what is assignment of contract

Assignment of Contract

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An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.

How Does Assignment of Contract Work?

An assignment of contract is simpler than you might think.

The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.

When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement . Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer. However, the general rule is that contracts are freely assignable unless there is an explicit provision that says otherwise.

In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment ” to notify any other contract signers of the change.

The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. If the assignment is valid, the assignor is not required to obtain the consent or signature of the other parties to the original contract for the valid assignment to take place.

Check out this article to learn more about how assigning a contract works.

Contract Assignment Examples

Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:

Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.

Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.

Here is an article where you can find out more about contract assignments.

Assignment of Contract in Real Estate

Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts .

This process is called real estate wholesaling.

Real Estate Wholesaling

Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.

The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.

This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.

This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.

But how do real estate wholesalers find these properties?

It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:

• Direct mailers
• Place newspaper ads
• Make posts in online forums
• Social media posts

The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.

Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to another person, they are always upfront about during the preliminary phases of the sale.

In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.

After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.

Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.

If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.

One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.

On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.

Learn more about assignment of contract in real estate by checking out this article .

Who Handles Assignment of Contract?

The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract , post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.

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What Is an Assignment of Contract?

Assignment of Contract Explained

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

Learn more about assignment of contract and how it works.

What Is Assignment of Contract?

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

How Does Assignment of Contract Work?

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

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

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

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

What Does Assignment of Contract Cover?

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

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

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

Assigning Intellectual Property

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

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

Alternatives to Assignment of Contract

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

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

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

Do I Need an Assignment of Contract?

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

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

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

Key Takeaways

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

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

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

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

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

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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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Contract Assignments

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  What is a Contract Assignment?

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

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

Who are the Various Parties Involved in a Contract Assignment?

How is a contract assignment created, when is a contract assignment prohibited, which parties are liable to each other in a contract assignment, are there issues with multiple assignments, should i hire a lawyer for contract assignments.

In a contract, there are two parties to the agreement, X and Y. The parties may agree to let X assign X’s rights to a third party . Once the third party enters the picture, each party has a special name. For instance, suppose X, a seller of bookmarks, contracts with Y, a purchaser of bookmarks. Y desires to have Y’s right to X’s performance (the sale of bookmarks on a monthly basis) to another person. 

This third person, Z, is called the assignee. X is called the obligor , and Y is called the assignor , since Y has assigned its right to X’s performance . X, the obligor, is obligated to continue to perform its duties under the agreement.

There are no “magic words” needed to create an assignment. The law simply requires that the would-be assignor have an intent to immediately and completely transfer their rights in the agreement. In addition, writing is typically not required to create an assignment. As long as X and Y both adequately understand what right is being assigned, an assignment is created. 

Words that indicate a transfer is to take place suffice, such as “I intend to transfer my rights under this agreement,” or, “I intend to give my rights to Z,” or “I intend to confer an assignment on Z.” In addition,consideration,which is a bargained-for exchange required for a contract to be valid, is not required for assignment.

In certain instances, an assignment of contract rights can be prohibited. If the contract contains a clause prohibiting assignment of “the contract,” without specifying more, the law construes this language as barring only delegation of the assignor’s duties, not their rights. If the assignment language states “assignment of contractual rights are prohibited,” the obligor may sue for damages if the assignor attempts to assign the agreement. If the contract language states that attempts to assign “will be void,” the parties can bar assignment.of rights.

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

There are exceptions to this rule. Delegation can be prohibited when:

• The duties to be performed involve personal judgment and special skill (e.g., a portrait, creation of a custom-made dress). 
• “Personal judgment” is the exercise of some kind of superior judgment when it comes to determining how, when, or where to do something. Examples of individuals who exercise personal judgment include talent scouts and financial advisors.  Special skill is the unique ability to create a good or perform a service. A delegator can be prohibited from delegating duties when it is that specific delegator’s services are sought. For example, if the services of a specific famous chef are sought, and the original agreement was entered into on the understanding that the chef was hired for their specific talent, the delegator may not delegate the services;
• The assignment fundamentally changes risks or responsibilities under the agreement;
• The assignment is over future rights associated with a future contract that does not currently exist;
• Delegation would increase the obligation of the obligee. For example, if a shoe manufacturer contracts to deliver soles to a store in the same town as the shoe factory, the other party cannot assign the delivery to a different store in another state. Doing so would impose a greater obligation on the obligee than was originally contemplated;
• The obligee had placed special trust in the delegator. For example, assume that you have hired a patent attorney, based on that attorney’s significant skill and expertise, to obtain a valuable patent. You have placed special trust in this person, hiring them instead of other patent attorneys, because of their unique expertise. In such a situation, the attorney may not delegate his duties to another attorney (delegate), since the attorney was hired because of one person’s special capabilities;
• The delegation is of a promise to repay a debt; or
• The contract itself restricts or prohibits delegation. If the contract states, “any attempt to delegate duties under this contract is void,” a delegation will not be permitted.

In a contract involving assignment of rights, the assignee may sue the obligor. This is because the assignee, once the assignee has been assigned rights, is entitled to performance under the contract. If the obligor had a defense that existed in the original contract between obligor and assignor, the obligor may assert that defense against the assignee. Examples of such defenses include the original contract was not valid because of lack of consideration, or because there was never a valid offer or acceptance).

