Prohibit Assignment

Assignability of contract rights is useful, and prohibitions against it are not generally favored. Many contracts contain general language that prohibits assignment of rights or of “the contract.” Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning “the contract” bars “only the delegation to the assignee of the assignor’s performance.”Restatement (Second) of Contracts, Section 322. In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties.

Even if a contractual provision explicitly prohibits it, a right to damages for breach of the whole contract is assignable under UCC Section 2-210(2) in contracts for goods. Likewise, UCC Section 9-318(4) invalidates any contract provision that prohibits assigning sums already due or to become due. Indeed, in some states, at common law, a clause specifically prohibiting assignment will fail. For example, the buyer and the seller agree to the sale of land and to a provision barring assignment of the rights under the contract. The buyer pays the full price, but the seller refuses to convey. The buyer then assigns to her friend the right to obtain title to the land from the seller. The latter’s objection that the contract precludes such an assignment will fall on deaf ears in some states; the assignment is effective, and the friend may sue for the title.

Future Contracts

The law distinguishes between assigning future rights under an existing contract and assigning rights that will arise from a future contract. Rights contingent on a future event can be assigned in exactly the same manner as existing rights, as long as the contingent rights are already incorporated in a contract. Ben has a long-standing deal with his neighbor, Mrs. Robinson, to keep the latter’s walk clear of snow at twenty dollars a snowfall. Ben is saving his money for a new printer, but when he is eighty dollars shy of the purchase price, he becomes impatient and cajoles a friend into loaning him the balance. In return, Ben assigns his friend the earnings from the next four snowfalls. The assignment is effective. However, a right that will arise from a future contract cannot be the subject of a present assignment.

Partial Assignments

An assignor may assign part of a contractual right, but only if the obligor can perform that part of his contractual obligation separately from the remainder of his obligation. Assignment of part of a payment due is always enforceable. However, if the obligor objects, neither the assignor nor the assignee may sue him unless both are party to the suit. Mrs. Robinson owes Ben one hundred dollars. Ben assigns fifty dollars of that sum to his friend. Mrs. Robinson is perplexed by this assignment and refuses to pay until the situation is explained to her satisfaction. The friend brings suit against Mrs. Robinson. The court cannot hear the case unless Ben is also a party to the suit. This ensures all parties to the dispute are present at once and avoids multiple lawsuits.

Successive Assignments

It may happen that an assignor assigns the same interest twice (see Figure 14.2 "Successive Assignments" ). With certain exceptions, the first assignee takes precedence over any subsequent assignee. One obvious exception is when the first assignment is ineffective or revocable. A subsequent assignment has the effect of revoking a prior assignment that is ineffective or revocable. Another exception: if in good faith the subsequent assignee gives consideration for the assignment and has no knowledge of the prior assignment, he takes precedence whenever he obtains payment from, performance from, or a judgment against the obligor, or whenever he receives some tangible evidence from the assignor that the right has been assigned (e.g., a bank deposit book or an insurance policy).

Some states follow the different English rule: the first assignee to give notice to the obligor has priority, regardless of the order in which the assignments were made. Furthermore, if the assignment falls within the filing requirements of UCC Article 9 (see Chapter 33 "Secured Transactions and Suretyship" ), the first assignee to file will prevail.

Figure 14.2 Successive Assignments

Screen Shot 2020-03-26 at 2.36.41 PM.png

Assignor’s Warranties

An assignor has legal responsibilities in making assignments. He cannot blithely assign the same interests pell-mell and escape liability. Unless the contract explicitly states to the contrary, a person who assigns a right for value makes certain assignor’s warranties to the assignee: that he will not upset the assignment, that he has the right to make it, and that there are no defenses that will defeat it. However, the assignor does not guarantee payment; assignment does not by itself amount to a warranty that the obligor is solvent or will perform as agreed in the original contract. Mrs. Robinson owes Ben fifty dollars. Ben assigns this sum to his friend. Before the friend collects, Ben releases Mrs. Robinson from her obligation. The friend may sue Ben for the fifty dollars. Or again, if Ben represents to his friend that Mrs. Robinson owes him (Ben) fifty dollars and assigns his friend that amount, but in fact Mrs. Robinson does not owe Ben that much, then Ben has breached his assignor’s warranty. The assignor’s warranties may be express or implied.

