Assignment Clauses

Generally, in contract law land contracts are freely assignable (meaning they can be transferred).  However, if an agreement possess a restrictive or anti-assignment clause it will prevent this transferring of the agreement.

Thus (anti)-assignment clauses determines whether rights, obligations and duties under an agreement may be transferred in whole in or part to another, and under what conditions. Under U.S. law, contractual rights are freely assignable or delegable, unless prescribed or limited by agreement.

The clause frequently overlaps with “successors and assign” or “parties in interest” clauses that controls whether successors or assignees can assume the rights and obligations under the contract.  Some of the frequently asked questions you should ask yourself about the deal you are doing in regards to the opposite party are the following:

  • Do you want the the ability to delegate tasks in the agreement?
  • Do you want the ability to assign something of value stemming from the contract, such as revenue?
  • Do you want the ability to assign all rights under the agreement to another company that may acquire your business? (remember assignability makes it easier to transfer, thus giving you more options, meaning more value)
  • Do you want to give the other party the ability to assign the agreement? Do you want them to always be responsible to you, even if the agreement is assigned (do you want them to remain on the “hook”)?
  • Do you want the party to specifically do the work or can they use sub-contractors?

Some examples:

Here is a simple assignment clause that makes it so that Person X, must get the written consent from Party A to assign the rights or obligations of the agreement.  It may show up in an independent contractor agreement where Person X is providing services to Company A:

This agreement or any of the rights or obligations thereunder shall not be assigned in whole or in part by Person X without the prior written consent of the Company A.

Here is an example of a clause that restricts the licensee (person receiving the license) to that one license, and they will not be do transfer it to anyone else without the permission of the licensor.  This is typically a clause used in intellectual property or grants of the right to use something, so consider software, logos, grants of access to things, etc . . . . It is in this way a licensor can make “more” single-holder licenses by restricting transfer, and forcing those that want the item in question by entering licensing agreements.

The right of Licensee to hold and use the property of Licensor pursuant to this Agreement is restricted solely to Licensee and shall not be assigned, transferred, sublicensed, encumbered, or subject to any security interest without the written authorization of Licensor. Any attempted assignment will be void and of no effect.

*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.

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