An assignee may also sue an assignor. Generally, if an assignment is made for consideration,it is irrevocable. Assignments not made for consideration, but under which an obligor has already performed, are also irrevocable. If an assignor attempts to revoke an irrevocable assignment,the assignee may sue for “wrongful revocation.” 

In circumstances involving delegation of duties,an obligee must accept performance from the delegate of all duties that may be delegated. The delegator remains liable on the agreement. Therefore, the obligee may sue the delegator for nonperformance by the delegate. The obligee may sue the delegate for nonperformance, but can only require the delegate to perform if there has been an assumption by the delegate. An assumption by the delegate is a promise that the delegate will perform the delegated duty, which promise is supported by consideration. 

Assignments that are not supported by consideration are revocable. If an initial assignment is revocable, a subsequent assignment can revoke it. If a first assignment is irrevocable, because consideration was present,the first assignment will usually prevail over a subsequent assignment. This means the person who can claim the assignment was first made to them will prevail over someone who claims a subsequent assignment. 

If, however, the second person paid value for the assignment, and entered into the assignment without knowing of the first assignment, the “subsequent”assignee is entitled to proceeds the first judgment against the obligor (the original party who still must perform), in the event such a judgment is issued,

If you have an issue with assignment of rights or duties under a contract, you should contact a contract lawyer  for advice. An experienced business lawyer near you can review the facts of your case, advise you of your rights, and represent you in court proceedings.

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Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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Updated on: November 24, 2023 · 3min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

• The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
• The assignor must agree to assign their rights and duties under the contract to the assignee.
• The assignee must agree to accept, or "assume," those contractual rights and duties.
• The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

• First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
• All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
• Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

• Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
• The effective date of the assignment and assumption agreement
• Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
• Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
• Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
• A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Assignment of Contract (What It Is And How It Works: Best Overview)

Looking for Assignment of Contract ?

What is the assignment of a contract in simple terms?

How does it work?

In this article, I will break down the meaning of contract assignment so you know all there is to know about it!

Keep reading as I have gathered exactly the information that you need!

Let me explain to you what assignment of contract means and why it matters!

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Let’s get started!

Table of Contents

What Is Assignment of Contract

The assignment of contract refers to instances where one party to a contract transfers its rights and obligations to another party.

In other words, one contracting party exits the contract and another party steps in the exiting party’s shoes.

For instance, Mary and Joe are parties to a contract.

Joe assigns his rights and obligations under the contract to Tim.

The original contract now continues between Mary and Tim where Joe has stepped out.

The party assigning the contract is called the “assignor” and the third party stepping in to the assignor’s shoes is the “assignee”.

Be sure to keep reading as I will explain to you how the assignment works and it’s important that you know more about the assignor’s liability when assigning the contract.

Assignment Under Contract Law

Under contract law , the assignment of a contract is considered to include the assignment of rights and the delegation of the party’s duties to another.

This means that the assignor’s rights are passed on to the assignee.

In addition to that, the assignor’s duties under the contract are also assigned to the assignee.

Assignment Under Property Law

In property law, the assignment of contract generally takes place between landlords and tenants.

Typically, a person (the tenant) will sign a lease with another party (the landlord) to rent an apartment or premises.

If the tenant wishes to leave the premise without breaching the terms of the contract, an assignment may be an option.

In that case, the tenant will assign its rights and duties under the lease agreement to another party (a new tenant).

How Assignment of Contract Works

To better understand the assignment of contract, let’s look more closely at how it works.

Contract Assignment Clause

One of the first things you should consider when contemplating an assignment of a contract is to find the contract assignment clause in your contract.

In most commercial contracts, the parties will include an assignment clause governing the possible assignment by the parties.

Some contracts will authorize the assignment, others will limit assignment to specific situations, while some contracts entirely prohibit assignments.

Be sure to read the contract assignment to see how your contract regulates assignments.

Consent To Assignment of Contract

In most cases, a contracting party looking to assign the contract to another party will need to get the consent of the other contracting party.

If the staying party consents to the assignment, the assignor can proceed with the assignment of the agreement to a third party (or assignee).

However, if the staying party does not consent to the assignment, then the other party must remain in the contract and observe its contractual obligations.

Assignor’s Liability

Assigning a contract does not necessarily mean that the assignor will be released of all liability under the contract.

Depending on the assignment clause language, the assignor may have the right to assign the contract but continue to remain liable under the contract.

In the event the assignor may continue to remain liable under the contract, it’s important that an assignment agreement be signed where the staying party releases and discharges the assignor of future contract liability .

Assignment Enforceability

Under the assignment law, when a contract is assigned as per the terms of the contract, the assignment will be legally enforceable.

However, assignment contracts are not enforceable if the contract prohibits the assignment, the assignment agreement is not materially consistent with the obligations under the original contract, or the assignment violates public policy or the law in some way.

In addition, a contract cannot be assigned if the assignor is not formally in a contract.

There are also instances where the contract requires that a party with special skills or unique characteristics render the services or perform the obligations, and an assignment would not work.

Keep reading as I will now give you an example of contract assignment so you can see how it works in practice.

Contract Assignment Process

The actual contract assignment process is fairly straightforward for most contracts.