Key Takeaway

Generally, it is OK for an obligee to assign the right to receive contractual performance from the obligor to a third party. The effect of the assignment is to make the assignee stand in the shoes of the assignor, taking all the latter’s rights and all the defenses against nonperformance that the obligor might raise against the assignor. But the obligor may agree in advance to waive defenses against the assignee, unless such waiver is prohibited by law.

There are some exceptions to the rule that contract rights are assignable. Some, such as personal rights, are not circumstances where the obligor’s duties would materially change, cases where assignability is forbidden by statute or public policy, or, with some limits, cases where the contract itself prohibits assignment. Partial assignments and successive assignments can happen, and rules govern the resolution of problems arising from them.

When the assignor makes the assignment, that person makes certain warranties, express or implied, to the assignee, basically to the effect that the assignment is good and the assignor knows of no reason why the assignee will not get performance from the obligor.

If Able makes a valid assignment to Baker of his contract to receive monthly rental payments from Tenant, how is Baker’s right different from what Able’s was?
Able made a valid assignment to Baker of his contract to receive monthly purchase payments from Carr, who bought an automobile from Able. The car had a 180-day warranty, but the car malfunctioned within that time. Able had quit the auto business entirely. May Carr withhold payments from Baker to offset the cost of needed repairs?
Assume in the case in Exercise 2 that Baker knew Able was selling defective cars just before his (Able’s) withdrawal from the auto business. How, if at all, does that change Baker’s rights?
Why are leases generally not assignable? Why are insurance contracts not assignable?

Assessing Assignability: Transferring Contractual Rights or Obligations | Practical Law

Assessing Assignability: Transferring Contractual Rights or Obligations

Practical law legal update 5-546-6326 (approx. 7 pages).

An intended transfer is of the type that is prohibited by law or public policy (see Practice Note, Assignability of Commercial Contracts: Statutory and Public Policy Exceptions ).
The parties expressly agree to restrict transferability (see Practice Note, Assignability of Commercial Contracts: Contractual Anti-assignment and Anti-delegation Clauses ).
Breaching the contract.
Making an ineffective and invalid transfer.

Distinguishing Between Assignment and Delegation

The assignment of rights to receive performance.
The delegation of duties to perform.

Characteristics of Assignments

The right to receive performance from the assignor.
Its remedies against the assignor for any failure to perform.

Characteristics of Delegation

The general rule governing assignment and delegation.

Most assignments of contractual rights.
Many delegations of contractual performance.
Assignments and delegations that violate public policy or law.
Assignments of rights or delegations of performance that are personal in nature.
Contracts with anti-assignment or anti-delegation clauses.

Contracts That Present the Greatest Challenges

Personal services contracts (see Personal Services Contracts ).
Non-exclusive intellectual property licenses (see Intellectual Property Licenses ).
Contracts with anti-assignment and anti-delegation clauses (see Contracts With Anti-assignment and Anti-delegation Contract Clauses ).

Personal Services Contracts

Intellectual property licenses, contracts with anti-assignment and anti-delegation clauses, is a change of control an assignment.

Contains an anti-assignment and anti-delegation clause expressly restricting a change of control.
States that a change in management or equity ownership of the contracting party is deemed to be an assignment.

When Does an Involuntary Transfer Trigger a Restricted Transfer?

A contractual anti-assignment and anti delegation clause applies to a specific type or transfer.
The transfer is permissible, with or without a contractual anti-assignment and anti-delegation provision.

Drafting and Negotiating Anti-assignment and Anti-delegation Clauses

Directly addressing assignment of rights and delegation of performance.
Clarifying the universe of restricted transfers.
Designating the non-transferring party's consent rights.
Specifying any exceptions to non-transferability.
Requiring notification of a permitted transfer.
Including a declaration that impermissible transfers are void.
Adding a novation to the anti-assignment and anti-delegation provision.

