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Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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CAN YOU SELL A GOVERNMENT CONTRACT: ASSIGNMENT, NOVATION, CHANGE OF NAME AND ASSIGNMENT OF CLAIMS

Contractors frequently ask if they can sell or transfer (assign) their government contract to another company.  The sale or assignment of a purely commercial contract is very common and well recognized at law. But for a Government contract, there are special rules.  Although a transfer can be made through a process known as “novation,” the contract can be annulled if the rules are not carefully followed.

Commercial Contracts May Generally Be Sold: Generally, commercial contracts can be sold or transferred to a third party.  Indeed, Article 2-210 of the Uniform Commercial Code (“UCC”) explicitly permits this, by stating:

§ 2-210. Delegation of Performance; Assignment of Rights.

(1) A party may perform his duty through a delegate unless otherwise agreed [].

(2) Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract [].

(4) An assignment of “the contract” or of “all my rights under the contract” or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. [].

UCC Article 2 has been adopted by 49 states and the District of Columbia.  Only Louisiana, which has a civil law (not an English Common Law) system, has declined to adopt it.

Government Contracts May Not Be Sold Or Assigned, Except through Novation: The simple answer to the question of the assignment or sale of a government contract, is “NO.”  U.S. law prohibits it, and states that any attempted transfer or assignment will annul the contract:

General Prohibition on Transfer of Contracts . The party to whom the Federal Government gives a contract or order may not transfer the contract or order, or any interest in the contract or order, to another party. A purported transfer in violation of this subsection annuls the contract or order so far as the Federal Government is concerned, except that all rights of action for breach of contract are reserved to the Federal Government.

41 U.S.C. § 6305, known as the “Contracts Act.”  This prohibition, which is repeated in FAR 42.1204, protects the government from secret asssignments, prevents possible multiple claims and makes unnecessary the investigation of assignments. See American Gov’t Properties and Houma SSA v. United States, Fed. Cl. No. 09-153 (Aug. 28, 2014).  There are only two exceptions: (1) where the Government waives the prohbition by giving clear assent to the assignment; and (2) where the assignment occurs by operation of law (e.g., where there was corporate success through merger or consolidation).  In American Gov’t Properties, the Court held that an assignment of the contract violated the Contracts Act since there was no exception, that the contract had been annulled (voided), and that therefore, the Court had no jurisdiction because there was no contract and the Contract Disputes Act did not apply.

Furthermore, as readers know, only responsible contractors may receive contract awards, and when a contractor sells or transfer a contract, unless special provision are made for government review, the Government will have no assurance that the buyer is responsible.

Novation-the proper way to transfer a Government contract:  The FAR does provide for transfer of a contract to a third party through a process called “novation” (substitution of a new contract for an existing one, between different parties).  The government has the option (but is not required) to recognize a third party as a “successor in interest” to a Government contract only when there is a transfer of: (1) all the contractor’s assets; or (2) the entire portion of the contractor’s assets involved in performing the contract. FAR 42.1204(a).

In order to effect a novation, the contractor must carefully following the procedure in FAR 42.1204, by submitting copies of a proposed novation agreement, along with detailed information on all affected contracts, evidence of the transferee’s capability to perform, and any other relevant information requested by the contracting officer.  Certain specific documents must also be submitted (bill or sale or merger; minutes of boards of directors authorizing the transfer, copies of corporate articles, opinion of legal counsel, balance sheets, evidence of security clearances, if required, consent of sureties).  Even more important, the novation agreement must provide that:

(1)   the transferee assumes all the transferor’s obligations under the contract, and is receiving all the assets devoted to the contract

(2)   the transferor guarantees performance of the contract by the transferee (a bond may be used)

(3)   the transferor waives all rights under the government contract

(4)   Both transferor and transferee must comply with all Federal laws.

A sample novation agreement is included in the FAR, and should be used for all novations. FAR 42.1204.  REMEMBER: The novation will not take effect until approved by the Contracting Officer and the Contract is modified, in writing, to acknowledge and accept the novation.  Until that happens, the transferor must continue to perform, and all payments will be made to the contractor whose name appears on the contract.

Change of Name Only: If only a change of the contractor’s name is involved and the Government’s and contractor’s rights and obligations remain unaffected, the contractor may simply forward to the contracting officer copies of the Change of Name Agreement, a list of contracts, the State document effecting the name change, and the opinion of legal counsel.  FAR 42.1205.  Once again, this section of the FAR includes a simple “Change of Name Agreement” which can be used.  Again, this should be memorialized in a modification to the contract.

You Cannot Sell Your Government Contract Invoices:  In the commercial world, invoices can be sold or “factored” to get immediate cash flow.  A financial factor may buy your invoiced receivables at a discount.  Collecting from the customer then becomes the factor’s responsibility. You cannot “sell” or factor your government contract invoices to a third party, because the Contracts Act states “ [the contractor] may not transfer the contract or order, or any interest in the contract or order, to another party”  41 U.S.C. § 6305(a).  But there is another lawful method, outlined in the Contracts Act, and 31 U.S.C. § 3727, the Assignment of Claims Act of 1940, that permits something similar, but not identical.

Under the Assignment of Claims Act, a Government contractor may obtain financing for its contract by borrowing money from a bank or financial institution and then assigning moneys due or to become due under a contract if the assignment is made to a that bank or financial institution, the contract does not prohibit the assignment, and generally, the assignment covers all unpaid amounts payable, is made to only one party, and is not subject to any further assignment.  There is a specific procedure in FAR 32.805, which requires formal submission of the Notice of Assignment to the Contracting Officer, and an acknowledgement of that instrument of assignment by the Contracting Officer.  Once acknowledged, the assignment takes effect.

The contract must then be modified, and all future payments of invoices must be made only to the assignee.  If the Government erroneously pays the contractor, the bank or financing institution may bring a suit against the government to recover any contract payment made to the contractor. Produce Factors Corp. v. United States, 467 F.2d 1343, 1349 (Ct.Cl.1972). An erroneous payment made by the Government is no bar to the rightful claimant, the assignee bank. Central Nat’l Bank v. United States, 91 F.Supp. 738, 741 (Ct.Cl.1950) (citation omitted).

Summary:  While commercial contracts may be sold or assigned to a third party, Government Contracts may not be.   However, government contracts may be transferred through novation, where the government gives its formal written approval after submission of specific information and assurances.  A simple change of the contractor’s name does not require a novation.  Finally, although government contractors may not “sell” their invoices, they may obtain loans from financial institutions and assign the proceeds of the contract to the financial institution granting the loan.

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Anti-Assignment Provisions and Assignments by ‘Operation of Law’: What Do I Have to Do? What Should I Do?

Introduction.

One of the key roles of legal due diligence in mergers and acquisitions (M&A) is to assist in the efficient and successful completion of any proposed M&A transaction. Due diligence is not merely a procedural formality but can serve as a proactive shield against unforeseen challenges and risks. One essential aspect of the legal due diligence process is reviewing third-party contracts to which the target entity is party, in order to better understand the scope of its commercial relationships and to anticipate any issues that may arise via the underlying contractual relationships as a result of completing the proposed M&A transaction.

A frequent reality in many M&A transactions is the requirement to obtain consents from third parties upon the “change of control” of the target entity and/or the transfer or assignment of a third-party contract to which the target is party. Notwithstanding the wording of such contracts, in many instances, the business team from the purchaser will often ask the question: “When is consent actually required?” While anti-assignment and change of control provisions are fairly ubiquitous in commercial contracts, the same cannot be said for when the requirement to obtain consent is actually triggered. The specifics of the proposed transaction’s structure will often dictate the purchaser’s next steps when deciding whether the sometimes-cumbersome process of obtaining consents with one or multiple third parties is actually needed.

This article examines what anti-assignment provisions are and how to approach them, depending on the situation at hand, including in the context of transactions where a change of control event may be triggered. This article also discusses how to interpret whether consent is required when faced with an anti-assignment provision which states that an assignment, including an assignment by operation of law , which requires consent from the non-assigning party.

Understanding Anti-Assignment Provisions

Generally, an anti-assignment provision prohibits the transfer or assignment of some or all of the assigning party’s rights and obligations under the contract in question to another person without the non-assigning party’s prior written consent. By way of example, a standard anti-assignment provision in a contract may read as follows:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written consent of Company XYZ.

In this case, Company ABC requires Company XYZ’s prior written consent to assign the contract. Seems simple enough. However, not all anti-assignment provisions are cut from the same cloth. For example, some anti-assignment provisions expand on the prohibition against general contractual assignment by including a prohibition against assignment by operation of law or otherwise . As is discussed in greater detail below, the nuanced meaning of this phrase can capture transactions that typically would not trigger a general anti-assignment provision and can also trigger the requirement to get consent from the non-assigning party for practical business reasons.

To explore this further, it is helpful to consider anti-assignment provisions in the two main structures of M&A transactions: (i) asset purchases and (ii) share purchases.