Contract Assignment Steps

Here are the steps you’ll need to take to assign a contract:

• See if the contract has an assignment clause
• Make sure that the assignment clause authorizes assignments 
• If the assignment is authorized, follow the assignment logistic provided in the contract 
• If the assignment is prohibited, you may want to speak to the other contracting party to see if you could get consent to assign the contract

In some cases, all you may need to do is to give notice of assignment to provide the details of the assignment if the contract allows for an assignment this way.

In other cases, you may want to have an assignment agreement signed by the staying party, the exiting party, and the third party detailing the terms and conditions of the assignment.

Assignment Agreement Content

When a contract assignment agreement is needed, you should make sure that you include all the right information for the assignment to be valid and enforceable.

In most cases, the assignment of the contract is simple where you may find an assignment of contract form online to complete.

For simple assignment contracts, here is the content that you should expect:

• Identification of the parties (original contract parties and assignee)
• Contract assignment effective date
• Original contracting party’s consent to the assignment
• Assignee’s acceptance of the assignment 
• Assignor’s release and discharge of obligations going forward 
• Governing law 
• Signature block for the three parties 

Alternatives To Assignment Contracts

What are the alternatives to a contract assignment?

Here are the main alternatives to a contract assignment:

• Novation 

Licensing refers to situations when a party authorizes another party to use a property or asset (whether tangible or intangible).

Delegation is when someone authorizes another to act on its behalf under a contract.

Novation is when a new party takes on a contracting party’s rights and obligations where the existing party’s rights are relinquished and all liability under the original contract wiped out.

Assignment of Contract vs Delegation of Contract

What is the difference between the assignment of a contract and the delegation of a contract?

The “assignment” of contract refers to a situation where one contracting party “transfers” the contract to a third party.

Once the assignment is completed, the assignor will no longer be in a contract with the other contracting party and the assignee will take the assignor’s place.

For example, Party A and Party B are part of a service contract.

Party B assigns the contract to Party C.

Going forward, the contract will be between Party A and Party C.

On the other hand, a delegation is when a party to a contract subcontracts parts of a contract to another party.

The party delegating the contract to another remains a contracting party and will remain responsible for the contract even though the obligations were delegated to another.

For example, a general contractor may delegate the plumbing work in a project to a plumber.

Although the general contractor has delegated part of the project to a subcontractor, it remains a contracting party and will remain responsible for the overall project.

Assignment of Contract Example

Let’s look at a few examples of when a contract may be assigned to another.

Assignment of Contract In Bankruptcy

You have entered into a contract with a company providing you with phone services.

The company goes bankrupt.

In the context of the bankruptcy, another phone company buys out a portion of the bankrupt’s book of business and your contract is in the pool of assets purchased.

The bankruptcy trustee assigns your contract from the bankrupt phone company to the new phone company.

Assignment of Contract In Real Estate

In real estate, some investors engage in assignment transactions where they do not actually buy the property but enter into a purchase contract that it then assigns to another.

In essence, the real estate investor enters into a real estate purchase agreement defining the terms and conditions relating to the purchase of a property.

Following the executing of the real estate purchase agreement and prior to the “closing” of the transaction, it assigns the contract to another party in an attempt to make a profit without ever actually owning the property.

Assignment of Contract In Corporate Restructuring

In the corporate world, companies tend to restructure their operations to ensure they are legally and operationally optimized.

In the context of a corporate restructuring transaction, a company may assign a contract to another entity within its group, a subsidiary, or an affiliate.

Assignment of Agreement Takeaways 

So there you have it folks!

What Does Assignment of Contract Mean

“Assignment of contract” is a legal term used to refer to situations where a party to an existing contract transfers its contractual obligations to another party.

Following the assignment , the assignee becomes responsible to execute the contractual obligations in favor of the party staying in the original contract.

If you are looking to assign a contract, you may want to consult with a qualified contract attorney who can assess your rights and obligations.

Keep in mind that a simple assignment of a contract does not necessarily mean that the assignor is released from liability under the original contract.

Now that you know what is an assignment of contract, how it works, and what it entails, good luck with your transaction!

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If you enjoyed this article on what is an assignment contract, I recommend you look into the following terms and concepts. Enjoy!

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Assignment of Rights and Obligations Under a Contract: Everything You Need to Know

An assignment of rights and obligations under a contract occurs when a party assigns their contractual rights to a third party. 3 min read updated on January 01, 2024

Updated October 29, 2020:

An assignment of rights and obligations under a contract occurs when a party assigns their contractual rights to a third party. The benefit that the issuing party would have received from the contract is now assigned to the third party. The party appointing their rights is referred to as the assignor, while the party obtaining the rights is the assignee.

What Is an Assignment of Contract?

In an assignment contract, the assignor prefers that the assignee reverses roles and assumes the contractual rights and obligations as stated in the contract. Before this can occur, all parties to the original contract must be notified.

Contracts create duties and rights. An obligor is the party who is legally or contractually obliged to provide a benefit or payment to another, while an obligation is owed to the obligee. The obligee transfers a right to obtain a benefit owed by the obligor to a third party. At this point, the obligee becomes an assignor. An assignor is the party that actually creates an assignment. 