Assignment Clause

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Contract Clauses

Acceleration Clause
Arbitration Clause
Cancellation Clause
Choice of Law Clause
Confidentiality Clause
Consideration Clause
Definitions Clause
Dispute Resolution Clause
Entire Agreement Clause
Escalation Clause
Exclusivity Clause
Exculpatory Clause
Force Majeure Clause
Governing Law Clause
Indemnification Clause
Indemnity Clause
Insurance Clause
Integration Clause
Merger Clause
Non-Competition Clause
Non-Disparagement Clause
Non-Exclusivity Clause
Non-Solicitation Clause
Privacy Clause
Release Clause
Severability Clause
Subordination Clause
Subrogation Clause
Survival Clause
Termination Clause
Time of Essence Clause

Jump to Section

Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

Example 1 . A business closing or a change of control occurs
Example 2 . New services providers taking over existing customer contracts
Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival . Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database, EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database, EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database, EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database, EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

Real estate contracts
Sales contract
Asset purchase agreement
Purchase and sale agreement
Bill of sale
Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

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When Can a Party Assign Contractual Rights to...

When Can a Party Assign Contractual Rights to Another Party?

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What is a Contract?

An agreement between two private parties creates mutual legal obligations. A contract can be either oral or written. However, oral contracts are more challenging to enforce and should be avoided, if possible.

A contract that involves a significant amount of money (over $500) must be written in order to be valid. Every aspect of life involves contracts. To ensure you have a valid contract, you must understand the rules governing them.

All valid contracts must include the following elements to be enforced:

An offer (I will pay you $1,000 for 1,000 cupcakes);
And acceptance of the offer presented with (Another person accepts $1,000 for 1,000 cupcakes);
A promise to perform (Other person says they will perform);
A valuable consideration ($1,000);
A time or an event when the performance must be made (1,000 cupcakes exactly two weeks from now);
Terms and conditions for the performance (The cupcakes must be chocolate and have vanilla frosting); and
Performance (The 1,000 cupcakes are delivered, and the person is paid $1,000).

On top of that, the courts will not enforce certain contracts unless they are in writing. These contracts fall under the Statute of Frauds and must be in writing. Examples include marriage contracts, contracts not to be performed within one year, interest on land contracts, and the decedent’s debt guarantees.

When dealing with a contract issue, it is important to consider the local laws since state statutes govern most contracts.

What are the Required Elements for a Contract?

What is considered a breach of a contract, what are there different types of contracts, what is a contract assignment, does a contract assignment need to be in writing, do i need a lawyer for help with contract assignments.

Any contract must contain five elements. A contract must have a legal purpose and cannot be used for illegal purposes. Contracting to commit a crime (such as hiring a hitman). In addition, there must be a mutual agreement between the parties. In order for this to occur, one party must have made an offer to another party for acceptance. The signing of a contract, for instance, indicates that the parties are in agreement and on the same page.

Some offers may not have an expiration period , so the offer remains open for a “reasonable” time. Offers can also be revoked until acceptance occurs. Acceptance usually means agreeing to the terms of the offer, and if there is any change to the terms in the acceptance, it would be considered a counteroffer. States differ on this, and it would be ideal to consider the regulations in your local jurisdiction.

Third, consideration is key in order for the contract to be valid. Both parties agree to provide something of value in exchange for a benefit. The consideration can take the form of a car, money, or even manual labor. It must be something of real value.

Gifts and promises differ as well. It is not considered a contract if someone gives you a handbag or if they promise to give you a handbag but don’t; there is still no contract. A contract exists, however, when a friend promises you a handbag in exchange for completing a task. I will buy you a handbag if you clean my gutters.

Fourth, the parties must be legally competent . Minors and the mentally impaired cannot validly contract. Additionally, the party must be of a sound mind while contracting and without the influence of drugs or alcohol. Lastly, all parties must agree based on their own will. Contracts will be void if there is a mistake, duress, or fraud by one or more parties.