Context of M&A Transactions: Asset Purchases and Share Purchases

There are key differences between what triggers an anti-assignment provision in an asset purchase transaction versus a share purchase transaction.

i) Asset Purchases

An anti-assignment provision in a contract that forms part of the “purchased assets” in an asset deal will normally be triggered in an asset purchase transaction pursuant to which the purchaser acquires some or all of the assets of the target entity, including some or all of its contracts. Because the target entity is no longer the contracting party once the transaction ultimately closes (since it is assigning its rights and obligations under the contract to the purchaser), consent from the non-assigning party will be required to avoid any potential liability, recourse or termination of said contract as a result of the completion of the transaction.

ii) Share Purchases

Provisions which prohibit the assignment or transfer of a contract without the prior approval of the non-assigning party will not normally, under Canadian law, be captured in a share purchase transaction pursuant to which the purchaser acquires a portion or all of the shares of the target entity. In other words, no new entity is becoming party to that same contract. General anti-assignment provisions are not typically triggered by a share purchase because the contracts are not assigned or transferred to another entity and instead there is usually a “change of control” of the target entity. In such cases, the target entity remains the contracting party under the contract and the consent analysis will be premised on whether the contract requires consent of the third party for a “direct” or “indirect” change of control of the target entity and not the assignment of the contract.

Importantly, some anti-assignment provisions include prohibitions against change of control without prior written consent. For example, the provision might state the following:

Company ABC shall not assign or transfer this agreement, in whole or in part, without the prior written approval of Company XYZ. For the purposes of this agreement, any change of control of Company ABC resulting from an amalgamation, corporate reorganization, arrangement, business sale or asset shall be deemed an assignment or transfer.

In that case, a change of control as a result of a share purchase will be deemed an assignment or transfer, and prior written consent will be required.

A step in many share purchase transactions where the target is a Canadian corporation that often occurs on or soon after closing is the amalgamation of the purchasing entity and the target entity. So, what about anti-assignment provisions containing by operation of law language – do amalgamations trigger an assignment by operation of law? The short answer: It depends on the jurisdiction in which the anti-assignment provision is being scrutinized (typically, the governing law of the contract in question).

Assignments by Operation of Law

In Canada, the assignment of a contract as part of an asset sale, or the change of control of a party to a contract pursuant to a share sale – situations not normally effected via legal statute or court-ordered proceeding in M&A transactions – will not in and of itself effect an assignment of that contract by operation of law . [1]

Still, one must consider the implications of amalgamations, especially in the context of a proposed transaction when interpreting whether consent is required when an anti-assignment provision contains by operation of law language. Under Canadian law, where nuances often blur the lines within the jurisprudence, an amalgamation will not normally effect the assignment of a contract by operation of law . The same does not necessarily hold true for a Canadian amalgamation scrutinized under U.S. legal doctrines or interpreted by U.S. courts. [2]

Difference Between Mergers and Amalgamations

As noted above, after the closing of a share purchase transaction, the purchasing entity will often amalgamate with the target entity ( click here to read more about amalgamations generally). When two companies “merge” in the U.S., we understand that one corporation survives the merger and one ceases to exist which is why, under U.S. law, a merger can result in an assignment by operation of law . While the “merger” concept is commonly used in the U.S., Canadian corporations combine through a process called “amalgamation,” a situation where two corporations amalgamate and combine with neither corporation ceasing to exist. For all of our Canadian lawyer readers, you will remember the Supreme Court of Canada’s description of an amalgamation as “a river formed by the confluence of two streams, or the creation of a single rope through the intertwining of strands.” [3] Generally, each entity survives and shares the pre-existing rights and liabilities of the other, including contractual relationships, as one corporation. [4]

MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V.

As a practical note and for the reasons below, particularly in cross-border M&A transactions, it would be wise to consider seeking consent where a contract prohibits assignment by operation of law without the prior consent of the other contracting party when your proposed transaction contemplates an amalgamation.

In MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V. (a Superior Court of Delaware decision), the court interpreted a Canadian (British Columbia) amalgamation as an assignment by operation of law , irrespective of the fact that the amalgamation was effected via Canadian governing legislation. In essence, the Delaware court applied U.S. merger jurisprudence to a contract involving a Canadian amalgamation because the contract in question was governed by Delaware law. This is despite the fact that, generally, an amalgamation effected under Canadian common law jurisdictions would not constitute an assignment by operation of law if considered by a Canadian court. As previously mentioned, under Canadian law, unlike in Delaware, neither of the amalgamating entities cease to exist and, technically, there is no “surviving” entity as there would be with a U.S.-style merger. That being said, we bring this to your attention to show that it is possible that a U.S. court (if the applicable third-party contract is governed by U.S. law or other foreign laws) or other U.S. counterparties could interpret a Canadian amalgamation to effect an assignment by operation of law . In this case, as prior consent was not obtained as required by the anti-assignment provision of the contract in question, the Delaware court held that the parties to that agreement were bound by the anti-assignment provision’s express prohibition against all assignments without the other side’s consent. [5]

To avoid the same circumstances that resulted from the decision in MTA Canada Royalty Corp. , seeking consent where an anti-assignment provision includes a prohibition against assignment by operation of law without prior consent can be a practical and strategic option when considering transactions involving amalgamations. It is generally further recommended to do so in order to avoid any confusion for all contracting parties post-closing.

Practical Considerations

The consequences of violating anti-assignment provisions can vary. In some cases, the party attempting to complete the assignment is simply required to continue its obligations under the contract but, in others, assignment without prior consent constitutes default under the contract resulting in significant liability for the defaulting party, including potential termination of the contract. This is especially noteworthy for contracts with third parties that are essential to the target entity’s revenue and general business functions, as the purchaser would run the risk of losing key contractual relationships that contributed to the success of the target business. As such, identifying assignment provisions and considering whether they are triggered by a change of control and require consent is an important element when reviewing the contracts of a target entity and completing legal due diligence as part of an M&A transaction.

There can be a strategic and/or legal imperative to seek consent in many situations when confronted with contractual clauses that prohibit an assignment, either by operation of law or through other means, absent the explicit approval of the non-assigning party. However, the structure of the proposed transaction will often dictate whether consent is even required in the first place. Without considering this nuanced area of M&A transactions, purchasers not only potentially expose themselves to liability but also risk losing key contractual relationships that significantly drive the value of the transaction.

The  Capital Markets Group  at Aird & Berlis will continue to monitor developments in cross-border and domestic Canadian M&A transactions, including developments related to anti-assignment provisions and commercial contracts generally. Please contact a member of the group if you have questions or require assistance with any matter related to anti-assignment provisions and commercial contracts generally, or any of your cross-border or domestic M&A needs.

[1] An assignment by operation of law can be interpreted as an involuntary assignment required by legal statute or certain court-ordered proceedings. For instance, an assignment of a contract by operation of law may occur in, among other situations: (i) testamentary dispositions; (ii) court-ordered asset transfers in bankruptcy proceedings; or (iii) court-ordered asset transfers in divorce proceedings.

[2] MTA Canada Royalty Corp. v. Compania Minera Pangea, S.A. de C.V ., C. A. No. N19C-11-228 AML, 2020 WL 5554161 (Del. Super. Sept. 16, 2020) [ MTA Canada Royalty Corp. ].

[3] R. v. Black & Decker Manufacturing Co. , [1975] 1 S.C.R. 411.

[4] Certain Canadian jurisdictions, such as the Business Corporations Act (British Columbia), explicitly state that an amalgamation does not constitute an assignment by operation of law (subsection 282(2)).

[5] MTA Canada Royalty Corp .

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Federal Contracts When Selling a Business

When selling a business, the owner must balance deal certainty, tax consequences, speed, regulatory clearances, third party consents and liability allocation. Owners selling a business that holds prime federal contracts have additional considerations that may limit the structure of the transaction and the categories of available buyers. This Client Alert provides a high-level overview of one issue unique to federal contractors — the Anti-Assignment Act.

One diligence consideration in the sale of any business is whether vendor and customer contracts can be transferred to the buyer. For non-Government contracts, applicable laws generally favor the free assignability of contracts. For commercial contracts, silence generally equals the consent to the transfer.

By contrast, the Anti-Assignment Act, 41 USC § 15 (the “Act”), expressly prohibits the transfer of a federal contract. Despite the Act’s absolute prohibition on transfers, courts have made clear that the Government may consent to a transfer, and that certain transfers are allowed even without Government consent. If the Act applies, and the Government withholds consent, or if the contractor does not follow the applicable Federal Acquisition Regulations (“FAR”), then the Government may terminate the contract or hold the seller in breach.

What Types of Transfers Are Subject to the Anti-Assignment Act?

According to FAR 42.1204(a), “novation agreements” with the Government are required if a federal contractor transfers all of the assets involved in performing a federal Government contract, including:

•  the sale of these assets with a provision for assuming liabilities;

•  the transfer of these assets incident to a merger or corporate consolidation; or

•  the contribution of these assets in connection with formation of a new business entity.

A novation agreement is required if a forward merger or asset purchase agreement results in the transfer of a Government contract or all of the assets involved in performing that contract. Some case law suggests that the Act does not always apply to a forward merger, but our experience has been that most buyers in a forward merger will require a novation agreement rather than risk a conflict with the contracting officer overseeing the contract being transferred.

What Transfers Are Not Subject to the Anti-Assignment Act?

FAR 42.1204(b) suggests that novation agreements are not required when a contractor changes ownership as a result of a stock purchase, with no legal change in the party to the Government contract, and when that contracting party remains in control of the assets and is the party performing the contract. (However, even if consent is not required, other FAR provisions may require notice of ownership changes since the ownership change may result in changes to asset valuations or other changes affecting allowable costs.)