The party that creates an assignment is both the obligee and a transferor. The assignee receives the right to acquire the obligations of the promisor/obligor. The assignor can assign any right to the obligor unless:

• Doing so will materially alter the obligation
• It's materially burdening
• It decreases the value of the original contract
• It increases their risk
• Public policy or a statute makes it illegal
• The contract prevents assignment

Assignments are important in business financing, especially in factoring . A factor is someone who purchases a right to receive a benefit from someone else.

How Assignments Work

The specific language used in the contract will determine how the assignment plays out. For example, one contract may prohibit assignment, while another contract may require that all parties involved agree to it before proceeding. Remember, an assignment of contract does not necessarily alleviate an assignor from all liability. Many contracts include an assurance clause guaranteeing performance. In other words, the initial parties to the contract guarantee the assignee will achieve the desired goal.

When Assignments Will Not Be Enforced

The following situations indicate when an assignment of a contract is not enforced:

• The contract specifically prohibits assignment
• The assignment drastically changes the expected outcome
• The assignment is against public policy or illegal
• The contract contains a no-assignment clause
• The assignment is for a future right that only would be attainable in a contract in the future
• The contract hasn't been finalized or written yet

Delegation vs. Assignment

Occasionally, one party in a contract will desire to pass on or delegate their responsibility to a third party without creating an assignment contract. Some duties are so specific in nature they cannot be delegated. Adding a clause in the contract to prevent a party from delegating their responsibilities and duties is highly recommended.

Characteristics of Assignments

An assignment involves the transfer by an assignor of some or all of its rights to receive performance under the contract to an assignee. The assignee then receives all the benefits of the assigned rights. The assignment doesn't eliminate or reduce the assignor's performance commitments to the nonassigning party.

Three Steps to Follow if You Want to Assign a Contract

There are three main steps to take if you're looking to assign a contract:

• Make sure the current contract does not contain an anti-assignment clause
• Officially execute the assignment by transferring the parties' obligations and rights
• Notify the obligor of the changes made

Once the obligor is notified, the assignor will effectively be relieved of liability.

Anti-Assignment Clauses

If you'd prefer not to allow the party you're doing business with to assign a contract, you may be able to prevent this from occurring by clearly stating anti-assignment clauses in the original contract. The three most common anti-assignment clauses are:

• Consent required for assignment
• Consent not needed for new owners or affiliates
• Consent not unreasonably withheld

Based on these three clauses, no party in the contract is allowed to delegate or assign any obligations or rights without prior written consent from the other parties. Any delegation or assignment in violation of this passage shall be deemed void. It is not possible to write an anti-assignment clause that goes against an assignment that is issued or ordered by a court.

If you need help with an assignment of rights and obligations under a contract, you can  post your job  on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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• Delegation vs Assignment
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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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Legal Templates

Home Business Assignment Agreement

Assignment Agreement Template

Use our assignment agreement to transfer contractual obligations.

Updated February 1, 2024 Reviewed by Brooke Davis

An assignment agreement is a legal document that transfers rights, responsibilities, and benefits from one party (the “assignor”) to another (the “assignee”). You can use it to reassign debt, real estate, intellectual property, leases, insurance policies, and government contracts.

What Is an Assignment Agreement?

What to include in an assignment agreement, how to assign a contract, how to write an assignment agreement, assignment agreement sample.

Partnership Interest

An assignment agreement effectively transfers the rights and obligations of a person or entity under an initial contract to another. The original party is the assignor, and the assignee takes on the contract’s duties and benefits.

It’s often a requirement to let the other party in the original deal know the contract is being transferred. It’s essential to create this form thoughtfully, as a poorly written assignment agreement may leave the assignor obligated to certain aspects of the deal.

The most common use of an assignment agreement occurs when the assignor no longer can or wants to continue with a contract. Instead of leaving the initial party or breaking the agreement, the assignor can transfer the contract to another individual or entity.

For example, imagine a small residential trash collection service plans to close its operations. Before it closes, the business brokers a deal to send its accounts to a curbside pickup company providing similar services. After notifying account holders, the latter company continues the service while receiving payment.

Create a thorough assignment agreement by including the following information:

• Effective Date:  The document must indicate when the transfer of rights and obligations occurs.
• Parties:  Include the full name and address of the assignor, assignee, and obligor (if required).
• Assignment:  Provide details that identify the original contract being assigned.
• Third-Party Approval: If the initial contract requires the approval of the obligor, note the date the approval was received.
• Signatures:  Both parties must sign and date the printed assignment contract template once completed. If a notary is required, wait until you are in the presence of the official and present identification before signing. Failure to do so may result in having to redo the assignment contract.

Review the Contract Terms

Carefully review the terms of the existing contract. Some contracts may have specific provisions regarding assignment. Check for any restrictions or requirements related to assigning the contract.

Check for Anti-Assignment Clauses

Some contracts include anti-assignment clauses that prohibit or restrict the ability to assign the contract without the consent of the other party. If there’s such a clause, you may need the consent of the original parties to proceed.

Determine Assignability

Ensure that the contract is assignable. Some contracts, especially those involving personal services or unique skills, may not be assignable without the other party’s agreement.

Get Consent from the Other Party (if Required)

If the contract includes an anti-assignment clause or requires consent for assignment, seek written consent from the other party. This can often be done through a formal amendment to the contract.

