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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.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Understanding Assignment Clauses in Contracts

Nov 22, 2023 | Contracts

Contracts are an integral part of our daily lives, governing a wide range of transactions from buying goods and services to entering into employment agreements. One often-overlooked yet crucial aspect of contracts is the assignment clause. Understanding assignment clauses is essential for individuals and businesses alike, as they can significantly impact the parties involved. In this comprehensive guide, we will explore the intricacies of assignment clauses, their significance, and how they can affect contractual relationships.

Table of Contents

What is an Assignment Clause?

An assignment clause, also known as a delegation clause, is a provision in a contract that dictates whether one party (the assignor) can transfer its rights, obligations, or both to another party (the assignee). In simpler terms, it outlines whether the original parties to the contract can delegate their responsibilities or transfer their benefits to a third party.

Key Components of Assignment Clauses:

Consent Requirement:

Some contracts explicitly state that an assignment can only occur with the consent of all parties involved. This ensures that no party is forced into a relationship with an unknown or potentially undesirable third party.

Prohibition of Assignment:

Conversely, some contracts expressly prohibit assignment altogether. In such cases, the parties to the contract are obligated to fulfill their roles personally, without the option to transfer their obligations or benefits.

Automatic Assignment:

In certain instances, contracts may include automatic assignment clauses. This means that rights and obligations are automatically transferred to a third party without the need for explicit consent.

Notice Requirements:

Assignment clauses often include provisions regarding notice requirements. These stipulate that the assignor must inform the other party or parties involved in the contract about the assignment, providing transparency and an opportunity for objection if necessary.

Significance of Assignment Clauses:

Risk Management:

Assignment clauses play a crucial role in risk management. For the party assigning its rights or obligations, it’s a way to mitigate potential risks and liabilities associated with the contract.

Flexibility:

From a business perspective, assignment clauses offer flexibility. They allow companies to adapt to changing circumstances, such as mergers, acquisitions, or restructuring, without the need to renegotiate every existing contract.

Investment and Financing:

Assignment clauses are of particular importance in financial transactions. Lenders and investors often look for the ability to assign contractual rights as a way to secure their interests.

Contractual Relationships:

Understanding assignment clauses is crucial for maintaining healthy contractual relationships. When parties are aware of the potential for assignment, they can negotiate terms that protect their interests and maintain the intended balance in the contract.

Common Misconceptions:

Assumption of Liabilities:

One common misconception is that by assigning contractual rights, the assignor is automatically relieved of all liabilities. In many cases, unless explicitly stated otherwise, the assignor may still be responsible for fulfilling the contractual obligations.

Unilateral Assignment:

Parties often assume they can unilaterally assign their rights or obligations. However, many contracts require the consent of all involved parties before an assignment can take place.

Case Studies:

To illustrate the practical implications of assignment clauses, let’s examine a couple of hypothetical scenarios:

Real Estate Transactions:

In real estate, assignment clauses are commonly used. For example, if a buyer signs a purchase agreement and later decides to sell the property before closing, the assignment clause dictates whether such a transfer is allowed and under what conditions.

Business Contracts:

In a business context, consider a company that enters into a service agreement with a third party. If the company undergoes a merger, the assignment clause becomes critical in determining whether the rights and obligations under the service agreement can be transferred to the newly formed entity.

Conclusion:

Understanding assignment clauses is fundamental for anyone entering into a contract, whether as an individual or a business entity. These clauses have far-reaching implications, influencing the flexibility, risk management, and overall dynamics of contractual relationships. By carefully considering and negotiating assignment clauses, parties can ensure that their interests are protected and that the contract remains adaptable to the ever-changing landscape of business and personal transactions.

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• 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.

PLC US Commercial Transactions, PLC US Law Department

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Assignment provisions in contracts

Author’s note, Nov. 22, 2014: For a much-improved update of this page, see the Common Draft general provisions article .

(For more real-world stories like the ones below, see my PDF e-book, Signing a Business Contract? A Quick Checklist for Greater Peace of Mind , a compendium of tips and true stories to help you steer clear of various possible minefields. Learn more …. )

Table of Contents

Legal background: Contracts generally are freely assignable

When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor , has transferred its rights under the contract to someone else, known as the assignee , and also has delegated its obligations to the assignee.

Under U.S. law, most contract rights are freely assignable , and most contract duties are freely delegable, absent some special character of the duty, unless the agreement says otherwise. In some situations, however, the parties will not want their opposite numbers to be able to assign the agreement freely; contracts often include language to this effect.

Intellectual-property licenses are an exception to the general rule of assignability. Under U.S. law, an IP licensee may not assign its license rights, nor delegate its license obligations, without the licensor’s consent, even when the license agreement is silent. See, for example, In re XMH Corp. , 647 F.3d 690 (7th Cir. 2011) (Posner, J; trademark licenses); Cincom Sys., Inc. v. Novelis Corp. , 581 F.3d 431 (6th Cir. 2009) (copyright licenses); Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp. , 284 F.3d 1323 (Fed. Cir. 2002) (patent licenses). For additional information, see this article by John Paul, Brian Kacedon, and Douglas W. Meier of the Finnegan Henderson firm.