Case law interpreting the Act has made clear that a novation agreement is not required where the contract essentially continues with the same entity after closing. This “operation of law” exception to the Act has been held to apply to a reverse triangular merger where the seller merges into a subsidiary of the buyer, and the seller is the surviving company in the merger. The cases determined that the assets of the seller were not transferred in the merger.

Asset sales under Section 363 of the Bankruptcy Code also should not require a novation agreement pursuant to this “operation of law” exception to the Act recognized by the courts.

How Do I Obtain a Novation Agreement?

Business owners accustomed to obtaining a third party’s consent to the assignment of a commercial contract are often surprised by the cost, complexity and time needed to complete a novation agreement with the federal Government. If a novation agreement is required, FAR 42.1024(e) and (f) require the seller to submit the following information to the responsible contracting officer (“RCO”):

•  three signed copies of the proposed novation agreement;

•  the purchase/sale agreement or memorandum of understanding;

•  a list of all affected contracts between the seller and the Government, as of the date of sale or transfer of assets, showing for each, as of that date, the --

-  contract number and type;

-  name and address of the contracting office;

-  total dollar value, as amended; and

-  approximate remaining unpaid balance.

•  evidence of the buyer’s capability to perform;

•  an authenticated copy of the instrument effecting the transfer of assets;

•  a certified copy of each company’s board resolutions authorizing the asset transfer;

•  a certified copy of the minutes of each corporate party’s stockholder meeting necessary to approve the asset transfer;

•  an authenticated copy of the buyer’s certificate and articles of incorporation, if a corporation was formed for the purpose of receiving the assets;

•  legal opinions of counsel for each of the buyer and seller stating that the transfer was properly effected under applicable law and the effective date of the transfer;

•  balance sheets of the buyer and seller as of the dates immediately before and after the transfer of assets, audited by independent accountants;

•  evidence that any security clearance requirements have been met;

•  the consent of sureties on all affected contracts if bonds are required, or a statement from the seller that none are required; and

•  any other relevant information requested by the RCO.

Our clients have found most burdensome the requirements for audited pre- and post-closing financial statements and formal legal opinions from legal counsel for each of the buyer and seller. Sometimes these requirements are waived by the Government, but even when they are, the FAR novation process is time-consuming when compared to obtaining consent to transfer commercial contracts, which often can be accomplished by seller and the consenting third party signing a one-page consent letter. To avoid the cost and time involved, clients often seek to avoid the novation process by choosing a stock purchase or a reverse triangular merger transaction structure, as these structures are effective in avoiding the requirements for novation.

Government Approval Process

If a business sale cannot avoid the novation process, the seller will need to submit the novation documentation to the RCO, who is responsible for coordinating with all Government offices interested in the contracts being transferred.

The RCO determines whether it is in the Government’s interest to allow the transfer to the buyer based upon information received from Government officials, the buyer’s status as a responsible contractor, and any other factors relating to the buyer’s performance that the Government determines would aid or impair the buyer’s ability to perform.

Novations are often approved by the Government, but the process can take several weeks to six months or more to complete. For this reason, parties generally do not make the Government’s novation a condition to closing and instead will covenant to pursue the novation agreement on a post-closing basis. Or, the parties will enter into an interim subcontract whereby the buyer will perform on behalf of the seller pending completion of the novation process. Additionally, the parties may provide for a purchase price adjustment, indemnity, or permanent subcontract if the novation is denied.

If the RCO determines that a novation is not in the Government’s interest, the seller will remain obligated under the contracts, and the contracts could be terminated for default if the seller does not or can no longer perform. Generally, however, special arrangements, such as subcontracting arrangements between the seller and the buyer, or termination for convenience, are agreed to by the Government for contracts that cannot be transferred.

Bottom line : If other important transaction objectives can be achieved, consider structuring acquisitions of federal contracts to avoid the requirement of entering into a novation agreement with the federal Government. If a novation agreement cannot be avoided, involve your legal counsel early and be prepared for a more costly and protracted process than for other contract transfers.

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Prohibition of assignment clause did not prevent a transfer of rights by operation of law

The Court of Appeal has held that a clause in a contract that prohibited the parties from assigning their rights under the contract did not prevent one party’s rights being transferred automatically to an insurer by operation of law. The case shines a light on how the courts may interpret a prohibition of assignment clause.

What happened?

What did the court of appeal say, what does this mean for me.

Dassault Aviation SA v Mitsui Sumitomo Insurance Co. Ltd [2024] EWCA Civ 5 involved a contract for the sale of two aircraft and spare parts.

Under the contract, which was governed by English law, Dassault Aviation would sell the aircraft to Mitsui Bussan Aerospace (MBA). Under a separate contract (governed by Japanese law), MBA would subsequently on-sell the aircraft to the Japanese Coastguard.

MBA was concerned that, if Dassault delivered the aircraft late to MBA, this would affect delivery times under MBA’s contract with the Coastguard and MBA could be liable for late delivery to the Coastguard.

To protect itself against this risk, MBA took out an insurance policy from Mitsui Sumitomo Insurance (MSI) (which, despite the name, was not connected in any way with MBA). The insurance policy was governed by Japanese law.

As it happened, the aircraft were delivered late. MBA claimed under the insurance policy, and MSI duly paid the claim.

Under article 25 of the Japanese Insurance Act (No. 56 of 2008), where an insurer pays out under a Japanese policy of insurance, the insurer is automatically subrogated to any claim the policyholder may have in connection with the event that led to the pay-out. In other words, the policyholder’s right to claim damages passes automatically to the insurer.

Essentially, the same position applies in England and Wales under the common law. See the box “ What is subrogation? ” for more information.

In this scenario, this would mean that MBA’s right to claim against Dassault for breach of contract (due to the late delivery by Dassault) would pass to MSI, so that MSI could claim directly against Dassault.

However, the sale contract between Dassault and MBA contained the following clause (the assignment prohibition):

“[T]his Contract shall not be assigned or transferred in whole or in part by any Party to any third party, for any reason whatsoever, without the prior written consent of the other Party and any such assignment, transfer or attempt to assign or transfer any interest or right hereunder shall be null and void without the prior written consent of the other Party.”

Dassault argued that the prohibition prevailed and prevented MBA’s rights under the contract from transferring to MSI under the Insurance Act. If correct, this would mean that MSI would have no right to claim against Dassault to recover the amount it had paid out to MBA.

Subrogation is a broad doctrine which essentially states that, if a person (X) pays or discharges a debt or obligation of someone else (Y), then X steps into Y’s shoes and acquires Y’s rights.

Under English law, subrogation applies in a wide range of circumstances, including the following.

• When an insurer pays out to a policyholder . The insurer is subrogated to the policyholder’s rights and can take action in place of the policyholder. For example, an individual might take out buildings and contents insurance on their property and, at some point during the policy term, a leak develops, flooding the property and causing damage. The damage is caused by faulty workmanship by a plumber. The individual may be able to claim against the plumber in negligence but instead claims under their insurance policy. The insurer is subrogated to the claim in negligence against the plumber in place of the individual.
• When a guarantor pays out under a guarantee . For example, a person (X) borrows a sum of money from a lender. Another person (Y) gives a guarantee for X’s obligation to repay the sum. The lender calls on the guarantee and Y repays the sum instead of X. By way of subrogation, Y can bring proceedings against X to claim back the amount Y has paid out to the lender. (This is also described as a right of reimbursement, rather than subrogation.)
• Where a person pays someone else’s secured debt . For example, a person (K) takes out a mortgage loan from a bank, which is secured by a mortgage over K’s property. The mortgage becomes payable, but K’s colleague (L) pays the mortgage off instead of K. Until K reimburses L, L is subrogated to the mortgage security over the property. If K does not reimburse L, L can enforce the mortgage and take possession of the property (and sell it).
• Where an agent pays out for their principal . For example, an individual appoints an agent to negotiate a purchase of land on the individual’s behalf. The purchase contract is settled and the individual is required to pay the purchase price. However, for whatever reason (perhaps for ease), the agent pays the purchase price. The seller transfers the land to the individual. By virtue of subrogation, until the agent is paid back, the agent has all the rights over the land which the seller had before the sale.

Subrogation can be complicated and how it works in practice varies greatly depending on the legal and factual circumstances. In many respects, subrogation is less a doctrine and more a form of remedy which a person who has discharged someone else’s obligations can seek in an appropriate form. The principal point of subrogation is that the person whose obligations have been discharged should not be unjustly enriched by failing to perform those obligations themselves.

However, one common factor to all types of subrogation is that it involves an automatic transfer of rights , which occurs by operation of law and does not require a specific assignment by anyone.

Initially, the dispute was referred to arbitration at the ICC in London. The arbitration panel held (by a majority) that MBA’s rights under the sale contract had transferred to MSI under the Insurance Act.

Dassault appealed to the High Court of England and Wales. The High Court overturned the arbitrators’ decision, finding that the prohibition was wide enough to capture a transfer by operation of law.

The High Court noted the words “by any Party” in the assignment prohibition were ambiguous and needed to be interpreted. It therefore embarked on the traditional process of contractual interpretation that applies when the wording of a contract is unclear. See the box “ How will the court interpret a contract? ” for more information.