The contract is breached if either party fails to fulfill its legal obligations. The other party will suffer economic losses if one party violates the contract. As an example, if you hired a construction company to complete a project on time and that company failed to meet the deadline, then you will most likely suffer financial losses.

There are several options available to compensate for those losses. You can either sue for damages, demand specific performance , or terminate the contract. In the end, the court will decide the outcome and the amount of compensation.

A unilateral contract involves a promise in exchange for specific performance. In a bilateral contract, one promise is exchanged for another promise.

Other types of contracts include:

Express contracts usually specify orally or in writing the exact terms of the contract;
Conditional contracts are based upon the completion of a condition;
Joint and several contracts have multiple parties involved;
Implied contracts where courts find that a contract exists based on the situation;
Unconscionable contracts put one party at a greater advantage than another one and are considered unjust;
Adhesion contracts are considered to give one party more bargaining power than another and therefore result in a “take it or leave it” situation;
Option contracts allow you to enter into another contract with another party at a later time; and
Fixed-price contracts involve a buyer and a seller that agree to pay a fixed price for a project.

Keeping in mind that contracts come in all shapes and sizes is something we deal with every day. Contact a local lawyer if you are unsure what type of contract to which you are a party.

A contract assignment occurs when one party in a contract transfers or “assigns” their contract rights to another party. For instance, suppose that party X contracts with party Y, stating that Y will build their house. X can then assign their rights to the building to another party (Z) if they choose to do so. Here, X is called the “assignor,” while Z is called the “assignee.”

Contractual rights may be assigned to another party at any time unless:

The contract prohibits the assignment of contractual rights
The assignment would fundamentally change certain duties or risks involved in the contract
The assignment has to do with future rights derived from a future, non-existent contract
The assignment is legally prohibited by law

Aside from these situations, contract assignments are allowed and frequently occur in many situations. This is especially common in contracts involving sub-contracts and building projects.

An oral agreement is usually sufficient for a contract assignment to be valid. The original party (the obligor) does not need to be informed of the assignment. In any contract situation, it’s best if the agreement is reduced to writing and signed by all parties. By doing this, everyone will be on the same page, and a record of interactions can be maintained in case of a lawsuit.

Contract rights often contain many terms, which can get more complex when other parties enter the picture. You may need to hire a contract lawyer for advice and guidance if you have any questions, concerns, or disputes involving contract assignments.

A qualified lawyer can assist with drafting documents, reviewing agreements, and other tasks. Furthermore, your lawyer can represent you in court if you need to file a legal claim. An issue that involves a large amount of money or evidence that the contract is invalid can easily get out of hand.

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[1] Bozbel, Savaş: Fikri Mülkiyet Hukuku. On İki Levha Yayıncılık, 2015, p. 198-199.

[2] Tekinalp, Ünal: Fikir ve Sanat Eserleri Hukuku, Vedat Kitapçılık, 2012, p. 232.

[3] Karahan, Sami; Suluk, Cahit; Saraç, Tahir; Nal, Temel : Fikri Mülkiyet Hukukunun Esasları, Seçkin Yayıncılık, 2012, p. 117.

[4] Tekinalp: p. 232.

[5] Karahan; Suluk; Saraç; Nal : p. 117.

[6] Commitments regarding the acts of disposal may also be given if the work is completed.

[7] Tekinalp: p. 232.

[8] Bozbel: p. 220.

[9] Bozbel: p. 220.

All rights of this article are reserved. This article may not be used, reproduced, copied, published, distributed, or otherwise disseminated without quotation or Erdem & Erdem Law Firm's written consent. Any content created without citing the resource or Erdem & Erdem Law Firm’s written consent is regularly tracked, and legal action will be taken in case of violation.

Colombia: Modifications To The Regime Of Assignment Contracts Of Author's Economic Rights

On June 16, 2011, Law 1450 was issued (through which the 2010-2014 National Development Plan was announced), by means of which the regime of assignment contracts of author's economic rights was modified.

Article 20 of Law 23 of 1982, which only acknowledged the presumption of assignment of economic rights within the frame of a service contract, now also includes this presumption regarding works created within the frame of a labour contract.