Assignment consent requirements

Model language

[Party name] may not assign this Agreement to any other person without the express prior written consent of the other party or its successor in interest, as applicable, except as expressly provided otherwise in this Agreement. A putative assignment made without such required consent will have no effect.

Optional: Nor may [Party name] assign any right or interest arising out of this Agreement, in whole or in part, without such consent.

Alternative: For the avoidance of doubt, consent is not required for an assignment (absolute, collateral, or other) or pledge of, nor for any grant of a security interest in, a right to payment under this Agreement.

Optional: An assignment of this Agreement by operation of law, as a result of a merger, consolidation, amalgamation, or other transaction or series of transactions, requires consent to the same extent as would an assignment to the same assignee outside of such a transaction or series of transactions.

• An assignment-consent requirement like this can give the non-assigning party a chokehold on a future merger or corporate reorganization by the assigning party — see the case illustrations below.

• A party being asked to agree to an assignment-consent requirement should consider trying to negotiate one of the carve-out provisions below, for example, when the assignment is connection with a sale of substantially all the assets of the assignor’s business {Link} .

Case illustrations

The dubai port deal (ny times story and story ).

In 2006, a Dubai company that operated several U.S. ports agreed to sell those operations. (The agreement came about because of publicity and political pressure about the alleged national-security implications of having Middle-Eastern companies in charge of U.S. port operations.)

A complication arose in the case of the Port of Newark: The Dubai company’s lease agreement gave the Port Authority of New York and New Jersey the right to consent to any assignment of the agreement — and that agency initially demanded $84 million for its consent.

After harsh criticism from political leaders, the Port Authority backed down a bit: it gave consent in return for “only” a $10 million consent fee, plus $40 million investment commitment by the buyer.

Cincom Sys., Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009) (affirming summary judgment)

A customer of a software vendor did an internal reorganization. As a result, the vendor’s software ended up being used by a sister company of the original customer. The vendor demanded that the sister company buy a new license. The sister company refused.

The vendor sued, successfully, for copyright infringement, and received the price of a new license, more than $450,000 as its damages. The case is discussed in more detail in this blog posting.

The vendor’s behavior strikes me as extremely shortsighted, for a couple of reasons: First, I wouldn’t bet much on the likelihood the customer would ever buy anything again from that vendor. Second, I would bet that the word got around about what the vendor did, and that this didn’t do the vendor’s reputation any good.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, No. 5589-VCP (Del. Ch. Apr. 8, 2011) (denying motion to dismiss).

The Delaware Chancery Court refused to rule out the possibility that a reverse triangular merger could act as an assignment of a contract, which under the contract terms would have required consent. See also the discussion of this opinion by Katherine Jones of the Sheppard Mullin law firm.

Assignment with transfer of business assets

Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party’s business.

Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party’s business to which this Agreement specifically relates.

Optional: The assignee must not be a competitor of the non-assigning party.

• A prospective assigning party might argue that it needed to keep control of its own strategic destiny, for example by preserving its freedom to sell off a product line or division (or even the whole company) in an asset sale.

• A non-assigning party might argue that it could not permit the assignment of the agreement to one of its competitors, and that the only way to ensure this was to retain a veto over any assignment.

• Another approach might be to give the non-assigning party, instead of a veto over asset-disposition assignments, the right to terminate the contract for convenience . (Of course, the implications of termination would have to be carefully thought through.)

Assignment to affiliate

[Either party] may assign this Agreement without consent to its affiliate.

Optional: The assigning party must unconditionally guarantee the assignee’s performance.

Optional: The affiliate must not be a competitor of the non-assigning party.

Optional: The affiliate must be a majority-ownership affiliate of the assigning party.

• A prospective assigning party might argue for the right to assign to an affiliate to preserve its freedom to move assets around within its “corporate family” without having to seek approval.

• The other party might reasonably object that there is no way to know in advance whether an affiliate-assignee would be in a position to fulfill the assigning party’s obligations under the contract, nor whether it would have reachable assets in case of a breach.

Editorial comment: Before approving a blanket affiliate-assignment authorization, a party should consider whether it knew enough about the other party’s existing- or future affiliates to be comfortable with where the agreement might end up.

Consent may not be unreasonably withheld or delayed

Consent to an assignment of this Agreement requiring it may not be unreasonably withheld or delayed.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are to be treated as direct damages.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are not subject to any exclusion of remedies or other limitation of liability in this Agreement.

• Even if this provision were absent, applicable law might impose a reasonableness requirement; see the discussion of the Shoney case in the commentary to the Consent at discretion provision.

• A reasonableness requirement might not be of much practical value, whether contractual or implied by law. Such a requirement could not guarantee that the non-assigning party would give its consent when the assigning party wants it. And by the time a court could resolve the matter, the assigning party’s deal could have been blown.