It held that the words indicated an element of action or willingness by a Party, and that this was what was required for the prohibition to apply. A transfer would fall outside the prohibition only if it were outside the voluntary control of the transferring party (here, MBA).

In this case, although MBA had not directly assigned its rights to MSI, it had entered willingly into the insurance policy and made a claim under it, with the direct and predictable result that its rights would be transferred to MSI under the Insurance Act. In the High Court’s view, this amounted to an assignment by MBA and was caught by the prohibition.

MSI appealed to the Court of Appeal of England and Wales.

The court re-examined the words “by any Party” and found that they were unambiguous and clear. They covered a transfer effected by a party to the sale contract, but that did not include a transfer that occurred automatically by operation of law (as was the case under the Insurance Act).

The judges disagreed with the High Court’s approach that the key question was whether the transfer was outside MBA’s voluntary control. Rather, it was a simple case of reading the contract to decide whether the transfer had been made by MBA.

It had not. The transfer had taken place automatically under the Insurance Act and so was not prohibited by the assignment prohibition.

In reaching its decision, the court noted that the sale contract between Dassault and MBA contained provisions that specifically contemplated the parties taking out insurance (Dassault insurance against loss or damage to certain specific equipment, and MBA insurance in connection with ferry flight delivering the aircraft).

Although these specific provisions did not cover the insurance policy that MBA had placed with MSI, they did indicate that the parties were happy for insurance to cover the arrangements, suggesting in turn that they understood that rights under the contract might transfer to an insurer.

The court found, therefore, that MBA’s rights had transferred to MSI and the assignment prohibition did not apply.

If the wording of an agreement is clear, the courts will assume that it reflects the parties’ intentions and enforce the literal word of the contract. This will be the case even if the result is unusual or uncommercial.

The only exception to this is where the parties’ agreement is in some way restricted by law. For example, the court may find that a clause is unenforceable as a restraint of trade, a contractual penalty, and unreasonable exclusion or limitation of liability, or an attempt to carry out unlawful acts. In these cases, the courts may be able to strike parts of the contract out to make it work.

However, if the wording of a contract is ambiguous and could have more than one meaning, the court must embark on a process of contractual interpretation (also called construction).

The law on contractual interpretation is now settled, following three landmark cases ( Rainy Sky SA v Kookmin Bank [2011] UKSC 50; Arnold v Britton [2015] UKSC 36; and Wood v Capita Insurance Services Ltd [2017] UKSC 24).

In short, the court will examine the wording of the contract and ascertain what a reasonable person with all the relevant background knowledge at the time of the contract would have understood.

The court will look not only at the text of the contract, but also the surrounding context at the time. This is a single exercise, and the court will not automatically prefer the wording (textualism) over the surrounding circumstances (contextualism) or vice versa. However, the weight the court will give the text and the context will vary depending on the nature and formality of the contract.

If, after doing this, the court finds there is still more than one plausible interpretation of the contract, it will prefer the interpretation that is most consistent with business common sense.

The case shows the importance of formulating any prohibition of assignment provisions properly.

Here, the court felt that the wording of the sale contract was clear. By using the words “by any Party”, the prohibition extended only to direct attempts by a party to assign their rights.

Had those words not appeared (e.g. “[T]his Contract shall not be assigned or transferred in whole or in part to any third party…”), the court may have been required to embark on a deeper analysis of the clause to understand whether it would have prohibited transfers by operation of law. Indeed, the court might have concluded that it would have done so.

The case revolved around automatic transfers under Japanese law. The position might well be different under English law. This point was not argued – both Dassault and MSI appear to have accepted that, had the contract been governed by English law, the transfer of rights to MSI would have taken place – and so the court did not need to decide the issue.

But that does not mean that it is impossible to exclude the right to subrogation through a prohibition of assignment, and contract parties may wish to ensure any contractual prohibitions are worded broadly enough that they at least make an attempt to do so.

However, whether this is appropriate will need to be judged on a case-by-case basis, and may be more obviously covered by agreeing a subrogation waiver. For example, it is very common for a buyer of a business to deploy warranty and indemnity (W&I) insurance and for the seller(s) to require the W&I insurer to expressly waive any rights of subrogation.

Conversely, most liability insurance policies contain an express obligation on the insured party not to enter into any agreement with a third party that might restrict the insurer’s right of recovery. A prohibition of assignment that excludes a right of subrogation may do exactly that and could, in theory, invalidate the insurance policy itself.

Where insurance arrangements are contemplated under a contract, the parties should have a mind to the potential implications from an insurance-law perspective, including any potential subrogation following a claim under an insurance policy.

Any contractual provisions that do contemplate insurance are unlikely to stipulate a particular governing law for the insurance, so it may not be possible to make an informed assessment. In addition, the party taking out insurance may well not inform the other party that they are doing so and/or might take out insurance of a type not contemplated by the contract.

In each case, this could lead to a contract party facing legal proceedings under the contract by a third party whose identity is not known at the date of the contract.

Ultimately, where a contract party intends in advance to procure insurance in relation to the subject matter of the contract, it is important to seek legal advice to ensure that the policy and the contract operate smoothly and clearly alongside each other.

Access the court’s decision on whether a contract prohibited an assignment by operation of law ( Dassault Aviation SA v Mitsui Sumitomo Insurance Co. Ltd [2024] EWCA Civ 5)

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Novation Agreements Under Federal Contracts

Contributor.

A unique aspect of doing business with the federal government is the built-in limits on a contractor's right to assign the contract or the right to payment under the contract to third parties. The Anti-Assignment Act ( 41 U.S.C. § 6305 ) prohibits the transfer of a government contract or interest in a government contract to a third party. An assignment of a contract in violation of this law voids the contract except for the Government's right to pursue a breach of contract remedies. What's a contractor to do when it is acquired/merged with another firm, is restructured, or goes through a variety of other types of corporate transaction? The Federal Acquisition Regulations recognize that firms involved in government contracts get bought and sold from time to time and includes procedures for the novation of contracts in certain situations to avoid a potential violation of the Anti-Assignment Act.

What is a novation?

A novation is a three-party agreement between the United States, the original contractor, and the new contractor offering to assume the government contract. The purpose the novation is to allow the Government to recognize a new contractor as the successor-in-interest to a government contract and avoid a violation of the Anti-Assignment Act. The novation process typically begins when the contractor presents a proposed novation agreement to the contracting officer along with various other materials discussed below. If a firm has multiple government contracts, even with different federal agencies, they will typically be included with one omnibus novation agreement with the agency and contracting officer with which the transferring contractor has its largest contract. The Government is not required to enter into a novation agreement when requested, but may do so when it finds it to be in its best interest. As a practical matter, contracting officers are typically cooperative in the novation process.

A novation agreement is straightforward. The new contractor ("transferee") must agree, among other things, to be bound by all obligations, liabilities, and claims of the old contractor ("transferor") and to ratify all actions taken by the transferor. The transferee must also agree that all payments/ reimbursements previously made by the Government to the transferor are considered discharged. In turn, the transferor must agree to waive all claims and rights against the Government in connection with the novated contracts. The transferor must also agree to guarantee payment of all liabilities and the performance of all obligations of the transferor assumes under the novation.

A form Novation Agreement is found at the end of  FAR 42.1204 – Applicability of novation agreements .

When is a novation necessary?

A novation is necessary when a third party acquires all of the assets of a contractor. Additionally, a novation is needed when a third party acquires the assets involved in the performance of a government contract through a sale of assets (with assumption of liabilities), a transfer of assets through a merger or corporate consolidation, or through incorporation or formation of a partnership. A novation agreement is typically not required when the ownership of a contractor changes as a result of a stock purchase, provided that there is no legal change in the contracting party, and the contracting party continues to perform the contract and remains in control of the assets necessary for contract performance.

Contents of the novation submission

Here are the documents the Government requires from a contract seeking novation of its government contracts:

• Three signed copies of the proposed novation agreement
• Copy of the purchase/sale agreement between the transferor and transferee
• List of contracts that the transferor has with the Government, including (a) contract number and type; (b) name and address of contracting office; (c) total contract value; and (d) approximate remaining unpaid balance
• Evidence of the transferee's capability to perform
• Any other relevant information requested by the contacting officer
• Authenticated copy instrument effecting the transfer of assets (e.g. bill of sale)
• Certified copy of each resolution of the corporate party's board of directors authorizing the transfer of assets
• Certified copy of the stockholder meeting minutes for the transferor and transferee showing approval of the transfer of assets
• Authenticated copy of the transferee's certificate and articles of incorporation;
• Opinion of legal counsel for the transferor and transferee stating the transfer was properly effected under applicable law and the effective date of the transfer;
• Balance sheets of the transferor and transferee as of the dates immediately before and after the sale audited by independent accounts;
• Evidence that any security clearance requirements have been met; and
• The consent of sureties on all contracts if bonds are required or a statement from the seller that none are required.