Prepare an Assignment Agreement

Draft an assignment agreement that clearly outlines the transfer of rights and obligations from the assignor (the party assigning the contract) to the assignee (the party receiving the assignment). Include details such as the names of the parties, the effective date of the assignment, and the specific rights and obligations being transferred.

Include Original Contract Information

Attach a copy of the original contract or reference its key terms in the assignment agreement. This helps in clearly identifying the contract being assigned.

Execution of the Assignment Agreement

Both the assignor and assignee should sign the assignment agreement. Signatures should be notarized if required by the contract or local laws.

Notice to the Other Party

Provide notice of the assignment to the non-assigning party. This can be done formally through a letter or as specified in the contract.

File the Assignment

File the assignment agreement with the appropriate parties or entities as required. This may include filing with the original contracting party or relevant government authorities.

Communicate with Third Parties

Inform any relevant third parties, such as suppliers, customers, or service providers, about the assignment to ensure a smooth transition.

Keep Copies for Records

Keep copies of the assignment agreement, original contract, and any related communications for your records.

Here’s a list of steps on how to write an assignment agreement:

Step 1 – List the Assignor’s and Assignee’s Details

List all of the pertinent information regarding the parties involved in the transfer. This information includes their full names, addresses, phone numbers, and other relevant contact information.

This step clarifies who’s transferring the initial contract and who will take on its responsibilities.

Step 2 – Provide Original Contract Information

Describing and identifying the contract that is effectively being reassigned is essential. This step avoids any confusion after the transfer has been completed.

Step 3 – State the Consideration

Provide accurate information regarding the amount the assignee pays to assume the contract. This figure should include taxes and any relevant peripheral expenses. If the assignee will pay the consideration over a period, indicate the method and installments.

Step 4 – Provide Any Terms and Conditions

The terms and conditions of any agreement are crucial to a smooth transaction. You must cover issues such as dispute resolution, governing law, obligor approval, and any relevant clauses.

Step 5 – Obtain Signatures

Both parties must sign the agreement to ensure it is legally binding and that they have read and understood the contract. If a notary is required, wait to sign off in their presence.

Related Documents

• Purchase Agreement : Outlines the terms and conditions of an item sale.
• Business Contract : An agreement in which each party agrees to an exchange, typically involving money, goods, or services.
• Lease/Rental Agreement : A lease agreement is a written document that officially recognizes a legally binding relationship between two parties -- a landlord and a tenant.
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How To Navigate The Real Estate Assignment Contract

What is assignment of contract?

Assignment of contract vs double close

How to assign a contract

Assignment of contract pros and cons

Even the most left-brained, technical real estate practitioners may find themselves overwhelmed by the legal forms that have become synonymous with the investing industry. The assignment of contract strategy, in particular, has developed a confusing reputation for those unfamiliar with the concept of wholesaling. At the very least, there’s a good chance the “assignment of contract real estate” exit strategy sounds more like a foreign language to new investors than a viable means to an end.

A real estate assignment contract isn’t as complicated as many make it out to be, nor is it something to shy away from because of a lack of understanding. Instead, new investors need to learn how to assign a real estate contract as this particular exit strategy represents one of the best ways to break into the industry.

In this article, we will break down the elements of a real estate assignment contract, or a real estate wholesale contract, and provide strategies for how it can help investors further their careers. [ Thinking about investing in real estate? Register to attend a FREE online real estate class and learn how to get started investing in real estate. ]

What Is A Real Estate Assignment Contract?

A real estate assignment contract is a wholesale strategy used by real estate investors to facilitate the sale of a property between an owner and an end buyer. As its name suggests, contract assignment strategies will witness a subject property owner sign a contract with an investor that gives them the rights to buy the home. That’s an important distinction to make, as the contract only gives the investor the right to buy the home; they don’t actually follow through on a purchase. Once under contract, however, the investor retains the sole right to buy the home. That means they may then sell their rights to buy the house to another buyer. Therefore, when a wholesaler executes a contact assignment, they aren’t selling a house but rather their rights to buy a house. The end buyer will pay the wholesale a small assignment fee and buy the house from the original buyer.

The real estate assignment contract strategy is only as strong as the contracts used in the agreement. The language used in the respective contract is of the utmost importance and should clearly define what the investors and sellers expect out of the deal.

There are a couple of caveats to keep in mind when considering using sales contracts for real estate:

Contract prohibitions: Make sure the contract you have with the property seller does not have prohibitions for future assignments. This can create serious issues down the road. Make sure the contract is drafted by a lawyer that specializes in real estate assignment contract law.

Property-specific prohibitions: HUD homes (property obtained by the Department of Housing and Urban Development), real estate owned or REOs (foreclosed-upon property), and listed properties are not open to assignment contracts. REO properties, for example, have a 90-day period before being allowed to be resold.

What Is An Assignment Fee In Real Estate?

An assignment fee in real estate is the money a wholesaler can expect to receive from an end buyer when they sell them their rights to buy the subject property. In other words, the assignment fee serves as the monetary compensation awarded to the wholesaler for connecting the original seller with the end buyer.

Again, any contract used to disclose a wholesale deal should be completely transparent, and including the assignment fee is no exception. The terms of how an investor will be paid upon assigning a contract should, nonetheless, be spelled out in the contract itself.