• Still, an unreasonable-withholding provision should make the non-assigning party think twice about dragging its feet too much, becuase of the prospect of being held liable for damages for a busted transaction. Cf. Pennzoil vs. Texaco and its $10.5 billion damage award for tortious interference with an M&A deal.

• Including an unreasonable-delay provision might conflict with the Materiality of assignment breach provision, for reasons discussed there in the summary of the Hess Energy case.

Consent at discretion

A party having the right to grant or withhold consent to an assignment of this Agreement may do so in its sole and unfettered discretion.

• If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include that in the contract language. Otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law (see the next bullet). On the other hand, asking for such language but not getting it could be fatal to the party’s case that it was implicitly entitled to withhold consent in its discretion.

• If a commercial- or residential lease agreement requires the landlord’s consent before the tentant can assign the lease, state law might impose a reasonableness requirement. I haven’t researched this, but ran across an unpublished California opinion and an old law review article, each collecting cases. See Nevada Atlantic Corp. v. Wrec Lido Venture, LLC, No. G039825 (Cal. App. Dec. 8, 2008) (unpublished; reversing judgment that sole-discretion withholding of consent was unreasonable); Paul J. Weddle, Pacific First Bank v. New Morgan Park Corporation: Reasonable Withholding of Consent to Commercial Lease Assignments , 31 Willamette L. Rev. 713 (1995) (first page available for free at HeinOnline ).

Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)

In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a proposed sublease. The supreme court noted that the contract specifically gave Shoney’s the right, in its sole discretion , to consent to any proposed assignment or sublease.

Significantly, prior case law from Alabama was to the effect that a refusal to consent would indeed be judged by a commercial-reasonableness standard. But, the supreme court said, “[w]here the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be construed as written.” Shoney’s LLC v. MAC East, LLC , No. 1071465 (Ala. Jul. 31, 2009) (on certification by Eleventh Circuit), cited by MAC East, LLC v. Shoney’s [LLC] , No. 07-11534 (11th Cir. Aug. 11, 2009), reversing No. 2:05-cv-1038-MEF (WO) (M.D. Ala. Jan. 8, 2007) (granting partial summary judgment that Shoney’s had breached the contract).

Termination by non-assigning party

A non-assigning party may terminate this Agreement, in its business discretion , by giving notice to that effect no later than 60 days after receiving notice, from either the assigning party or the assignee, that an assignment of the Agreement has become effective.

Consider an agreement in which a vendor is to provide ongoing services to a customer. A powerful customer might demand the right to consent to the vendor’s assignment of the agreement, even in strategic transactions. The vendor, on the other hand, might refuse to give any customer that kind of control of its strategic options.

A workable compromise might be to allow the customer to terminate the agreement during a stated window of time after the assignment if it is not happy with the new vendor.

Assignment – other provisions

Optional: Delegation: For the avoidance of doubt, an assignment of this Agreement operates as a transfer of the assigning party’s rights and a delegation of its duties under this Agreement.

Optional: Promise to perform: For the avoidance of doubt, an assignee’s acceptance of an assignment of this Agreement constitutes the assignee’s promise to perform the assigning party’s duties under the Agreement. That promise is enforceable by either the assigning party or by the non-assigning party.

Optional: Written assumption by assignee: IF: The non-assigning party so requests of an assignee of this Agreement; THEN: The assignee will seasonably provide the non-assigning party with a written assumption of the assignor’s obligations, duly executed by or on behalf of the assignee; ELSE: The assignment will be of no effect.

Optional: No release: For the avoidance of doubt, an assignment of this Agreement does not release the assigning party from its responsibility for performance of its duties under the Agreement unless the non-assigning party so agrees in writing.

Optional: Confidentiality: A non-assigning party will preserve in confidence any non-public information about an actual- or proposed assignment of this Agreement that may be disclosed to that party by a party participating in, or seeking consent for, the assignment.

The Delegation provision might not be necessary in a contract for the sale of goods governed by the Uniform Commercial Code, because a similar provision is found in UCC 2-210

The Confidentiality provision would be useful if a party to the agreement anticipated that it might be engaging in any kind of merger or other strategic transaction.

Materiality of assignment breach

IF: A party breaches any requirement of this Agreement that the party obtain another party’s consent to assign this Agreement; THEN: Such breach is to be treated as a material breach of this Agreement.

A chief significance of this kind of provision is that failure to obtain consent to assignment, if it were a material breach, would give the non-assigning party the right to terminate the Agreement.

If an assignment-consent provision requires that consent not be unreasonably withheld , then failure to obtain consent to a reasonable assignment would not be a material breach, according to the court in Hess Energy Inc. v. Lightning Oil Co. , No. 01-1582 (4th Cir. Jan. 18, 2002) (reversing summary judgment). In that case, the agreement was a natural-gas supply contract. The customer was acquired by a larger company, after which the larger company took over some of the contract administration responsibilities such as payment of the vendor’s invoices. The vendor, seeking to sell its gas to someone else at a higher price, sent a notice of termination, on grounds that the customer had “assigned” the agreement to its new parent company, in violation of the contract’s assignment-consent provision. The appeals court held that, even if the customer had indeed assigned the contract (a point on which it expressed considerable doubt) without consent, the resulting breach of the agreement was not material, and therefore the vendor did not have the right to terminate the contract.