Unusual circumstances

Every corporate transaction is unique. In some situations, a change in corporate ownership/structure or other circumstances might not neatly qualify as a situation where novation is prescribed by FAR 42.1204(a). The Government has authority in those situations to approve an atypical novation agreement or to waiver the requirement for a novation entirely. This authority arises directly from the Anti-Assignment Act which serves two purposes: (1) to avert fraud by "preventing persons of influence from buying up claims against the United States, which might then be improperly urged upon officers of the Government"; and (2) to avoid multiple litigation by enabling the United State "'to deal exclusively with the original claimant instead of several parties,' thereby eliminating the confusion and conflicting demand for payment and the chances of multiple litigation."  United International Investigative Sers. v. United States , 26 Cl. Ct. 892, 898 (1992) (quoting  Tuftco Corp. v. United States , 614 F.2d 740, 744 (Cl. Ct. 1980)). The Anti-Assignment Act exists solely for the benefit of the Government. As such, the Government has the discretion to waive the Act and agree to an assignment of a contract.  Johnson Control World Servs., Inc. v. United States , 44 Fed. Cl. 334, 342 (1999). But, the Government's ability to agree to assignment is not strictly limited to the situations described in FAR Subpart 42.12. For instance, in  Johnson Control , the court found that the Air Force could waive application of the Anti-Assignment Act and recognize the transfer of a contract by operation of a corporate restructuring.

Commence the novation process early

Government contractors contemplating a corporate transaction that may require a novation should approach their government customer as early as practical. Ideally, significant details of the novation can be worked out between the Government and contractor in advance of closing. Failure to take these steps impacts the timing for closing the transaction or requires an extended bridge agreement between the transferor and transferee to allow the transferor to continue performance of outstanding government contracts pending execution of the novation by the Government.

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.

Government, Public Sector

United states.

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Transfer And Assignment Agreement: Definition & Sample

Jump to section, what is a transfer and assignment agreement.

A transfer and assignment agreement is a legal document that outlines the terms and conditions of the transfer of an employee from one company to another. It also includes the assignment of all rights and obligations, including any IP or confidential information. This document can be used to protect both the employee and the employer in case of any disputes. When negotiating a transfer and assignment agreement, it is important to consider all potential risks and liabilities.

Common Sections in Transfer And Assignment Agreements

Below is a list of common sections included in Transfer And Assignment Agreements. These sections are linked to the below sample agreement for you to explore.

Transfer And Assignment Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-10.7 10 dex107.htm FORM OF SALE, TRANSFER AND ASSIGNMENT AGREEMENT , Viewed April 26, 2022, View Source on SEC .

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Meet some of our Transfer And Assignment Agreement Lawyers

Jo Ann has been practicing for over 20 years, working primarily with high growth companies from inception through exit and all points in between. She is skilled in Mergers & Acquisitions, Contractual Agreements (including founders agreements, voting agreements, licensing agreements, terms of service, privacy policies, stockholder agreements, operating agreements, equity incentive plans, employment agreements, vendor agreements and other commercial agreements), Corporate Governance and Due Diligence.

Jeremiah C.

Creative, results driven business & technology executive with 24 years of experience (15+ as a business/corporate lawyer). A problem solver with a passion for business, technology, and law. I bring a thorough understanding of the intersection of the law and business needs to any endeavor, having founded multiple startups myself with successful exits. I provide professional business and legal consulting. Throughout my career I've represented a number large corporations (including some of the top Fortune 500 companies) but the vast majority of my clients these days are startups and small businesses. Having represented hundreds of successful crowdfunded startups, I'm one of the most well known attorneys for startups seeking CF funds. I hold a Juris Doctor degree with a focus on Business/Corporate Law, a Master of Business Administration degree in Entrepreneurship, A Master of Education degree and dual Bachelor of Science degrees. I look forward to working with any parties that have a need for my skill sets.

Benjamin W.

I am a California-barred attorney specializing in business contracting needs. My areas of expertise include contract law, corporate formation, employment law, including independent contractor compliance, regulatory compliance and licensing, and general corporate law. I truly enjoy getting to know my clients, whether they are big businesses, small start-ups looking to launch, or individuals needing legal guidance. Some of my recent projects include: -drafting business purchase and sale agreements -drafting independent contractor agreements -creating influencer agreements -creating compliance policies and procedures for businesses in highly regulated industries -drafting service contracts -advising on CA legality of hiring gig workers including effects of Prop 22 and AB5 -forming LLCs -drafting terms of service and privacy policies -reviewing employment contracts I received my JD from UCLA School of Law and have been practicing for over five years in this area. I’m an avid reader and writer and believe those skills have served me well in my practice. I also complete continuing education courses regularly to ensure I am up-to-date on best practices for my clients. I pride myself on providing useful and accurate legal advice without complex and confusing jargon. I look forward to learning about your specific needs and helping you to accomplish your goals. Please reach out to learn more about my process and see if we are a good fit!

Texas licensed attorney specializing for 22 years in Business and Contract law with a focus on construction law and business operations. My services include General Business Law Advisement; Contract Review and Drafting; Legal Research and Writing; Business Formation; Articles or Instructive Writing; and more. I am able to draft and review contracts, and have experience with, contract law and business formation in any state. For more insight into my skills and experience, please feel free to visit my LinkedIn profile or contact me with any questions.

I am a licensed attorney and a member of the California Bar. I graduated from the University of Dayton School of Law's Program in Law and Technology. I love IP, tech transfers, licensing, and how the internet and developing technology is changing the legal landscape. I've interned at both corporations and boutique firms, and I've taken extensive specialized classes in intellectual property and technology law.

Charlotte L.

I hold a B.S. in Accounting and a B.A. in Philosophy from Virginia Tech (2009). I received my J.D. from the University of Virginia School of Law in 2012. I am an associate member of the Virginia Bar and an active member of the DC bar. Currently, I am working as a self-employed legal consultant and attorney. Primarily my clients are start-up companies for which I perform various types of legal work, including negotiating and drafting settlement, preparing operating agreements and partnership agreements, assisting in moving companies to incorporate in new states and setting up companies to become registered in a state, assisting with employment matters, drafting non-disclosure agreements, assisting with private placement offerings, and researching issues on intellectual property, local regulations, privacy laws, corporate governance, and many other facets of the law, as the need arises. I have previously practiced as an attorney at a small DC securities law firm and worked at Deloitte Financial Advisory Services LLC. My work experience is dynamic and includes many short-term and long term experience that span across areas such as maintaining my own blog, freelance writing, and dog walking. My diverse background has provided me with a stong skill set that can be easily adapted for new areas of work and indicates my ability to quickly learn for a wide array of clients.

With over 25 years of experience in the technology sector, I am a strategic business counsel, outsourced general counsel, and a leader of high-performing legal teams aimed to help maximize the efficiency of all stakeholders. I recently joined the renewable energy space with the addition of a new client on its way to becoming the first Chinese battery company to build a battery manufacturing presence in the US beginning with a 1+ GWh cell and pack plant, and a domestic anode and cathode plant. In my most recent full-time role, I served as the Sr. Director and Assistant General Counsel at SMART Global Holdings, where I served as the general counsel for the HPC and AI division of this publicly traded holding company, comprised of four companies, before becoming the global head of the commercial legal function across all portfolio companies, including two multinational industry leaders. During much of my career, I provided outside legal services on a recurring basis for several years advising several high growth start-ups and venture firms as well as house hold names, and also led one of the country's fastest growing infrastructure resellers and managed services providers. My core competencies include contract review, commercial negotiation, legal operations, information security, privacy, supply chain and procurement, alliances and channel sales, HR, and general corporate. I am passionate about leveraging my legal skills to achieve business solutions, supporting innovation and growth in the technology sector, and helping maximize the commercial flow and efficiency at growing companies. I hold an undergraduate business degree, a JD, a MSBA Taxation, and certifications from the California Bar Association, Six Sigma, and ISM.

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Transfer and Assignment: Everything You Need to Know

A copyright transfer and assignment refers a copyright owner temporarily or permanently transfers part, or all, of his rights to another party. 3 min read

A copyright transfer and assignment refers to the different ways in which a copyright owner temporarily or permanently transfers part, or all, of his rights to another party.

The U.S. Constitution provides the basis for copyright protection. A copyright refers to the legal rights conferred on a person in recognition of his/her creative work. Copyrights protect original works of IP (intellectual property) whether it has been published or not. Ideas can't be copyrighted — what can be copyrighted is the way an individual chooses to express the creative idea.

Copyright Ownership

The owner of a copyright:

• Retains the right to lease or sell copies of his/her work to others or permit them to perform, record or display it in public.
• Decides whether others can revise portions, or all, of the work and whether they can make copies.

Copyright differs from patents and trademarks since patents provide protection to inventions while trademarks protect phrases/names used to identify specific products or services.

Copyright Transfer

A copyright transfer could be non-exclusive. Licensing agreements are one of the most common forms of a non-exclusive transfer of copyrights.

For example, most computer software sold on the open market are actually transfers of the owner's rights to other individuals for use of the software for a period of time.

However, the owner still retains ownership of the copyright. Licenses are usually non-transferable — meaning that the individual who purchased the software has no right to give, lend or sell the licensed item to third parties without the express consent of the copyright owner.

Copyright Assignment

Unlike a non-exclusive copyright transfer such as a licensing agreement, a copyright assignment is a form of exclusive copyright transfer. Copyright assignments could be made on part or on the entirety of an intellectual work. The copyright can be temporary — meaning that the copyright will return to its original owners after a specified duration.

It could also be permanent — meaning that the person receiving the copyright has the rights to use or distribute the copyrighted material as he or she sees fit. An instance of a permanent copyright assignment is a work-for-hire agreement stating that the copyright of the work belongs to the entity that is purchasing the work for hire and not the entity that created it.

