An assignment (Latin cessio) is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party—the assignor—to another party—the assignee.[1] The details of the assignment determines some additional rights and liabilities (or duties).
Typically a third-party is involved in a contract with the assignor, and the contract is in effect transferred to the assignee. For example, a borrower borrows money from a local bank. The local bank receives a mortgage note and can thereafter transfer that note to a financial institution in exchange for a lump-sum of cash, thereby assigning the right to receive payment from the borrower to another entity. Mortgages and lending contracts are relatively amenable to assignment since the lender's duties are relatively limited; other contracts which involve personal duties such as legal counsel may not be assignable.
The related concept of novation is not assignment; rather than assigning only the rights to another party, novation involves the replacement of the original party with a new party or the replacement of the original contract with a new contract. Since novation creates a new contract, it requires the consent of all parties whereas assignment does not require the consent of the non-assigning party, although in the case of assignment the consent of the non-assigning party may be required through a contractual provision.[2]
Contents
1 Procedure
2 Liabilities and duties
3 Assignment of contract rights
3.1 When assignment will be permitted
3.2 Requirements for an effective assignment
3.2.1 Requirement of a writing
3.3 Compare: Delegation
4 Remedies
4.1 Revocability
4.2 Breach and defenses
4.3 Successive assignments
5 Special rules for assignment of certain rights
5.1 Property rights
5.2 Partnership rights
5.3 Intellectual property rights
5.4 Personal injury torts
5.5 Legal malpractice
6 Equitable assignment
6.1 General principles
6.2 Mere expectancies
7 References
Procedure
The assignment does not necessarily have to be in writing; however, the assignment agreement must show an intent to transfer rights. The effect of a valid assignment is to extinguish privity (in other words, contractual relationship, including right to sue) between the assignor and the third-party obligor and create privity between the obligor and the assignee.
Liabilities and duties
Unless the contractual agreement states otherwise, the assignee typically does not receive greater rights than the assignor, and the assignor may remain liable to the original counterparty for the performance of the contract. The assignor often delegates duties in addition to rights to the assignee, but the assignor may remain ultimately responsible.
However, in the United States there are various laws which limit the liability of the assignee, often in order to facilitate credit, since assignees are typically lenders.[3] Notable examples include a provision in the Truth in Lending Act[4] and provisions in the Consumer Leasing Act and the Home Ownership Equity Protection Act.[3]
In other cases, the contract may be a negotiable instrument in which the person receiving the instrument may become a holder in due course, which is similar to an assignee except that issues such as lack of performance by the assignor may not be a valid defense for the obligor.[5] As a response to this, the United States Federal Trade Commission promulgated Rule 433, formally known as the "Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses", which "effectively abolished the [holder in due course] doctrine in consumer credit transactions".[5] In 2012, the FTC reaffirmed the regulation.[6]
Assignment of contract rights
Contract law
Part of the common law series
Contract formation
Offer and acceptance
Posting rule
Mirror image rule
Invitation to treat
Firm offer
Consideration
Implication-in-fact
Defenses against formation
Lack of capacity
Duress
Undue influence
Illusory promise
Statute of frauds
Non est factum
Contract interpretation
Parol evidence rule
Contract of adhesion
Integration clause
Contra proferentem
Title-transfer theory of contract
Excuses for non-performance
Mistake
Misrepresentation
Frustration of purpose
Impossibility
Impracticability
Illegality
Unclean hands
Unconscionability
Accord and satisfaction
Rights of third parties
Privity of contract
Assignment
Delegation
Novation
Third-party beneficiary
Breach of contract
Anticipatory repudiation
Cover
Exclusion clause
Efficient breach
Deviation
Fundamental breach
Remedies
Specific performance
Liquidated damages
Penal damages
Rescission
Quasi-contractual obligations
Promissory estoppel
Quantum meruit
Related areas of law
Conflict of laws
Commercial law
Other common law areas
Tort law
Property law
Wills, trusts, and estates
Criminal law
Evidence
v
t
e
Assignment of rights under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if Party A contracts with Party B to sell Party A's car to Party B for $10, Party A can later assign the benefits of the contract - i.e., the right to be paid $10 - to Party C. In this scenario, Party A is the obligee/assignor, Party B is an obligor, and Party C is the assignee. Such an assignment may be donative (essentially given as a gift), or it may be contractually exchanged for consideration. It is important to note, however, that Party C is not a third party beneficiary, because the contract itself was not made for the purpose of benefiting Party C. When an assignment is made, the assignment always takes place after the original contract was formed. An Assignment only transfers the rights/benefits to a new owner. The obligations remain with the previous owner. Compare Novation.