See also (list is generated automatically) :

• Notebook update: Reverse triangular merger might be an assignment of a contract, requiring consent Just updated the Notebook with a citation to a case in which the Delaware Chancery Court refused to rule out the possibility that a reverse...
• Assignment-consent requirements can cause serious problems in future M&A transactions A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a...
• SCOTX rejects implied obligation not to unreasonably withhold consent to assignment of contract In a recent Texas case, two sophisticated parties in the oil and gas busi­ness — let’s call them Alpha and Bravo — were negotiating a contract....
• Ken Adams and the marketplace of ideas I (used to) comment occasionally at Ken Adams’s blog. Recent examples: Here, here, here, here, and here. Ken and I disagree on a number of issues; some...

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What Is an Assignment Clause?

An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the contractual parties to another party. 3 min read updated on February 01, 2023

Updated October 29, 2020:

An assignment clause spells out which contractual obligations, rights, and duties may be transferred from one of the contractual parties to another party. The assignment may be in whole or in part, and the clause also details the conditions under which a party can assign these duties.

U.S. law dictates that most contractual rights can be freely assigned or delegated, unless an agreement states otherwise.

The assignment clause often overlaps with two other clauses:

• Parties in Interest
• Successors and Assigns

These control who assumes contractual rights and obligations.

Legal Background and Freely Assignable Rights

When one party in a contract “assigns” the agreement to someone else, this means the first party — the assignor — transfers its contractual rights and obligations to the second party — the assignee.

In some instances, one party will not want the other contractual party to freely assign its duties. Contracts will then include language that states this.

One exception to the general assignability rule is intellectual property licenses . Legally, a licensor must first give consent before an IP licensee can assign or delegate its rights or obligations, even in the case where the license agreement is silent.

Requirements for Assignment Consent

There are different ways to say the same thing in a contract. Some people prefer lengthier statements, and others like to keep things brief. The following are various ways to make the same points.

• One contractual party isn't allowed to assign its agreement to another person without prior written consent of the other contractual party, except as provided for in the contract. If an assignment is made without this consent, it won't be considered valid.
• One party may not assign any interest or right arising out of this contract — in whole or in part — without prior consent.
• To keep all doubts at bay, no consent is required for an assignment — including collateral, absolute, or other — for a contractual right to payment.

These are the takeaways from these stipulations:

• This type of requirement for an assignment clause can create obstacles for the non-assigning party in corporate reorganizations or future mergers.
• The party that's being asked to consent to an assignment clause requirement may want to negotiate its position. For instance, it may find negotiations helpful in a situation when the assignment involves a substantial sale.

A Party May Not Unreasonably Withhold or Delay Consent

It's not permissible to hold up consent to unreasonable delays.

Other ways to state this include:

• To avoid doubt, a party that suffers damage due to the unreasonable delay or withholding of consent by the other party can treat them as direct damages.
• To avoid doubt, damages that arise to one party from the unreasonable delay or withholding of consent by the other party aren't excluded from remedies.

Even when these provisions aren't in place, the law may still impose a reasonableness requirement. This requirement may not hold a lot of practical value, whether it's implied by the law or contractual. A reasonableness requirement can't guarantee that the non-assigning party will give consent when the assigning party wants it. By the time a case has worked its way through the court system to a decision, the deal that the assigning party was working on could have fallen through or otherwise be negated or moot.

However, this provision for unreasonable withholding should get the non-assigning party to carefully consider taking too much time due to the prospect of being held liable for damages. This can result in costly consequences.

On the other hand, having an unreasonable delay provision could create conflict with the provision concerning material breach of contract.

When you enter into a contract, it's important that you know what your rights and obligations are, as well as the other party's rights and obligations. If you don't want certain outcomes — assignment of duties, for instance — you must usually make it clear in the agreement. Getting help from a legal professional in the contract law field is a good idea when writing up a contract . That way, you increase the chances of covering everything you want covered, from the finer points to the bigger ones.

If you need help with contracts, 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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Content Approved by UpCounsel

• Legal Assignment
• Assignment Law
• Consent to Assignment
• Assignment of Rights and Obligations Under a Contract
• Assignment of Rights Example
• Assignment Contract Law
• Assignability Of Contracts
• What Is the Definition of Assigns
• Assignment Legal Definition
• Delegation vs Assignment

6.3 Assignment, Delegation, and Commonly Used Contracts Clauses

Learning objectives.

• Learn about assignment and delegation.
• Examine novation.
• Explore restrictions on assignment, exculpatory clauses, noncompete clauses, mandatory arbitration clauses, acceleration clauses, and liquidated damages clauses.
• Explore the parol evidence rule.