For the abovementioned presumption to take place, all labour and service contracts must be in writing. However, this presumption admits for the parties to agree otherwise and does not deprive authors from any of the moral rights he/she has upon his/her work.

On the other hand, the requisite regarding the need for the assignment contracts to be acknowledged before Notary Public or converted into Public Deed was eliminated. The only validity requirement that shall be demanded from now on, shall be that said contracts are in writing. Notwithstanding the above, and with the aim of providing legal security, the contracts must still be registered before the Copyright Office for their enforceability before third parties.

This reform obliges the contracting parties to be clear at the moment of assigning economic author's rights, because in some aspects, the law supplies the lack of stipulation. Therefore, when the parties have not made any agreement on the term or territory of the assignment, it is understood it shall have a term of maximum five (5) years and it shall be limited to the country where the rights are assigned.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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What Is an Assignment of Contract?

Assignment of Contract Explained

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Assignment of contract allows one person to assign, or transfer, their rights, obligations, or property to another. An assignment of contract clause is often included in contracts to give either party the opportunity to transfer their part of the contract to someone else in the future. Many assignment clauses require that both parties agree to the assignment.

Learn more about assignment of contract and how it works.

What Is Assignment of Contract?

Assignment of contract means the contract and the property, rights, or obligations within it can be assigned to another party. An assignment of contract clause can typically be found in a business contract. This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark , and copyright) agreements.

How Does Assignment of Contract Work?

An assignment may be made to anyone, but it is typically made to a subsidiary or a successor. A subsidiary is a business owned by another business, while a successor is the business that follows a sale, acquisition, or merger.

Let’s suppose Ken owns a lawn mowing service and he has a contract with a real estate firm to mow at each of their offices every week in the summer. The contract includes an assignment clause, so when Ken goes out of business, he assigns the contract to his sister-in-law Karrie, who also owns a lawn mowing service.

Before you try to assign something in a contract, check the contract to make sure it's allowed, and notify the other party in the contract.

Assignment usually is included in a specific clause in a contract. It typically includes transfer of both accountability and responsibility to another party, but liability usually remains with the assignor (the person doing the assigning) unless there is language to the contrary.

What Does Assignment of Contract Cover?

Generally, just about anything of value in a contract can be assigned, unless there is a specific law or public policy disallowing the assignment.

Rights and obligations of specific people can’t be assigned because special skills and abilities can’t be transferred. This is called specific performance. For example, Billy Joel wouldn't be able to transfer or assign a contract to perform at Madison Square Garden to someone else—they wouldn't have his special abilities.

Assignments won’t stand up in court if the assignment significantly changes the terms of the contract. For example, if Karrie’s business is tree trimming, not lawn mowing, the contract can’t be assigned to her.

Assigning Intellectual Property

Intellectual property (such as copyrights, patents, and trademarks) has value, and these assets are often assigned. The U.S. Patent and Trademark Office (USPTO) says patents are personal property and that patent rights can be assigned. Trademarks, too, can be assigned. The assignment must be registered with the USPTO's Electronic Trademark Assignment System (ETAS) .

The U.S. Copyright Office doesn't keep a database of copyright assignments, but they will record the document if you follow their procedure.

Alternatives to Assignment of Contract

There are other types of transfers that may be functional alternatives to assignment.

Licensing is an agreement whereby one party leases the rights to use a piece of property (for example, intellectual property) from another. For instance, a business that owns a patent may license another company to make products using that patent.

Delegation permits someone else to act on your behalf. For example, Ken’s lawn service might delegate Karrie to do mowing for him without assigning the entire contract to her. Ken would still receive the payment and control the work.

Do I Need an Assignment of Contract?

Assignment of contract can be a useful clause to include in a business agreement. The most common cases of assignment of contract in a business situation are:

Assignment of a trademark, copyright, or patent
Assignments to a successor company in the case of the sale of the business
Assignment in a contract with a supplier or customer
Assignment in an employment contract or work for hire agreement

Before you sign a contract, look to see if there is an assignment clause, and get the advice of an attorney if you want to assign something in a contract.