The standard assignment fee is $5,000. However, every deal is different. Buyers differ on their needs and criteria for spending their money (e.g., rehabbing vs. buy-and-hold buyers). As with any negotiations , proper information is vital. Take the time to find out how much the property would realistically cost before and after repairs. Then, add your preferred assignment fee on top of it.

Traditionally, investors will receive a deposit when they sign the Assignment of Real Estate Purchase and Sale Agreement . The rest of the assignment fee will be paid out upon the deal closing.

Assignment Contract Vs Double Close

The real estate assignment contract strategy is just one of the two methods investors may use to wholesale a deal. In addition to assigning contracts, investors may also choose to double close. While both strategies are essentially variations of a wholesale deal, several differences must be noted.

A double closing, otherwise known as a back-to-back closing, will have investors actually purchase the home. However, instead of holding onto it, they will immediately sell the asset without rehabbing it. Double closings aren’t as traditional as fast as contract assignment, but they can be in the right situation. Double closings can also take as long as a few weeks. In the end, double closings aren’t all that different from a traditional buy and sell; they transpire over a meeter of weeks instead of months.

Assignment real estate strategies are usually the first option investors will want to consider, as they are slightly easier and less involved. That said, real estate assignment contract methods aren’t necessarily better; they are just different. The wholesale strategy an investor chooses is entirely dependent on their situation. For example, if a buyer cannot line up funding fast enough, they may need to initiate a double closing because they don’t have the capital to pay the acquisition costs and assignment fee. Meanwhile, select institutional lenders incorporate language against lending money in an assignment of contract scenario. Therefore, any subsequent wholesale will need to be an assignment of contract.

Double closings and contract assignments are simply two means of obtaining the same end. Neither is better than the other; they are meant to be used in different scenarios.

Flipping Real Estate Contracts

Those unfamiliar with the real estate contract assignment concept may know it as something else: flipping real estate contracts; if for nothing else, the two are one-in-the-same. Flipping real estate contracts is simply another way to refer to assigning a contract.

Is An Assignment Of Contract Legal?

Yes, an assignment of contract is legal when executed correctly. Wholesalers must follow local laws regulating the language of contracts, as some jurisdictions have more regulations than others. It is also becoming increasingly common to assign contracts to a legal entity or LLC rather than an individual, to prevent objections from the bank. Note that you will need written consent from all parties listed on the contract, and there cannot be any clauses present that violate the law. If you have any questions about the specific language to include in a contract, it’s always a good idea to consult a qualified real estate attorney.

When Will Assignments Not Be Enforced?

In certain cases, an assignment of contract will not be enforced. Most notably, if the contract violates the law or any local regulations it cannot be enforced. This is why it is always encouraged to understand real estate laws and policy as soon as you enter the industry. Further, working with a qualified attorney when crafting contracts can be beneficial.

It may seem obvious, but assignment contracts will not be enforced if the language is used incorrectly. If the language in a contract contradicts itself, or if the contract is not legally binding it cannot be enforced. Essentially if there is any anti-assignment language, this can void the contract. Finally, if the assignment violates what is included under the contract, for example by devaluing the item, the contract will likely not be enforced.

How To Assign A Real Estate Contract

A wholesaling investment strategy that utilizes assignment contracts has many advantages, one of them being a low barrier-to-entry for investors. However, despite its inherent profitability, there are a lot of investors that underestimate the process. While probably the easiest exit strategy in all of real estate investing, there are a number of steps that must be taken to ensure a timely and profitable contract assignment, not the least of which include:

Find the right property

Acquire a real estate contract template

Submit the contract

Assign the contract

Collect the fee

1. Find The Right Property

You need to prune your leads, whether from newspaper ads, online marketing, or direct mail marketing. Remember, you aren’t just looking for any seller: you need a motivated seller who will sell their property at a price that works with your investing strategy.

The difference between a regular seller and a motivated seller is the latter’s sense of urgency. A motivated seller wants their property sold now. Pick a seller who wants to be rid of their property in the quickest time possible. It could be because they’re moving out of state, or they want to buy another house in a different area ASAP. Or, they don’t want to live in that house anymore for personal reasons. The key is to know their motivation for selling and determine if that intent is enough to sell immediately.

With a better idea of who to buy from, wholesalers will have an easier time exercising one of several marketing strategies:

Direct Mail

Real Estate Meetings

Local Marketing

2. Acquire A Real Estate Contract Template

Real estate assignment contract templates are readily available online. Although it’s tempting to go the DIY route, it’s generally advisable to let a lawyer see it first. This way, you will have the comfort of knowing you are doing it right, and that you have counsel in case of any legal problems along the way.

One of the things proper wholesale real estate contracts add is the phrase “and/or assigns” next to your name. This clause will give you the authority to sell the property or assign the property to another buyer.

You do need to disclose this to the seller and explain the clause if needed. Assure them that they will still get the amount you both agreed upon, but it gives you deal flexibility down the road.

3. Submit The Contract

Depending on your state’s laws, you need to submit your real estate assignment contract to a title company, or a closing attorney, for a title search. These are independent parties that look into the history of a property, seeing that there are no liens attached to the title. They then sign off on the validity of the contract.