What if you formed a contract with a rock ’n’ roll band for its services? Specifically, you wanted the band to play at your nightclub, because you thought that your customers would enjoy the band enough to pay to see it perform. You hired this specific band because you heard that it drew large crowds of paying customers. Imagine your surprise when, as you anticipate the band’s performance, you discover that another band—one you have never heard of—has come to play instead of the original contracting band. On inquiry, you learn that the original band transferred its duties to perform to a lesser known band. Can it do that?

Contract elements—the terms of the contract—are important. They may, among other things, foreclose your ability to bring a complaint in court, they may render you unable to be hired in your profession (at least within certain boundaries), or they may limit liability to a party that had a role in causing injury to you. If you are not aware of these elements, then you may face an unpleasant surprise if you act in a way contrary to the restrictions imposed by those terms. Likewise, contracts possess certain qualities that prohibit parties from acting in certain ways, unless those qualities are expressly waived. This section identifies common properties of contracts, as well as commonly used elements of contracts. If you are negotiating a contract and you do not like a term, then you should not agree to it. In law, there is a presumption that you have read, understood, and agreed to each and every term of any contract to which you are a party. Arguing that you did not understand or that you did not approve of a particular term in the contract will not be a valid excuse to performance. You should know what you can expect when you enter into a contract. Are you getting the band that you wanted to hire to play in your nightclub, or are you really getting any band that the original band happens to transfer its duties to?

As a preliminary matter, it is important to realize that contracts are, by law, assignable and delegable. This means that the rights conveyed by the contract may be transferred to another party by assignment The ability to transfer rights conveyed by a contract to another party. , unless an express restriction on assignment exists within the contract, or unless an assignment would violate public policy. Likewise, the duties imposed on a party may be transferred to another party by delegation The ability to transfer duties imposed on a party by a contract to another party. , unless the contract expressly restricts delegation, or there is a substantial interest in personal performance by the original party to the contract, or if delegation would violate public policy. In the case of a band hired to perform at a nightclub, an argument could be made that the original band cannot delegate its duties under the contract because there was a substantial interest in personal performance by the original band. This would render the contract nondelegable. To be on the safe side, your contract with that band should have had a clause expressly prohibiting delegation.

Many students have seen restrictions on assignment in the form of no-sublease clauses in leases with landlords. Do you have a no-sublease clause in your lease? If so, that is a restriction on assignment A clause that prohibits parties from transferring the rights conveyed by a contract to another party. . This clause is necessary to prevent you from assigning your rights under the lease—your rights to inhabit the premises—to another party. It is necessary for the landlord to include that provision expressly if she wishes to prevent you from subleasing the unit, because there is a presumption in law that assignment is permitted unless it is expressly prohibited by the contract or unless the assignment would violate public policy. Since it is unlikely that letting someone else live in your housing unit in your absence would violate public policy, then the landlord must expressly prohibit the assignment within the original contract if she wishes to prevent tenants from subleasing. A landlord may have a very good reason to wish to prevent subleasing; she may wish to ensure that each tenant is creditworthy prior to allowing the tenant to live in the property.

Note that in delegation and in assignment, the original contracting party is not “off the hook” if it transfers its duties or rights to another party. For instance, if subleasing was not prohibited, and the new tenant assumed the rights and duties imposed by the original contract, the original party to the contract is still liable for the payment of rent. If the subleasing tenant does not pay the rent, the original party to the lease is still liable. The way to excuse oneself from this liability is to form a three-way novation An agreement that transfers all rights and duties to a new party to the contract and releases the previous party from any further obligation arising from the original contract. with the original party and the new party, thereby excusing the exiting party from future liability arising under the contract. A novation is essentially a new contract that transfers all rights and duties to the new party to the contract and releases the previous party from any further obligation arising from the original contract.

Restrictions on assignment or delegation are not the only common elements that can be found in contracts. For example, you have probably encountered exculpatory clauses. An exculpatory clause An express limitation on potential or actual liability arising under the subject matter of the contract. is an express limitation on potential or actual liability arising under the subject matter of the contract. In short, exculpatory clauses are often employed when risk of injury exists. They seek to limit one party’s liability to another. You most certainly have signed exculpatory agreements or contracts containing exculpatory clauses if you have participated in any potentially dangerous activity at a club or with an organized group that could incur liability from injuries suffered by its patrons or members. For example, if you join a kayaking club, you will most likely be asked to sign such an agreement to “hold harmless” the club in the event of any accident or injury. However, despite the existence of an exculpatory clause, liability will not be limited (that is, the liability limitations will be unenforceable) when the party who would benefit from the limitation on liability acted with gross negligence, committed an intentional tort, or possessed greatly unequal bargaining power, or if the limitation on liability violates public policy. Imagine that you signed an agreement to engage in kayaking activities with a kayaking group, but the leader of the group battered you with her oar because she was angry with you for mishandling your kayak. Since battery is an intentional tort, the exculpatory clause will not protect the kayaking organization from liability it incurred through the actions of its employee.

Another common contract element that you may have encountered is a noncompete clause. A noncompete clause A contract clause that restricts competition for a specified period of time, within a certain geographic region, and for specified activities. attempts to restrict competition for a specified period of time, within a certain geographic region, and for specified activities. Noncomplete clauses are generally valid against the party who signed it if the time, place, and scope are reasonable. These are very common clauses in employment contracts, particularly where the duties involved in employment are likely to involve trade secrets or other proprietary information that the company wishes to protect.