The Recordation Process

The requirements for recordation include all applicable fees, a legible and complete copy of the property to be transferred, and the signature or certified true copy of the individual's signature assigning the copyright. Publishing or registration with the copyright office of the property to be transferred is not a requirement. The United States Copyright Office provides a cover sheet which can be used to submit the work for recordation. Although the use of this sheet is not mandatory, it is encouraged.

Although every assignment is a transfer of interest, not every transfer of interest can be called an assignment. It really depends on the intention of the copyright owner (i.e. the assignor). This means that a copyright assignment is dissimilar to other kinds of transfers such as a subrogation, a novation, or a sublease.

Subrogation

Subrogation refers to a substitution of one party for another. It is the equitable remedy where an individual steps into the position of another to take over all rights to a claim for monetary damages.

A sublease refers to a type of transfer where the tenant retains a partial right of reentry into the leased premises. However, if said tenant executes a transfer of the leasehold estate while retaining no reversionary interest nor right of reentry, such a transfer is called an assignment. Under a sublease agreement, the original tenant isn't released from the stipulations of the original lease. However, in a transfer, both the original tenant and the assignee are bound by the conditions stated in the original lease.

Although a copyright assignment and a novation have negligible differences, the distinction is an essential one. A novation refers to the mechanism whereby a contracting party transfers the entirety of its benefits and obligations to a third party. Under novation, the third party completely takes over the position of the original party under the contract. However, in an assignment, the position of the original contracting parties do not change and the privity of the contract is still in existence between them.

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Copyright transfer, assignment and licensing in the United States

Use the  Lexology Navigator  tool to compare the answers in this article with those from 20+ other jurisdictions.

Transfer, assignment and licensing

Transfer and assignment

What rules, restrictions and procedures govern the transfer and assignment of copyright? Are any formalities required to secure the legal effect of the transfer or assignment?

Any or all of the copyright owner’s exclusive rights or any subdivision of those rights may be transferred, but the transfer of exclusive rights is not valid unless that transfer is in writing and signed by either the owner of the rights conveyed or such owner’s duly authorised agent. However, the written transfer does not need to be made at the time of assignment, and a later written document confirming the agreement is sufficient to prove the assignment. Transfer of a right on a non-exclusive basis does not require a written agreement. A copyright may also be conveyed by operation of law. Additionally, it may be bequeathed by will or pass as personal property by the applicable laws of intestate succession. Copyright is a personal property right and is subject to the various state laws and regulations that govern the ownership, inheritance or transfer of personal property as well as terms of contracts or conduct of business. The recording of a transfer with the Copyright Office is not required to make the transfer valid between the parties; however, it provides certain legal advantages and may be required to validate the transfer as against third parties. To bring an infringement suit in court, a copyright owner needs proof of an unbroken chain of title going back to the author of the work.

What rules, restrictions and procedures govern copyright licensing?

Copyright rights can be licensed on an exclusive and non-exclusive basis. An exclusive licence generally occurs when a copyright owner transfers one or more, but not all, of its exclusive rights but retains others. The holder of an exclusive licence becomes the owner of the transferred right and as such is entitled to sue any party that infringes the right while the licensee owns it. A non-exclusive licence gives the licensee the right to exercise one or more of the copyright owner’s rights, but does not prevent the copyright owner from giving others permission to exercise the same right.

Are there any special provisions governing sub-licensing?

Exclusive licensees may sub-license only with the consent of the licensor.

What collective licensing bodies operate in your jurisdiction and how are their activities regulated?

Private organisations such as the American Society of Composers, Authors and Publishers, Broadcast Music, Inc and SESAC Inc grant and administer licences for the public performance of musical works on behalf of the copyright owners of such works.

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Assignment is a legal term whereby an individual, the “assignor,” transfers rights, property, or other benefits to another known as the “ assignee .”   This concept is used in both contract and property law.  The term can refer to either the act of transfer or the rights /property/benefits being transferred.

Contract Law   

Under contract law, assignment of a contract is both: (1) an assignment of rights; and (2) a delegation of duties , in the absence of evidence otherwise.  For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C.  That is, this assignment is both: (1) an assignment of A’s rights under the contract to the $50; and (2) a delegation of A’s duty to teach guitar to C.  In this example, A is both the “assignor” and the “delegee” who d elegates the duties to another (C), C is known as the “ obligor ” who must perform the obligations to the assignee , and B is the “ assignee ” who is owed duties and is liable to the “ obligor ”.

(1) Assignment of Rights/Duties Under Contract Law

There are a few notable rules regarding assignments under contract law.  First, if an individual has not yet secured the contract to perform duties to another, he/she cannot assign his/her future right to an assignee .  That is, if A has not yet contracted with B to teach B guitar, A cannot assign his/her rights to C.  Second, rights cannot be assigned when they materially change the obligor ’s duty and rights.  Third, the obligor can sue the assignee directly if the assignee does not pay him/her.  Following the previous example, this means that C ( obligor ) can sue B ( assignee ) if C teaches guitar to B, but B does not pay C $50 in return.

            (2) Delegation of Duties

If the promised performance requires a rare genius or skill, then the delegee cannot delegate it to the obligor.  It can only be delegated if the promised performance is more commonplace.  Further, an obligee can sue if the assignee does not perform.  However, the delegee is secondarily liable unless there has been an express release of the delegee.  That is, if B does want C to teach guitar but C refuses to, then B can sue C.  If C still refuses to perform, then B can compel A to fulfill the duties under secondary liability.

Lastly, a related concept is novation , which is when a new obligor substitutes and releases an old obligor.  If novation occurs, then the original obligor’s duties are wiped out. However, novation requires an original obligee’s consent .  

Property Law

Under property law, assignment typically arises in landlord-tenant situations.  For example, A might be renting from landlord B but wants to another party (C) to take over the property.   In this scenario, A might be able to choose between assigning and subleasing the property to C.  If assigning , A would be giving C the entire balance of the term, with no reversion to anyone whereas if subleasing , A would be giving C for a limited period of the remaining term.  Significantly, under assignment C would have privity of estate with the landlord while under a sublease, C would not. 

[Last updated in May of 2020 by the Wex Definitions Team ]

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UNDERSTANDING THE ANTI-ASSIGNMENT CLAUSE IN CONTRACTS

Contracts, generally, are freely assignable i.e., either party can freely transfer one’s obligations or rights to a third party. This is what an assignment clause signifies. An assignment is a transfer of

INTRODUCTION

Contracts, generally, are freely assignable i.e., either party can freely transfer one’s obligations or rights to a third party. This is what an assignment clause signifies. An assignment is a transfer of rights and liabilities that the third party must then discharge to the other party. But sometimes, some contracts include an Anti-assignment clause to obstruct or limit assignment. They prevent either party to contract to transfer contractual obligations and/or rights to a third party.

The early legal system was against assigning contract rights as it considered them highly personal and intelligible. Fear of litigation, fear of maintenance, and champerty are some of the other reasons that many commentators feel led to the development of a non-assignability clause. However, with the passage of time and the development of technology, the work-load increased mani-fold necessitating the assignment of some rights and liabilities to the third party; now assignment of rights has become a general trend and non-assignment has taken a backseat which especially needs to be drafted to forbid assignment.

An anti-assignment clause also referred to as a non-assignment clause is a boilerplate clause that either bar completely or partially either of the party to the contract from transferring their rights and obligations under the contract to a third party without due permission from the non-assigning party.

FORMS OF ANTI-ASSIGNMENT CLAUSE

A non-assignment clause in a contract can be presented to the oblige in varied forms depending on the nature of the contract and its terms and conditions.

It may take the following forms-

• Assignments of contract rights and liabilities may be completely prohibited, or;
• Assignments may be limited to entities within the same group as the assignor.
• The agreement may prohibit any transfers of the obligation without the approval of the obligor, which should not be unreasonably denied.

IMPORTANCE OF ANTI-ASSIGNMENT CLAUSE

A non-assignment clause limits the obligor’s contractual obligations to the obligee. The courts construe the clause in favor of the non-assigning party i.e., the obliger. Since the oblige afterward assigns its rights, the obliger then needs to also cooperate with the assignee i.e., a third-party or a stranger to the contract for the performance of the contract; therefore, the courts assume that only the party that can complain about the assignment is the non-assigning party.

SCOPE OF ANTI-ASSIGNMENT CLAUSE

Anti-assignment clauses in contracts have become a frequent practice because, without them, contracts are freely assignable. However, there are certain contracts where the assignment is excused by the statutes itself, however, the anti-assignment clause is still drafted into the contract for efficient enforcement. For example, Section 37 of the Indian Contract Act [1] prohibits the practice of “offering to perform” where it is against the lex-terrae. Such contracts could be of IPR where the nature of the contract is personal [2] or could be an employment agreement where an assignment without permission would lead to significant and unfavorable consequences for non-assigning parties. For all other contracts, anti-assignment clauses can be used with ease.