4. Assign The Contract

Finding your buyer, similar to finding a seller, requires proper segmentation. When searching for buyers, investors should exercise several avenues, including online marketing, listing websites, or networking groups. In the real estate industry, this process is called building a buyer’s list, and it is a crucial step to finding success in assigning contracts.

Once you have found a buyer (hopefully from your ever-growing buyer’s list), ensure your contract includes language that covers earnest money to be paid upfront. This grants you protection against a possible breach of contract. This also assures you that you will profit, whether the transaction closes or not, as earnest money is non-refundable. How much it is depends on you, as long as it is properly justified.

5. Collect The Fee

Your profit from a deal of this kind comes from both your assignment fee, as well as the difference between the agreed-upon value and how much you sell it to the buyer. If you and the seller decide you will buy the property for $75,000 and sell it for $80,000 to the buyer, you profit $5,000. The deal is closed once the buyer pays the full $80,000.

Assignment of Contract Pros

For many investors, the most attractive benefit of an assignment of contract is the ability to profit without ever purchasing a property. This is often what attracts people to start wholesaling, as it allows many to learn the ropes of real estate with relatively low stakes. An assignment fee can either be determined as a percentage of the purchase price or as a set amount determined by the wholesaler. A standard fee is around $5,000 per contract.

The profit potential is not the only positive associated with an assignment of contract. Investors also benefit from not being added to the title chain, which can greatly reduce the costs and timeline associated with a deal. This benefit can even transfer to the seller and end buyer, as they get to avoid paying a real estate agent fee by opting for an assignment of contract. Compared to a double close (another popular wholesaling strategy), investors can avoid two sets of closing costs. All of these pros can positively impact an investor’s bottom line, making this a highly desirable exit strategy.

Assignment of Contract Cons

Although there are numerous perks to an assignment of contract, there are a few downsides to be aware of before searching for your first wholesale deal. Namely, working with buyers and sellers who may not be familiar with wholesaling can be challenging. Investors need to be prepared to familiarize newcomers with the process and be ready to answer any questions. Occasionally, sellers will purposely not accept an assignment of contract situation. Investors should occasionally expect this, as to not get discouraged.

Another obstacle wholesalers may face when working with an assignment of contract is in cases where the end buyer wants to back out. This can happen if the buyer is not comfortable paying the assignment fee, or if they don’t have owner’s rights until the contract is fully assigned. The best way to protect yourself from situations like this is to form a reliable buyer’s list and be upfront with all of the information. It is always recommended to develop a solid contract as well.

Know that not all properties can be wholesaled, for example HUD houses. In these cases, there are often anti-assigned clauses preventing wholesalers from getting involved. Make sure you know how to identify these properties so you don’t waste your time. Keep in mind that while there are cons to this real estate exit strategy, the right preparation can help investors avoid any big challenges.

Assignment of Contract Template

If you decide to pursue a career wholesaling real estate, then you’ll want the tools that will make your life as easy as possible. The good news is that there are plenty of real estate tools and templates at your disposal so that you don’t have to reinvent the wheel! For instance, here is an assignment of contract template that you can use when you strike your first deal.

As with any part of the real estate investing trade, no single aspect will lead to success. However, understanding how a real estate assignment of contract works is vital for this business. When you comprehend the many layers of how contracts are assigned—and how wholesaling works from beginning to end—you’ll be a more informed, educated, and successful investor.

Click the banner below to take a 90-minute online training class and get started learning how to invest in today’s real estate market!

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• Implementing Global Human Resources

When to Select the Employment Model

By default, every enterprise uses the single-assignment employment model. To select a different employment model for the enterprise or for individual legal employers, use the Manage Enterprise HCM Information and Manage Legal Entity HCM Information tasks in the Setup and Maintenance work area respectively.

This topic discusses the choices you can make and identifies any restrictions.

You can select a different employment model for individual legal employers.

Single Assignment v. Multiple Assignment

If you select:

Single Assignment or Single Assignment with Contract, all work relationships in the enterprise or legal employer are restricted to a single assignment.

Multiple Assignments, all work relationships in the enterprise or legal employer can include one or more assignments; therefore, work relationships can include a single assignment when appropriate.

Multiple Contracts with Single Assignment, all assignments in the enterprise or legal employer can be associated with its individual contract.

Changing the Employment Model for the Enterprise or Legal Employer

In general, you can change the employment model for the enterprise or legal employer both during initial implementation and later. However, there are some restrictions on switching to and from particular employment models.

The following table identifies the valid and restricted switching options.

Julio Teheran designated for assignment 1 day after poor results in debut with Mets

A TLANTA (AP) — New York Mets right-hander Julio Teheran was designated for assignment on Tuesday, one day after he lasted only 2 2/3 innings in his debut with the team.

The Mets selected the contract of right-hander Dedniel Núñez from Triple-A Syracuse before Tuesday night's game against the Atlanta Braves.

Teheran, 33, gave up four runs in Monday night's 8-7 win over the Braves. Teheran signed with New York on Friday. He began his career with Atlanta in 2011 and was an All-Star with the Braves in 2014 and 2016.

Teheran earns $2.5 million while in the majors and $150,000 while in the minors in his contract with the Mets . The deal also includes the possibility of $400,000 in performance bonuses.