A mandatory arbitration clause A contractual clause that requires the parties to a contract that contains such a clause to submit to mandatory arbitration in the event of a dispute arising under the contract. Mandatory arbitration clauses frequently foreclose any possibility of appealing arbitration awards in court. is very common in consumer contracts and employment contracts. You have certainly subjected yourself to the restrictions imposed by these clauses if you have signed a contract for a credit card. Mandatory arbitration clauses require parties to a contract that contains such a clause to submit to mandatory arbitration in the event of a dispute arising under the contract. Mandatory arbitration clauses frequently foreclose any possibility of appealing arbitration awards in court.

An acceleration clause A type of clause that accelerates all payments due under the contract on breach. commonly exists in contracts where periodic payments are contemplated by the agreement. For example, if you signed a lease for your housing unit, then you most likely pay rent on a month-to-month basis. If you breached your lease, you would still owe rent for each subsequent month contemplated by the lease agreement. This means that your landlord would have new injury every month that you did not pay. An acceleration clause accelerates all payments due under the contract on breach. This allows the injured party—in this case, the landlord—to sue for all damages due for unpaid rent under that contract at once, rather than having to bring a new suit each month to seek monthly unpaid rent.

A liquidated damages clause A type of clause that sets the amount of damages in the event of breach. allows parties to set the amount of damages in the event of breach. Agreeing to a damage amount before any breach occurs can save money and time spent litigating. Providing that the liquidated damages clause does not look like a penalty, the clause will be valid and enforced by a court that hears a dispute arising under the contract. For example, imagine that you entered into a contract for the sale of your car. If the liquidated damages clause provided for two thousand dollars of damages in the event of breach, that will probably be a valid liquidated damages clause, providing that your car is an “average” car. However, if the liquidated damages clause provided for one million dollars of damages payable by the breaching party, then that would not be enforceable by the court because it looks like a penalty. The proposed liquidated damages far exceed the value of the car that is the subject of the agreement.

Of course, there are additional common elements to contracts. This is not an exhaustive study of possible provisions, though it is a list of commonly encountered elements. For example, time of performance is often included as a separate provision. However, time for performance is an essential element in common-law contract formation, and without it, the contract may fail due to lack of definite and certain terms in formation.

A major assumption made about a written contract is that it is integrated The legal assumption made about contracts that they contain the entire expression of the parties’ agreement. , which means that it contains the entire expression of the parties’ agreement. That means that any statements made before the parties signed the contract are not part of the contract, unless those statements are memorialized in the contract itself. In fact, any statements or actions that are not captured within the four corners of the contract are considered parol evidence Statements or actions that are not captured within the four corners of the contract. , and they will not be used to interpret the meaning of the contract.

Key Takeaways

Parties to contracts must not only take care to form the agreement so that it is legally enforceable, but they must also be aware of the properties of contracts in general, as well as specific provisions contained within contracts to which they are a party. Properties of contracts include ability to assign, delegate, and exclude parol evidence. Several types of contracts clauses are commonly used to restrict rights and limit liability.

• Think of an example of an exculpatory clause that you have signed. For what type of activity would you be unwilling to sign an exculpatory clause? If your refusal to sign the exculpatory clause or agreement prevented you from participating in that activity, would you still refuse to sign it?
• Do you think that too many limitations and restrictions can be placed on parties in a contract? Should there be more government regulation and standardization of contract terms between private parties? Why or why not?

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Contract Assignment Agreement

(This may not be the same place you live)

  What Is a Contract Assignment?

In a contract assignment, one of the two parties may transfer their right to the other’s performance to a third party. This is known as “contract assignment.” Typically, all rights under a contract may be assigned. A provision in the agreement that states the contract may not be assigned usually refers to the delegation of the assignor’s (individual who assigns) obligations under that agreement, not their rights.

In modern law, the term “assignment of contract” usually means assigning both rights and duties under a contract.

What Is a Contract Assignment Agreement?

Who are the various parties involved in a contract assignment, how is a contract assignment created, when is a contract assignment prohibited, what should a contract assignment agreement contain, what are some common disputes related to assignment agreements, what is a breach of contract, what are the ways you can breach a contract, do i need a lawyer for help with a contract assignment agreement.

A contract assignment agreement may be created in cases involving a contract assignment. An assignment is where the recipient of products, services, or other rights transfers (assigns) their rights to another party. The party transferring their rights is the assignor, while the party performing the services is dubbed the obligor. The party obtaining the transferred rights is called the assignee.

Contract assignments are often utilized in cases similar to beneficiary and gift-giving situations. Yet, there is frequently a substantial business or commercial component to contract assignments (such as those projects involving commercial building and contracting).