Examples of the use of the Anti-Assignment Clause

• In Franchise Agreement, this clause clearly outlines the extent of the permissibility of the assignment of the intellectual property of the franchise.
• In a Purchase and Sale Agreement, the purchaser may need to assign its rights and obligations to be able to obtain financing more easily. Certainly, the seller would need to keep some control over the financing parts of the transaction through a non-assignment clause to be on the safer side and protect himself against dealing with any strange entity.
• In Asset Acquisition Agreement , a purchaser only obtains those assets and liabilities of a target listed in the agreement. In the case of an asset acquisition. In the case of an asset acquisition, any agreement with an anti-assignment clause will be activated. [3]
• In the Stockholders’ Agreement, this clause will kick in (if included), the moment stockholder tries to transfer, assign, hypothecate, mortgage, or alienate any or all stocks in a corporation. This is the case where there is a complete ban on assignment, however the same can be assigned if however, there are exemptions to non-assignment by operation by law. [4]
• Almost in all Commercial Lease Agreements, there is an anti-assignment clause. The transfer of ownership may be forbidden by an anti-assignment clause, so before selling the business, you must seek permission from your proprietor; however, this permission should not be withheld against the interests of the lease.

However, the list is not exhaustive. There are still a lot of businesses where the anti-assignment clause is used including but not limited to joint-venture agreements, partnership agreements, limited liability company operating agreements, real estate contracts, bills of sale, Assignment, and transaction financing agreements, etc.

ENFORCEABILITY OF ANTI-ASSIGNMENT CLAUSE

This restrictive clause’s effect will be triggered the moment there is any breach of this clause. According to the traditional view, a contract is void if this restrictive clause is violated; however, the modern view holds that a breach of it will only result in a claim for damages; the contract is not ipso-facto void unless expressly stated in the contract. Along with this view, the court will consider the relevant law, the jurisdiction that governs the contract, and the language of the contract to enforce this clause.

MERITS OF ANTI-ASSIGNMENT CLAUSE

A contract with an anti-assignment clause thrives with the following advantages-

• The relationship between the assignor and the obligor is preserved, while the connection between the obligor and the assignee is either limited or eliminated.
• The obligor is safeguarded by this, as they may not want to be in a situation where they must mention a set-off defence against one party and a counterclaim against the other or become involved in a disagreement between the assignor and assignee under the contract of assignment. [5]

DEMERITS OF ANTI-ASSIGNMENT CLAUSE

The anti-Assignment clause also suffers from the following disadvantages-

• In cases where this clause is violated, it is extremely difficult to quantify and measure the damages.
• It can be a lengthy and exasperating process for businesses that are on the brink of bankruptcy, such as start-ups, to finalize the closure until they get the approval of all the commercial entities with whom they had a contract that included a non-assignment clause.
• In the event of a change in ownership, such as a merger or acquisition, a business may feel uneasy about the new owner of its partner company. To have a say in the selection of the other party’s owner, the business may include a clause in the agreement that mandates their approval before the change can occur, allowing them to indirectly manage the situation.

In conclusion, an anti-assignment clause is a provision in a contract that prohibits one party from transferring or assigning their rights or obligations under the contract to a third party without the other party’s consent. This clause is commonly used in contracts to protect the interests of the parties involved and to ensure that the original parties to the contract are the ones who will perform the obligations and receive the benefits. Anti-assignment clauses can be beneficial for both parties in a contract. For the party who is providing goods or services, it ensures that they are dealing with the same party throughout the duration of the contract, which can help to maintain consistency and quality. For the party who is receiving the goods or services, it can assure that they are dealing with a party that has the necessary expertise and resources to fulfill the obligations under the contract. However, there are also potential drawbacks to anti-assignment clauses. They can limit a party’s ability to transfer their rights or obligations under the contract, which can be problematic if the party needs to assign the contract due to unforeseen circumstances. Additionally, anti-assignment clauses can make it more difficult for a party to obtain financing or sell their business, as potential buyers or lenders may be hesitant to take on a contract with such a clause. Overall, the use of anti-assignment clauses in contracts should be carefully considered and tailored to the specific needs of the parties involved. It is important to strike a balance between protecting the interests of the parties and allowing for flexibility in the event of unforeseen circumstances.

Author(s) Name: Avee Singh Dalal (Dr B.R. Ambedkar National Law University, Sonipat)

References:

[1] The Indian Contract Act, 1872, Sec. 37, No. 9, Acts of Parliament, 1872 (India)

[2] Kapilaben v. Ashok Kumar Jayantilal Sheth, (2020) 20 SCC 648

[3] Aaron R Katz, A Guide to Understanding Anti-Assignment Clauses, GT ISRAEL LAW BLOG (Feb. 18, 2023, 5:15 PM), https://www.gtlaw-israelpractice.com/2016/02/04/a-guide-to-understanding-anti-assignment-clauses/ .

[4] The Law of Offices of STIMMEL, STIMMEL & ROESER, https://www.stimmel-law.com/en/articles/assignments-basic-law (last visited Feb. 18, 2023).

[5] Michael Bridge, The nature of assignment and non-assignment clauses, LSE RESEARCH ONLINE (2015), https://eprints.lse.ac.uk/61892/1/The_Nature.pdf .

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Proposed Collection of Information: Special Form of Assignment for U.S. Registered Securities

A Notice by the Bureau of the Fiscal Service on 08/15/2024

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• Document Details Published Content - Document Details Agencies Department of the Treasury Bureau of the Fiscal Service Document Citation 89 FR 66494 Document Number 2024-18210 Document Type Notice Page 66494 (1 page) Publication Date 08/15/2024 Published Content - Document Details
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Department of the Treasury

Bureau of the fiscal service.

Notice and request for comments.

The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995. Currently the Bureau of the Fiscal Service within the Department of the Treasury is soliciting comments concerning the Special Form of Assignment for U.S. Registered Securities.

Written comments should be received on or before October 15, 2024 to be assured of consideration.

Direct all written comments and requests for additional information to Bureau of the Fiscal Service, Bruce A. Sharp, Room #4006-A, P.O. Box 1328, Parkersburg, WV 26106-1328, or [email protected] .

Title: Special Form of Assignment for U.S. Registered Securities.

OMB Number: 1530-0058.

Form Number: FS Form 1832.

Abstract: The information is requested to complete transactions involving the assignment of U.S. Registered and Bearer Securities.

Current Actions: Extension of a currently approved collection.

Type of Review: Regular.

Affected Public: Individuals or households.

Estimated Number of Respondents: 10.

Estimated Time per Respondent: 15 minutes.

Estimated Total Annual Burden Hours: 3.

Request for Comments: Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on: 1. Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; 2. the accuracy of the agency's estimate of the burden of the collection of information; 3. ways to enhance the quality, utility, and clarity of the information to be collected; 4. ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology; and 5. estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

Dated: August 9, 2024.

Bruce A. Sharp,

Bureau PRA Clearance Officer.

[ FR Doc. 2024-18210 Filed 8-14-24; 8:45 am]

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Tom Cruise Injects Some Hollywood Flash Into Olympic Closing Ceremony Handoff

The  Mission: Impossible  actor took the Olympic flag from gold medalist Simone Biles and L.A. Mayor Karen Bass before riding away into the night.

Tom Cruise is a man on a mission. 

The 62-year-old actor was recruited by the organizers of the Summer Games to help in the handoff of the Olympic flag between Paris and Los Angeles officials at the Closing Ceremony on Sunday. 

In an action-packed sequence, the actor repelled from the top of the Stade de France to grab the flag from Olympic gold medalist Simone Biles  and L.A. Mayor Karen Bass before climbing onto the back of his motorcycle and speeding through the City of Lights. He then took a high-speed flight to Los Angeles in record time and jumped out of the plane with his parachute. As he lands on the mountains above Los Angeles, he travels to the Hollywood sign, which is transformed to include the Olympic rings.  

Olympic medalist skateboarder Jagger Eaton , mountain biker Kate Courtney, and track and field gold medalist Michael Johnson then have their turn carrying the Olympic flag. They skate, bike, and run through the streets of Santa Monica and pass by other iconic sites.

IT'S A BIRD. IT'S A PLANE. IT'S TOM CRUISE! 🤯 #ParisOlympics | #ClosingCeremony pic.twitter.com/5v4j8pOwBF — NBC Olympics & Paralympics (@NBCOlympics) August 11, 2024

RELATED: All About Phoenix and Their Paris Olympics Closing Ceremony Performance

A Preview of LA28

Eaton, Johnson, and Courtney's journey to L.A. ended on the beach, where the Red Hot Chili Peppers, Billie Eilish , and Snoop Dogg  were waiting to hold their own concert on the beach. The Red Hot Chili Peppers went first before handing off to Eilish and her brother Finneas, who performed her hit song "Birds of a Feather."

For the grand finale, Snoop Dogg rapped his song "Drop It Like It's Hot" and then brought out fellow West Coast rapper Dr. Dre to join him on the stage. The celebration ended with a blast of colors on the beach.

Following their performance, Leon Marchand brought the Olympic flame back to the Stade de France, where the flame was extinguished. 

With the Paris Olympics officially over, the countdown to the Los Angeles Olympics has officially started. Come 2028, thousands of athletes will descend upon the City of Angels to go for the gold. And though the Games are just under four years away, the Los Angeles organizers have already announced the venues and locations of some sports . Included among those sites are the iconic L.A. Coliseum and the Inglewood Stadium (also known as the SoFi Stadium).

Let the countdown begin!