Key Takeaways

Assignment of contract is the ability to transfer rights, property, or obligations to another.
Assignment of contract is a clause often found in business contracts.
A party may assign a contract to another party if the contract permits it and no law forbids it.

Legal Information Institute. " Assignment ." Accessed Jan. 2, 2021.

Legal Information Institute. " Specific Performance ." Accessed Jan. 2, 2021.

U.S. Patent and Trademark Office. " 301 Ownership/Assignability of Patents and Applications [R-10.2019] ." Accessed Jan. 2, 2021.

Licensing International. " What is Licensing ." Accessed Jan. 2, 2021.

14.1 Assignment of Contract Rights

Learning objectives.

Understand what an assignment is and how it is made.
Recognize the effect of the assignment.
Know when assignments are not allowed.
Understand the concept of assignor’s warranties.

The Concept of a Contract Assignment

Contracts create rights and duties. By an assignment The passing or delivering by one person to another of the right to a contract benefit. , an obligee One to whom an obligation is owed. (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor One who owes an obligation. (the one who has a duty to perform) to a third person ( assignee One to whom the right to receive benefit of a contract is passed or delivered. ); the obligee then becomes an assignor One who agrees to allow another to receive the benefit of a contract. (one who makes an assignment).

The Restatement (Second) of Contracts defines an assignment of a right as “a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires the right to such performance.” Restatement (Second) of Contracts, Section 317(1). The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring. A factor A person who pays money to receive another’s executory contractual benefits. is one who purchases the right to receive income from another.

Figure 14.1 Assignment of Rights

Method of Assignment

Manifesting assent.

Acceptance and Revocation

Effect of Assignment

General rule.

An assignment of rights effectively makes the assignee stand in the shoes of An assignee takes no greater rights than his assignor had. the assignor. He gains all the rights against the obligor that the assignor had, but no more. An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee. Likewise, under UCC Section 9-318(1), the assignee of an account is subject to all terms of the contract between the debtor and the creditor-assignor. Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 per month and the car is warranted for 50,000 miles. If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, $250 and deduct that $250 from the amount owed Dealer on the next installment (called a setoff). Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments. First, it is inapplicable to the sale of a negotiable instrument to a holder in due course (covered in detail Chapter 23 "Negotiation of Commercial Paper" ). Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor. Uniform Commercial Code, Section 9-206. While a waiver of defenses Surrender by a party of legal rights otherwise available to him or her. makes the assignment more marketable from the assignee’s point of view, it is a situation fraught with peril to an obligor, who may sign a contract without understanding the full import of the waiver. Under the waiver rule, for example, a farmer who buys a tractor on credit and discovers later that it does not work would still be required to pay a credit company that purchased the contract; his defense that the merchandise was shoddy would be unavailing (he would, as used to be said, be “having to pay on a dead horse”).

For that reason, there are various rules that limit both the holder in due course and the waiver rule. Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted. Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective. Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such consumer transactions A contract for household or domestic purposes, not commercial purposes. . Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them. Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.

When Assignments Are Not Allowed

The general rule—as previously noted—is that most contract rights are assignable. But there are exceptions. Five of them are noted here.

Material Change in Duties of the Obligor

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right The right or duty of a particular person to perform or receive contract duties or benefits; cannot be assigned. that cannot be assigned. For example, a student seeking to earn pocket money during the school year signs up to do research work for a professor she admires and with whom she is friendly. The professor assigns the contract to one of his colleagues with whom the student does not get along. The assignment is ineffective because it matters to the student (the obligor) who the person of the assignee is. An insurance company provides auto insurance covering Mohammed Kareem, a sixty-five-year-old man who drives very carefully. Kareem cannot assign the contract to his seventeen-year-old grandson because it matters to the insurance company who the person of its insured is. Tenants usually cannot assign (sublet) their tenancies without the landlord’s permission because it matters to the landlord who the person of their tenant is. Section 14.4.1 "Nonassignable Rights" , Nassau Hotel Co. v. Barnett & Barse Corp. , is an example of the nonassignability of a personal right.