When assignment will be permitted
The common law favors the freedom of assignment, so an assignment will generally be permitted unless there is an express prohibition against assignment in the contract. Where assignment is thus permitted, the assignor need not consult the other party to the contract. An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality. Certain kinds of performance, therefore, cannot be assigned, because they create a unique relationship between the parties to the contract. For example, the assignment of a legal malpractice claim is void since an assignee would be a stranger to the attorney-client relationship, who was owed no duty by the attorney and would imperil the sanctity of the highly confidential and fiduciary relationship existing between attorney and client.
Torts are not assignable as public policy, and various statutes may prohibit assignment in certain instances.[7] In addition, the Restatement (Second) of Contracts lists prohibitions in §317(2)(a) based upon the effect to the non-assigning party (obligor),[7] with similar prohibitions in the Uniform Commercial Code §2-210.[8] For example, UCC 2-210(1)(a) states the following:[9]
“ (a) Subject to paragraph (b) and except as otherwise provided in Section 9-406 or as otherwise agreed, all rights of the seller or the buyer may be assigned unless the assignment would materially change the duty of the other party, increase materially the burden or risk imposed on that party by the contract, or impair materially that party's chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of its entire obligation may be assigned despite an agreement otherwise. ”
Requirements for an effective assignment
For assignment to be effective, it must occur in the present. No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee. A promise to assign in the future has no legal effect. Although this prevents a party from assigning the benefits of a contract that has not yet been made, a court of equity may enforce such an assignment where an established economic relationship between the assignor and the assignee raised an expectation that the assignee would indeed form the appropriate contract in the future.
A contract may contain a non-assignment clause, which prohibits the assignment of specific rights, or of the entire contract, to another. However, such a clause does not necessarily destroy the power of either party to make an assignment. Instead, it merely gives the other party the ability to sue for breach of contract if such an assignment is made. However, an assignment of a contract containing such a clause will be ineffective if the assignee knows of the non-assignment clause, or if the non-assignment clause specifies that "all assignments are void".
Two other techniques to prevent the assignment of contracts are rescission clauses or clauses creating a condition subsequent. The former would give the other party to the contract the power to rescind the contract if an assignment is made; the latter would rescind the contract automatically in such circumstances. wiki
An assignment (Latin cessio) is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party—the assignor—to another party—the assignee.[1] The details of the assignment determines some additional rights and liabilities (or duties).
Typically a third-party is involved in a contract with the assignor, and the contract is in effect transferred to the assignee. For example, a borrower borrows money from a local bank. The local bank receives a mortgage note and can thereafter transfer that note to a financial institution in exchange for a lump-sum of cash, thereby assigning the right to receive payment from the borrower to another entity. Mortgages and lending contracts are relatively amenable to assignment since the lender's duties are relatively limited; other contracts which involve personal duties such as legal counsel may not be assignable.
The related concept of novation is not assignment; rather than assigning only the rights to another party, novation involves the replacement of the original party with a new party or the replacement of the original contract with a new contract. Since novation creates a new contract, it requires the consent of all parties whereas assignment does not require the consent of the non-assigning party, although in the case of assignment the consent of the non-assigning party may be required through a contractual provision.[2]
Contents
1 Procedure
2 Liabilities and duties
3 Assignment of contract rights
3.1 When assignment will be permitted
3.2 Requirements for an effective assignment
3.2.1 Requirement of a writing
3.3 Compare: Delegation
4 Remedies
4.1 Revocability
4.2 Breach and defenses
4.3 Successive assignments
5 Special rules for assignment of certain rights
5.1 Property rights
5.2 Partnership rights
5.3 Intellectual property rights
5.4 Personal injury torts
5.5 Legal malpractice
6 Equitable assignment
6.1 General principles
6.2 Mere expectancies
7 References
Procedure
The assignment does not necessarily have to be in writing; however, the assignment agreement must show an intent to transfer rights. The effect of a valid assignment is to extinguish privity (in other words, contractual relationship, including right to sue) between the assignor and the third-party obligor and create privity between the obligor and the assignee.
Liabilities and duties
Unless the contractual agreement states otherwise, the assignee typically does not receive greater rights than the assignor, and the assignor may remain liable to the original counterparty for the performance of the contract. The assignor often delegates duties in addition to rights to the assignee, but the assignor may remain ultimately responsible.
