In a contract assignment, one of the two parties may transfer their right to the other’s performance to a third party. This is known as “contract assignment.” Typically, all rights under a contract may be assigned. A provision in the agreement that states the contract may not be assigned usually refers to the delegation of the assignor’s (individual who assigns) obligations under that agreement, not their rights.
In modern law, the term “assignment of contract” usually means assigning both rights and duties under a contract.
What Is a Contract Assignment Agreement?
A contract assignment agreement may be created in cases involving a contract assignment. An assignment is where the recipient of products, services, or other rights transfers (assigns) their rights to another party. The party transferring their rights is the assignor, while the party performing the services is dubbed the obligor. The party obtaining the transferred rights is called the assignee.
Contract assignments are often utilized in cases similar to beneficiary and gift-giving situations. Yet, there is frequently a substantial business or commercial component to contract assignments (such as those projects involving commercial building and contracting).
Who Are the Various Parties Involved in a Contract Assignment?
There are two parties to the agreement in a contract, X and Y. The parties may agree to let X assign X’s rights to a third party. Once the third party enters the picture, each party has a particular name. For example, suppose X, a seller of bookmarks, contracts with Y, a purchaser of bookmarks. Y wants to have Y’s right to X’s performance (selling bookmarks every month) to another individual.
This third individual, Z, is dubbed the assignee. X is named the obligor, and Y is named the assignor since Y has assigned its right to X’s performance. X, the obligor, is bound to continue to perform its duties under the contract.
How Is a Contract Assignment Created?
There are no “magical words” required to make an assignment. The law demands that the would-be assignor intend to wholly and immediately transfer their rights in the agreement. In addition, writing is generally not needed to make an assignment. As long as X and Y adequately comprehend what right is being assigned, an assignment is formed.
Comments that demonstrate a transfer is to take place suffice, such as “I plan to transfer my rights under this agreement,” “I plan to give my rights to Z,” or “I plan to confer an assignment on Z.” In addition, consideration, which is a bargained-for exchange needed for a contract to be proper, is not needed for the assignment.
When Is a Contract Assignment Prohibited?
In specific examples, an assignment of contract rights can be restricted. If the agreement includes a clause forbidding assignment of “the contract” without establishing more, the law construes this language as banning only delegation of the assignor’s duties, not their rights.
If the assignment language states “assignment of contractual rights is forbidden,” the obligor may sue for damages if the assignor tries to assign the agreement. If the contract language says that attempts to assign “will be null,” the parties can ban the assignment of rights.
Under current contract law, the expression “I assign the contract” is usually interpreted to mean that one is assigning rights and duties. What is an assignment of duties? An assignment of duties emerges where Y, dubbed the obligor or delegator, promises to perform for X, the obligee. Y then entrusts their duty to perform to Z, the delegate. Under the law, most duties can be delegated.
What Should a Contract Assignment Agreement Contain?
A contract assignment should include:
- Names of the parties involved
- Depictions of the rights or contract benefits being assigned
- When the assignment takes effect, and whether or not it lapses
- Conditions regarding legal action if a breach or violation of contract should ensue
Most jurisdictions don’t demand a contract assignment to be in writing. Of course, it’s always best to put the agreement in writing to create a record of the transaction if there are any future problems.
What Are Some Common Disputes Related to Assignment Agreements?
Some typical legal problems involving contract assignments include:
- Failure to transfer the rights to the assignee
- Refusal to cooperate with the contract assignment terms
- Use of deception, misrepresentation, or force when dealing with assignment agreement documents
- Blunders or mistakes concerning definitions of the assignment subject
Conflicts oftentimes require legal action in a court of law to settle the legal problems. This can result in a monetary damages award to cover losses caused by a breach of contract. Alternatively, some courts may enforce other remedies such as cancellation or rewriting of the agreement.
What Is a Breach of Contract?
A breach of contract may arise when a party to a good agreement has failed to fulfill their side of the deal.
For example, the terms of a contract guide the parties in what they must do and how they should do it to maintain their promise. If a party does not do what the agreement instructs them to do, then the non-breaching party will be entitled to take legal action and file a lawsuit against them in court.
A breach of contract can arise as either a partial or a complete breach. A court will also consider whether the breach was substantial or only a minor one. This will allow the court to decide what type of damages the breaching party should have to expend.
What Are the Ways You Can Breach a Contract?
There are three major ways for which a party can be held liable for breach of contract. This includes when:
- There is an anticipatory breach: Often referred to as anticipatory repudiation, this kind of breach happens when the breaching party tells the non-breaching party that they will not be fulfilling the terms of their contract. Once the other party is informed, they can sue for breach of contract.
- A party has committed a minor breach: A minor breach of contract happens when a party fails to perform a small contract detail. The total contract has not been violated and can still be substantially performed in this circumstance. This also comes up when there is a technical mistake with the agreement (e.g., a false date, price, or typo within the terms of the agreement).
- If there is a material or fundamental breach: These are the most standard sorts of breaches cited as the basis of a breach of contract action. When the breach is so substantial, it essentially cancels the contract because it renders performance by either party impossible.
Some other ways that a contract can be breached include when the contract is dishonest, if the contract was formed illegally or is unconscionable, and when there is a mistake of fact present in the agreement terms. The parties may also include conditions unique to their respective agreement, which specify when a party’s actions can be deemed a breach.
Further, state regulations and the type of contract (e.g., lease agreement, sales contract, government contract, etc.) may indicate other ways a contract can be breached.
Do I Need a Lawyer for Help with a Contract Assignment Agreement?
Contract agreements often require much attention to detail and foresight for anticipating future events. It’s in your best interests to hire a contract lawyer if you need help with any contract matters. Your lawyer can help you with your records and represent you if you ever need to file a claim in court for damages.