Assignment Forbidden by Statute or Public Policy

Contracts That Prohibit Assignment

Assignability of contract rights is useful, and prohibitions against it are not generally favored. Many contracts contain general language that prohibits assignment of rights or of “the contract.” Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning “the contract” bars “only the delegation to the assignee of the assignor’s performance.” Restatement (Second) of Contracts, Section 322. In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties.

Future Contracts

Partial Assignments

Successive Assignments

Some states follow the different English rule: the first assignee to give notice to the obligor has priority, regardless of the order in which the assignments were made. Furthermore, if the assignment falls within the filing requirements of UCC Article 9 (see Chapter 28 "Secured Transactions and Suretyship" ), the first assignee to file will prevail.

Figure 14.2 Successive Assignments

Assignor’s Warranties

An assignor has legal responsibilities in making assignments. He cannot blithely assign the same interests pell-mell and escape liability. Unless the contract explicitly states to the contrary, a person who assigns a right for value makes certain assignor’s warranties Promises, express or implied, made by an assignor to the assignee about the merits of the assignment. to the assignee: that he will not upset the assignment, that he has the right to make it, and that there are no defenses that will defeat it. However, the assignor does not guarantee payment; assignment does not by itself amount to a warranty that the obligor is solvent or will perform as agreed in the original contract. Mrs. Robinson owes Ben fifty dollars. Ben assigns this sum to his friend. Before the friend collects, Ben releases Mrs. Robinson from her obligation. The friend may sue Ben for the fifty dollars. Or again, if Ben represents to his friend that Mrs. Robinson owes him (Ben) fifty dollars and assigns his friend that amount, but in fact Mrs. Robinson does not owe Ben that much, then Ben has breached his assignor’s warranty. The assignor’s warranties may be express or implied.

Key Takeaway

If Able makes a valid assignment to Baker of his contract to receive monthly rental payments from Tenant, how is Baker’s right different from what Able’s was?
Able made a valid assignment to Baker of his contract to receive monthly purchase payments from Carr, who bought an automobile from Able. The car had a 180-day warranty, but the car malfunctioned within that time. Able had quit the auto business entirely. May Carr withhold payments from Baker to offset the cost of needed repairs?
Assume in the case in Exercise 2 that Baker knew Able was selling defective cars just before his (Able’s) withdrawal from the auto business. How, if at all, does that change Baker’s rights?
Why are leases generally not assignable? Why are insurance contracts not assignable?

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View Examples. Assignment of Rights. I agree to assign, and do hereby irrevocably transfer and assign, to the Company: (i) all of my rights, title and interests in and with respect to any Assigned Inventions; (ii) all patents, patent applications, copyrights, mask works, rights in databases, trade secrets, and other intellectual property rights ...
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The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the ...
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Modifications To The Regime Of Assignment Contracts Of Author's
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Assignment of Contract Rights
Restatement (Second) of Contracts, Section 317 (1). The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights"). The assignor may assign any right unless (1) doing so would ...

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14.2: Assignment of Contract Rights

Learning Objectives

The Concept of a Contract Assignment

Method of Assignment

Acceptance and Revocation

Effect of Assignment

When Assignments Are Not Allowed

Material Change in Duties of the Obligor

Assignment of Personal Rights

Assignment Forbidden by Statute or Public Policy

Contracts That Prohibit Assignment

Future Contracts

Partial Assignments

Successive Assignments

Assignor’s Warranties

Key Takeaway

Assessing Assignability: Transferring Contractual Rights or Obligations | Practical Law

Assessing Assignability: Transferring Contractual Rights or Obligations

Distinguishing Between Assignment and Delegation

Characteristics of Assignments

Characteristics of Delegation

Contracts That Present the Greatest Challenges

Personal Services Contracts

When Does an Involuntary Transfer Trigger a Restricted Transfer?

Drafting and Negotiating Anti-assignment and Anti-delegation Clauses

Contract Clauses

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Assignment Clause Explained

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Assignment Clause Examples

Assignment Clause Samples

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Sample 4 – Asset Purchase Agreement