However, in the United States there are various laws which limit the liability of the assignee, often in order to facilitate credit, since assignees are typically lenders.[3] Notable examples include a provision in the Truth in Lending Act[4] and provisions in the Consumer Leasing Act and the Home Ownership Equity Protection Act.[3]
In other cases, the contract may be a negotiable instrument in which the person receiving the instrument may become a holder in due course, which is similar to an assignee except that issues such as lack of performance by the assignor may not be a valid defense for the obligor.[5] As a response to this, the United States Federal Trade Commission promulgated Rule 433, formally known as the "Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses", which "effectively abolished the [holder in due course] doctrine in consumer credit transactions".[5] In 2012, the FTC reaffirmed the regulation.[6]
Assignment of contract rights
Contract law
Part of the common law series
Contract formation
Offer and acceptance
Posting rule
Mirror image rule
Invitation to treat
Firm offer
Consideration
Implication-in-fact
Defenses against formation
Lack of capacity
Duress
Undue influence
Illusory promise
Statute of frauds
Non est factum
Contract interpretation
Parol evidence rule
Contract of adhesion
Integration clause
Contra proferentem
Title-transfer theory of contract
Excuses for non-performance
Mistake
Misrepresentation
Frustration of purpose
Impossibility
Impracticability
Illegality
Unclean hands
Unconscionability
Accord and satisfaction
Rights of third parties
Privity of contract
Assignment
Delegation
Novation
Third-party beneficiary
Breach of contract
Anticipatory repudiation
Cover
Exclusion clause
Efficient breach
Deviation
Fundamental breach
Remedies
Specific performance
Liquidated damages
Penal damages
Rescission
Quasi-contractual obligations
Promissory estoppel
Quantum meruit
Related areas of law
Conflict of laws
Commercial law
Other common law areas
Tort law
Property law
Wills, trusts, and estates
Criminal law
Evidence
v
t
e
Assignment of rights under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if Party A contracts with Party B to sell Party A's car to Party B for $10, Party A can later assign the benefits of the contract - i.e., the right to be paid $10 - to Party C. In this scenario, Party A is the obligee/assignor, Party B is an obligor, and Party C is the assignee. Such an assignment may be donative (essentially given as a gift), or it may be contractually exchanged for consideration. It is important to note, however, that Party C is not a third party beneficiary, because the contract itself was not made for the purpose of benefiting Party C. When an assignment is made, the assignment always takes place after the original contract was formed. An Assignment only transfers the rights/benefits to a new owner. The obligations remain with the previous owner. Compare Novation.
When assignment will be permitted
The common law favors the freedom of assignment, so an assignment will generally be permitted unless there is an express prohibition against assignment in the contract. Where assignment is thus permitted, the assignor need not consult the other party to the contract. An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality. Certain kinds of performance, therefore, cannot be assigned, because they create a unique relationship between the parties to the contract. For example, the assignment of a legal malpractice claim is void since an assignee would be a stranger to the attorney-client relationship, who was owed no duty by the attorney and would imperil the sanctity of the highly confidential and fiduciary relationship existing between attorney and client.
Torts are not assignable as public policy, and various statutes may prohibit assignment in certain instances.[7] In addition, the Restatement (Second) of Contracts lists prohibitions in §317(2)(a) based upon the effect to the non-assigning party (obligor),[7] with similar prohibitions in the Uniform Commercial Code §2-210.[8] For example, UCC 2-210(1)(a) states the following:[9]
“ (a) Subject to paragraph (b) and except as otherwise provided in Section 9-406 or as otherwise agreed, all rights of the seller or the buyer may be assigned unless the assignment would materially change the duty of the other party, increase materially the burden or risk imposed on that party by the contract, or impair materially that party's chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of its entire obligation may be assigned despite an agreement otherwise. ”
Requirements for an effective assignment
For assignment to be effective, it must occur in the present. No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee. A promise to assign in the future has no legal effect. Although this prevents a party from assigning the benefits of a contract that has not yet been made, a court of equity may enforce such an assignment where an established economic relationship between the assignor and the assignee raised an expectation that the assignee would indeed form the appropriate contract in the future.
A contract may contain a non-assignment clause, which prohibits the assignment of specific rights, or of the entire contract, to another. However, such a clause does not necessarily destroy the power of either party to make an assignment. Instead, it merely gives the other party the ability to sue for breach of contract if such an assignment is made. However, an assignment of a contract containing such a clause will be ineffective if the assignee knows of the non-assignment clause, or if the non-assignment clause specifies that "all assignments are void".
Two other techniques to prevent the assignment of contracts are rescission clauses or clauses creating a condition subsequent. The former would give the other party to the contract the power to rescind the contract if an assignment is made; the latter would rescind the contract automatically in such circumstances. wiki