Teheran spent spring training with the Baltimore Orioles but opted out of his minor league deal in late March when he didn’t make their opening-day roster. He was 3-5 with a 4.40 ERA in 11 starts and three relief appearances last year for NL Central champion Milwaukee.

Núñez, 27, pitched 3 1/3 scoreless innings in relief for Syracuse this season. He has not pitched in the majors.

AP MLB: https://apnews.com/hub/MLB

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Yankees' Josh Maciejewski: Designated for assignment

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The Yankees designated Maciejewski for assignment Saturday, YES Network reports.

Less than a week after being selected from Triple-A Scranton/Wilkes-Barre, Maciejewski will head back to the minors and lose his roster spot after making just one appearance with the Yankees. The 28-year-old southpaw has not allowed a run and has struck out five batters through 4.2 Triple-A innings.

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MLB Trade Rumors

Astros Designate Cooper Hummel For Assignment

By Darragh McDonald | April 10, 2024 at 4:00pm CDT

The Astros have selected the contract of right-hander Spencer Arrighetti , a move that was reported last night. Right-hander Wander Suero was optioned to Triple-A Sugar Land to open an active roster spot while utility player Cooper Hummel was designated for assignment to open a 40-man spot. Chandler Rome of The Athletic was among those to relay the list of transactions.

Hummel, 29, was just claimed off waivers last week but the Astros have been dealing with a notable roster churn of late. Each of Suero, Arrighetti and Blair Henley have been selected to the 40-man in the past few days, which has squeezed Hummel out of his spot.

It’s been quite a nomadic few months for Hummel, who was with the Mariners in 2023. Since December, he’s gone to the Mets, Giants and Astros via waiver claims or cash deals. It’s possible yet another jersey swap is over the horizon, as the Astros will now have a week to trade him or try to pass him through waivers.

His 227 major league plate appearances have resulted in an unimpressive batting line of .166/.264/.286 but he’s naturally been much better in the minors. From the start of 2021 through the present day, he has 992 Triple-A plate appearances. He has drawn a walk in a huge 17.3% of those while keeping his strikeout rate down to a respectable 21.2% rate. His combined batting line of .287/.419/.488 in that time translates to a wRC+ of 131.

Defensively, Hummel offers a unique level of versatility, having spent significant time behind the plate as well as the outfield corners, first base and even a small amount of time at third base. He also has one option year remaining, which means he can be kept in Triple-A for depth until needed. With less than a year of service time, he’s still not close to qualifying for arbitration or free agency.

That combination of his Triple-A offense, his defensive flexibility and his contract status clearly makes him appealing to clubs, judging by how many of them have tried to grab him since the end of last year. Taking all that into consideration, he may be on the move yet again in the days to come. If he were to finally pass through waivers unclaimed, he would stick with the Astros as non-roster depth, since he has neither the three years of service time nor the previous career outright that would give him the right to elect free agency.

10 Comments

Well, all the ceramics-collecting grandmas will be disappointed. There goes the Giveaway Promotion the Astros had named “Hummel Figure Night”.

If he makes a slight name change, they could have Hummer Night at the park. I guarantee you a sell out.

0.166 average in 199 at-bats makes him only a Mini-Cooper

Poor guy has been moved so many times in the last two months he may need to add “Suitcase” as his nickname. (Like Harry “Suitcase” Simpson.)

I hope he goes through waivers unclaimed. Seems like he has some potential

Hes 29 his potential is what you see

He may have the same resurgence that a certain player for the Rangers has. Name rhymes with Smarseeya. Below average player for years, then becomes insanely jacked, and all of a sudden hits lots of HRs.

Well, that didn’t work. Is Whitley healthy and throwing yet? Can’t be any worse than these other two jokers.

I really feel for some of these pitchers Henley and Spencer not having their best starts. Nor Suero on 2 pitches gets sent back down. They do have an open spot I think it said. Wonder who will put in that spot. Save it for Verlander

This rotation and more stinks. Many players not great right now. Pena started hot and is cooling down. Alvarez took time but I still think him and Tucker and even Bregman at 2 – 4 spots are not working. Not like in previous years. Bregman at least had his struggles with number 2 or 3 but he did hit better than now.

Chas is even struggling and saw articles he would slip this season. Meyers started fair but even he is going downhill.

Abreu is the WORST right now. Singleton right behind him. Kessinger is sitting but he can’t take first as with that spot we need more production. Dubon even though like him on bench right now may have to come in somewhere. Just do not know what they will do. I thought Espada would be better than this being under Dusty and more. But not sure if our hitting coaches and even Miller stink as coaches this season.

It does not look any better with Brown pitching tomorrow. He may last 2 to 4 innings and think will need 10 from him to spell bullpen.

I doubt we make October this season. We need to pick it up. I had thought maybe were turning things after last 2 wins with Rangers but we can’t even beat the Royals again. They are better this season. But will it last.

But how will Crane feel now with this team just imploding. He did interview on Great Day Houston and was on cloud 9. Said we would have a fantastic season. We didn’t need much during off season. Dana said same. But I think we are going to fall on our faces for a bit. Perhaps back to 100 loss season.

Sadly, Brown lasted 2/3 of an inning.

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