There are two parties to the agreement in a contract, X and Y. The parties may agree to let X assign X’s rights to a third party . Once the third party enters the picture, each party has a particular name. For example, suppose X, a seller of bookmarks, contracts with Y, a purchaser of bookmarks. Y wants to have Y’s right to X’s performance (selling bookmarks every month) to another individual.

This third individual, Z, is dubbed the assignee. X is named the obligor , and Y is named the assignor since Y has assigned its right to X’s performance . X, the obligor, is bound to continue to perform its duties under the contract.

There are no “magical words” required to make an assignment. The law demands that the would-be assignor intend to wholly and immediately transfer their rights in the agreement. In addition, writing is generally not needed to make an assignment. As long as X and Y adequately comprehend what right is being assigned, an assignment is formed.

Comments that demonstrate a transfer is to take place suffice, such as “I plan to transfer my rights under this agreement,” “I plan to give my rights to Z,” or “I plan to confer an assignment on Z.” In addition, consideration, which is a bargained-for exchange needed for a contract to be proper, is not needed for the assignment.

In specific examples, an assignment of contract rights can be restricted. If the agreement includes a clause forbidding assignment of “the contract” without establishing more, the law construes this language as banning only delegation of the assignor’s duties, not their rights.

If the assignment language states “assignment of contractual rights is forbidden,” the obligor may sue for damages if the assignor tries to assign the agreement. If the contract language says that attempts to assign “will be null,” the parties can ban the assignment of rights.

Under current contract law, the expression “I assign the contract” is usually interpreted to mean that one is assigning rights and duties. What is an assignment of duties? An assignment of duties emerges where Y, dubbed the obligor or delegator, promises to perform for X, the obligee. Y then entrusts their duty to perform to Z, the delegate. Under the law, most duties can be delegated.

A contract assignment should include:

• Names of the parties involved
• Depictions of the rights or contract benefits being assigned
• When the assignment takes effect, and whether or not it lapses
• Conditions regarding legal action if a breach or violation of contract should ensue

Most jurisdictions don’t demand a contract assignment to be in writing. Of course, it’s always best to put the agreement in writing to create a record of the transaction if there are any future problems.

Some typical legal problems involving contract assignments include:

• Failure to transfer the rights to the assignee
• Refusal to cooperate with the contract assignment terms
• Use of deception, misrepresentation, or force when dealing with assignment agreement documents
• Blunders or mistakes concerning definitions of the assignment subject

Conflicts oftentimes require legal action in a court of law to settle the legal problems. This can result in a monetary damages award to cover losses caused by a breach of contract. Alternatively, some courts may enforce other remedies such as cancellation or rewriting of the agreement.

A breach of contract may arise when a party to a good agreement has failed to fulfill their side of the deal.

For example, the terms of a contract guide the parties in what they must do and how they should do it to maintain their promise. If a party does not do what the agreement instructs them to do, then the non-breaching party will be entitled to take legal action and file a lawsuit against them in court.

A breach of contract can arise as either a partial or a complete breach. A court will also consider whether the breach was substantial or only a minor one. This will allow the court to decide what type of damages the breaching party should have to expend.

There are three major ways for which a party can be held liable for breach of contract. This includes when:

• There is an anticipatory breach: Often referred to as anticipatory repudiation, this kind of breach happens when the breaching party tells the non-breaching party that they will not be fulfilling the terms of their contract. Once the other party is informed, they can sue for breach of contract.
• A party has committed a minor breach: A minor breach of contract happens when a party fails to perform a small contract detail. The total contract has not been violated and can still be substantially performed in this circumstance. This also comes up when there is a technical mistake with the agreement (e.g., a false date, price, or typo within the terms of the agreement).
• If there is a material or fundamental breach: These are the most standard sorts of breaches cited as the basis of a breach of contract action. When the breach is so substantial, it essentially cancels the contract because it renders performance by either party impossible.

Some other ways that a contract can be breached include when the contract is dishonest, if the contract was formed illegally or is unconscionable, and when there is a mistake of fact present in the agreement terms. The parties may also include conditions unique to their respective agreement, which specify when a party’s actions can be deemed a breach.

Further, state regulations and the type of contract (e.g., lease agreement, sales contract, government contract, etc.) may indicate other ways a contract can be breached.

Contract agreements often require much attention to detail and foresight for anticipating future events. It’s in your best interests to hire a contract lawyer if you need help with any contract matters. Your lawyer can help you with your records and represent you if you ever need to file a claim in court for damages.

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No assignment or delegation

No assignment or delegation clause samples

14.6     No Assignment or Delegation. No party may assign any right or delegate any obligation hereunder, including by merger, consolidation, operation of law, or otherwise, without the written consent of the other parties hereto; provided, that such assignment shall not prevent or impede the Acquisition Merger from qualifying for the Intended Tax Treatment. Any purported assignment or delegation that does not comply with the immediately preceding sentence shall be void, in addition to constituting a material breach of this Agreement.

09/10/2020 (Chelsea Worldwide Inc.)