To see the Closing Ceremony in primetime tune in to Peacock or NBC at 7 p.m. ET/PT. Countdown to LA28 will air at the conclusion of the Closing Ceremony, at 10 p.m. ET/PT, and will be hosted by Venus Williams.

Have an Olympics programming question? Ask OLI

With so much happening at the   Olympic Games, it can be a challenge to keep track of when to watch   all your favorite events and athletes. Enter: OLI, the   NBC Olympics AI-powered viewing guide that will answer any of your burning Olympics programming questions, day or night. Check it out on  NBCOlympics.com ,  NBC.com , NBCSports.com ,  USANetwork.com  and  Today.com .

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Tom Cruise performs 'epic stunt' at Olympics closing ceremony

The Olympics closing ceremonies have always served as a nice sendoff for one of the world's biggest sporting events. However, this year's formalities had something extra special on display as well: Tom Cruise.

Earlier this week, it was reported that the legendary actor and stuntman would be performing an "epic stunt" as part of the closing ceremonies.

According to reports , Cruise would rappel into Paris' Stade de France , during the closing ceremonies. That would be followed by a pre-recorded video of Cruise skydiving onto the Hollywood sign in Los Angeles. That report is accurate now in hindsight.

Cruise, 62, is known for taking stunts to the next level, and given that Los Angeles will be hosting the 2028 Olympics , it was assumed that someone representing the city would be in attendance to take the Olympic flag, as is tradition. Here's how the stunt went down live.

Olympics News: Diana Taurasi has 6 Olympic golds. Will she be at LA2028? Yep, having a beer with Sue Bird

Cruise's stunt

IT'S A BIRD. IT'S A PLANE. IT'S TOM CRUISE! 🤯 #ParisOlympics | #ClosingCeremony pic.twitter.com/5v4j8pOwBF — NBC Olympics & Paralympics (@NBCOlympics) August 11, 2024

Tom Cruise flew into the Olympics closing ceremony 😎 pic.twitter.com/iGxYnZI3jy — SportsCenter (@SportsCenter) August 11, 2024

The 62-year-old rappelled down from the top of the Stade de France, greeting Olympians after landing safely.

We then witnessed a surprise appearance from Simone Biles at the closing ceremony, playing a part in the passing of the Olympic flag from Paris Mayor Anne Hidalgo to Los Angeles Mayor Karen Bass.

The two gave the Olympic flag to Cruise who rode a motorcycle in a pre-filmed sequence that ended with the actor soaring above Los Angeles in a skydiving stunt.

Internet reacts to Cruise's stunt

Tom Cruise did it again.. didn’t he? pic.twitter.com/XPTW8hhAxM — Pat McAfee (@PatMcAfeeShow) August 11, 2024

One thing about America is that they know how to put on a show. I’m excited for the LA 2028 Olympics. Also no matter what you might think of Tom Cruise, his star power and talent can’t be denied #ClosingCeremony pic.twitter.com/zx9t6DQNOE — Emi Eleode (@EmiEleode) August 11, 2024

How’d that lady almost make out with Tom Cruise on international TV 😂 #ClosingCeremony pic.twitter.com/IxtmIUPdcA — Georgia Rose 🇿🇦 🍉 (@Rasheeda_S) August 11, 2024

Okay LA, we’re off to a good start pic.twitter.com/oVASURnrPJ — J.A. Adande (@jadande) August 11, 2024

Has Cruise done anything like this before?

Yes, actually.

In 2004, Cruise participated in the Olympics' opening ceremonies, helping carry the Olympic torch through Los Angeles as it made its way around the world before resting in Athens, Greece, where the games were taking place that year.

And speaking of the #Olympics , let's go with this one of #TomCruise running with the Olympic torch in his hand in 2004, Athens @TomCruise @BigCityKnight #sfankhauser pic.twitter.com/qeHypR5O23 — ƧΛПDY F 😎 (@SandyFankhause4) July 27, 2024

Thomas Schad contributed to this report

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Democrats introduce bill to require reimbursements for electronic transfer fraud

The Protecting Consumers from Payment Scams Act would amend the Electronic Fund Transfer Act “to better protect consumers who are defrauded when they make payments,” according to a summary of the legislation by its sponsors. In addition to expanding legally required reimbursements to cover frauds and scams, the bill would mandate that such payments be evenly split between a customer’s financial institution and the institution that received the fraudulent transfer. It would also mandate that resolution duties apply if the consumer’s account is frozen or closed, unless access has been denied due to a court order, law enforcement or the consumer obtained the funds through unlawful or fraudulent means.

The legislation is sponsored in the Senate [ S. 4943 ] by Sens. Richard Blumenthal (D-Conn.) and Elizabeth Warren (D-Mass.) and in the House [ H.R. 9303 ] by House Financial Services Committee Ranking Member Maxine Waters (D-Calif.)

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The National Institute of Standards and Technology announced that it has finalized a principal set of encryption algorithms designed to withstand cyberattacks from a quantum computer.

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Biden 'not confident at all' that there will be peaceful transfer of power if Trump loses election

President Joe Biden said in a new interview that he is “not confident at all” that there will be a peaceful transfer of power in January if former President Donald Trump loses the election this fall .

"If Trump loses, I'm not confident at all," Biden said when he was asked in an interview with CBS News whether he was confident that power would be peacefully transferred in January.

Biden also said in the clip that aired Wednesday evening that people were not taking Trump’s past comments about a “bloodbath” seriously.

“He means it, all the stuff about if we lose there’ll be a bloodbath,” Biden said. “You can’t love your country only when you win.”

Reached for comment, a Trump campaign spokesperson did not address the clip directly.

"President Trump will win and take back the White House to Make America Great Again," said the spokesperson, Steven Cheung.

Talking about economic policies, Trump said in March that “it’s going to be a bloodbath for the country” if he loses the election.

Three months later, during the June 27 presidential debate, Trump was asked whether he would accept the election results. After he repeatedly dodged the question, he responded , “If it’s a fair and legal and good election, absolutely.”In the CBS News interview, Biden also referred to efforts that could complicate post-election certification processes.

“Look what they’re trying to do now in the local election districts where people count the votes,” he said.

The Republican-controlled State Election Board in Georgia voted this week to give local officials more power over the certification of elections results. Over the weekend, Trump praised the officials who later approved the rule change.

The full interview with Biden is scheduled to air Sunday morning.

Biden narrowly defeated Trump in Georgia in 2020. His victory, by just 11,779 votes, made him the first Democratic presidential nominee to win the state since Bill Clinton in 1992 .

Trump has continued to draw concern over how he would respond to losing the 2024 race given his efforts nearly four years ago to overturn his loss. Trump has referred to Jan. 6, 2021, when a mob of his supporters stormed the Capitol, as "a beautiful day," and he has called those supporters imprisoned for crimes related to the attack “ unbelievable patriots ” and “ hostages .”

Last week, he renewed his pledge to pardon those facing convictions related to the attack if he is elected in November.

Zoë Richards is a politics reporter for NBC News.

One Month After the Attempted Assassination of Donald Trump, Rep. Ritchie Torres Introduces Two Pieces of Legislation Reforming the Secret Service

Today, Rep.  Ritchie Torres  (NY-15) introduced two bills, the “Focus on Protection Act” and the “AR-15 Perimeter Security Enhancement Act” on the one-month anniversary of the attempted assassination of former President Donald Trump. These bills seek to reform the Secret Service to prevent similar mistakes from ever happening again.

The “Focus on Protection Act” would transfer the investigative jurisdiction over payment and financial systems from the United States Secret Service to the Department of the Treasury, while the “AR-15 Perimeter Security Enhancement Act” would direct the Director of the Secret Service to ensure that any security perimeter is co-extensive with the firing range of firearms likely to be used in assassination at- tempts and to secure all elevated positions within the firing range of firearms likely to be used in assassination attempts.

On these bills, Rep. Torres said:

“It’s been a month since the attempted assassination of former President Trump, and what prevented a national catastrophe was not the Secret Service — it was luck. If the former president had moved ever so slightly, or the shooter had been more precise in his targeting, the former president would’ve been murdered. The fact that we were only inches away from a national catastrophe is itself a crisis. We owe it to the American people to identify the security failures that led to the attempted assassination and then avoid repeating those failures in the future.

“Why was the security perimeter substantially smaller than the firing range of an AR-15, a common weapon that would be used in an assassination or in a mass shooting? Why were the rooftops and elevated positions within the firing range of an AR-15 not secured by the Secret Service? Those are two conspicuous failures. This legislation would require the Secret Service to establish a security perimeter that is every bit as extensive as the firing range of an AR-15 or a common weapon in an assassination. It would require the Secret Service to secure every rooftop and every elevated position in the perimeter. We have to prevent this kind of failure from repeating itself in the future.

“Then there is a larger issue that has to do with the Secret Service itself: it has too few resources and too many responsibilities. It has secondary responsibilities that distract from the core mission of protecting the president and presidential candidates. The Secret Service is responsible not only for presidential protection, but also for financial law enforcement, which is a vestige of the 19th century. It seems to me that it should be exclusively focused on presidential protection, and we need legislation that moves financial law enforcement from the Secret Service to the Treasury Department — precisely where it belongs. We should ask ourselves a simple question: do you want the Director of the Secret Service thinking about the protection of a president 100% of the time, or only 50% of the time? I prefer 100% of the time.”

The full text of both can be found here and here .

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