Section 5.12 No Assignment or Delegation. No Party may assign any right or delegate any obligation hereunder, including by merger, consolidation, operation of law, or otherwise, without the written consent of the all of the other Parties and any purported assignment or delegation without such consent shall be void, in addition to constituting a material breach of this Agreement. This Agreement shall be binding on the permitted successors and assigns of the Parties.

11/01/2019 (Lone Star Value Management LLC)

Section9. Binding Effect; No Assignment or Delegation. This Pledge Agreement shall be binding upon and inure to the benefit of the Pledgor, the Pledgee and their respective successors and assigns, except that the Pledgor may not assign or transfer its rights hereunder without the prior written consent of the Pledgee (which consent shall not unreasonably be withheld). Each duty or obligation of the Pledgor to the Pledgee pursuant to the provisions of this Pledge Agreement shall be performed in favor of any person or entity designated by the Pledgee, and any duty or obligation of the Pledgee to the Pledgor may be performed by any other person or entity designated by the Pledgee.

06/06/2016 (Ottawa Bancorp Inc)

Section 10.16 No Assignment or Delegation. No Party may assign any right or delegate any obligation hereunder, including by merger, consolidation, operation of law, or otherwise, without the written consent of the all of the other Parties and any purported assignment or delegation without such consent shall be void, in addition to constituting a material breach of this Agreement. Notwithstanding this restriction, the Buyer may assign this Agreement to an affiliate that effectuates the Roll-Up Transactions (the “Permitted Assignee”). In the event of any assignment to the Permitted Assignee, the capitalization of the Assignee shall be identical to the capitalization of the Buyer as provided for in this Agreement (only with such changes as are not adverse to the Sellers and do not diminish any rights to which the Sellers were otherwise entitled) and all other representations and warranties of the Buyer shall be true and correct as they apply to the Permitted Assignee, and the Buyer shall continue to be bound by the terms of this Agreement as a primary obligor hereunder such that should the Permitted Assignee fail to perform any of its obligations hereunder, the Sellers and Sellers’ Representative shall be entitled to pursue performance against the Buyer. This Agreement shall be binding on the permitted successors and assigns of the Parties; provided, however, no such assignment will relieve any Party of their obligations under this Agreement.

11/05/2020 (HARVEST HEALTH & RECREATION INC.)

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Non-Assignment Contract Clauses (50)

Grouped into 3 collections of similar clauses from business contracts.

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• Federal Circuit Reversal in Assignment Clause Case Highlights Importance of Contract Language in Intellectual Property Ownership

By Jeffrey Whittle, CLP ; Karthika Perumal, Ph.D., CLP ; & Sam Savanich, CLP-A

In a split opinion issued Tuesday , and based on language in an assignment clause of a contract, the Federal Circuit overturned a district court's summary judgment that Core Optical lacked standing to sue Nokia, Cisco, and ADVA for infringement.

The case, involving a fiber optic patent, centers on the interpretation of the phrase "entirely on my own time" within an assignment clause of the inventor's contractual agreement with his former employer, TRW Inc.

Nokia, Cisco, and ADVA contended that Dr. Mark Core's assignment of his patent rights to Core Optical was invalid because these rights allegedly had been automatically assigned to Dr. Core's employer, TRW, at the time of the invention. The inventor's contract with TRW stipulated that any inventions developed during work hours were to be assigned to the company, while inventions developed entirely on his “own time” remained Dr. Core’s property.

Initially, the lower court granted Nokia and the defendants summary judgment, ruling that the invention was developed as part of the Dr. Core’s research, funded by TRW, and was at least in part “TRW time” and not “entirely” Dr. Core’s “own time.” Therefore, this court concluded that the patent was automatically assigned to TRW, and Core Optical, Dr. Core’s company, lacked standing to sue.

The Federal Circuit majority, however, decided on appeal that it was not clear if the Ph.D. research conducted by Dr. Core constituted the inventor's own time. On one hand, Dr. Core was free to use particular hours or days for his research with no accountability to TRW; and, on the other hand, he worked on projects connected to TRW’s business on TRW-funded fellowship, with reporting obligations to TRW. Therefore, the Federal Circuit vacated the judgment and remanded the case back to the district court for further proceedings, thereby allowing Dr. Core to proceed with his patent infringement lawsuit.

The majority opinion noted, “[b]oth Core Optical’s and Nokia's interpretations of how the years-long, TRW-funded research should be treated under the 1990 invention agreement are plausible based on the undisputed facts presented. However, which interpretation prevails has not been determined, acknowledging that the contract language does not have an unambiguous meaning when applied to these facts.”

In dissent, U.S. Circuit Court Judge Haldane Robert Mayer argued that the lower court was correct in ruling that the inventor did not develop the fiber optic patent on his own time.

This majority decision underscores the complexities and nuances surrounding intellectual property rights and the importance of clear contractual terms regarding intellectual property issues, especially for intellectual property developed by an individual during non-traditional employment, such as employees permitted to pursue research or consulting projects. Care should be taken when drafting assignment and other intellectual property related language to reduce risk of a finding of ambiguity as in this instance.

[ View source .]

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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• 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.
• General Contract and Boilerplate
• General Commercial
• United States