When Can a Party Assign Contractual Rights to Another Party?

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 What is a Contract?

An agreement between two private parties creates mutual legal obligations. A contract can be either oral or written. However, oral contracts are more challenging to enforce and should be avoided, if possible.

A contract that involves a significant amount of money (over $500) must be written in order to be valid. Every aspect of life involves contracts. To ensure you have a valid contract, you must understand the rules governing them.

All valid contracts must include the following elements to be enforced:

  • An offer (I will pay you $1,000 for 1,000 cupcakes);
  • And acceptance of the offer presented with (Another person accepts $1,000 for 1,000 cupcakes);
  • A promise to perform (Other person says they will perform);
  • A valuable consideration ($1,000);
  • A time or an event when the performance must be made (1,000 cupcakes exactly two weeks from now);
  • Terms and conditions for the performance (The cupcakes must be chocolate and have vanilla frosting); and
  • Performance (The 1,000 cupcakes are delivered, and the person is paid $1,000).

On top of that, the courts will not enforce certain contracts unless they are in writing. These contracts fall under the Statute of Frauds and must be in writing. Examples include marriage contracts, contracts not to be performed within one year, interest on land contracts, and the decedent’s debt guarantees.

When dealing with a contract issue, it is important to consider the local laws since state statutes govern most contracts.

What are the Required Elements for a Contract?

Any contract must contain five elements. A contract must have a legal purpose and cannot be used for illegal purposes. Contracting to commit a crime (such as hiring a hitman). In addition, there must be a mutual agreement between the parties. In order for this to occur, one party must have made an offer to another party for acceptance. The signing of a contract, for instance, indicates that the parties are in agreement and on the same page.

Some offers may not have an expiration period, so the offer remains open for a “reasonable” time. Offers can also be revoked until acceptance occurs. Acceptance usually means agreeing to the terms of the offer, and if there is any change to the terms in the acceptance, it would be considered a counteroffer. States differ on this, and it would be ideal to consider the regulations in your local jurisdiction.

Third, consideration is key in order for the contract to be valid. Both parties agree to provide something of value in exchange for a benefit. The consideration can take the form of a car, money, or even manual labor. It must be something of real value.

Gifts and promises differ as well. It is not considered a contract if someone gives you a handbag or if they promise to give you a handbag but don’t; there is still no contract. A contract exists, however, when a friend promises you a handbag in exchange for completing a task. I will buy you a handbag if you clean my gutters.

Fourth, the parties must be legally competent. Minors and the mentally impaired cannot validly contract. Additionally, the party must be of a sound mind while contracting and without the influence of drugs or alcohol. Lastly, all parties must agree based on their own will. Contracts will be void if there is a mistake, duress, or fraud by one or more parties.

What is Considered a Breach of a Contract?

The contract is breached if either party fails to fulfill its legal obligations. The other party will suffer economic losses if one party violates the contract. As an example, if you hired a construction company to complete a project on time and that company failed to meet the deadline, then you will most likely suffer financial losses.

There are several options available to compensate for those losses. You can either sue for damages, demand specific performance, or terminate the contract. In the end, the court will decide the outcome and the amount of compensation.

What Are There Different Types of Contracts?

A unilateral contract involves a promise in exchange for specific performance. In a bilateral contract, one promise is exchanged for another promise.

Other types of contracts include:

  • Express contracts usually specify orally or in writing the exact terms of the contract;
  • Conditional contracts are based upon the completion of a condition;
  • Joint and several contracts have multiple parties involved;
  • Implied contracts where courts find that a contract exists based on the situation;
  • Unconscionable contracts put one party at a greater advantage than another one and are considered unjust;
  • Adhesion contracts are considered to give one party more bargaining power than another and therefore result in a “take it or leave it” situation;
  • Option contracts allow you to enter into another contract with another party at a later time; and
  • Fixed-price contracts involve a buyer and a seller that agree to pay a fixed price for a project.

Keeping in mind that contracts come in all shapes and sizes is something we deal with every day. Contact a local lawyer if you are unsure what type of contract to which you are a party.

What Is a Contract Assignment?

A contract assignment occurs when one party in a contract transfers or “assigns” their contract rights to another party. For instance, suppose that party X contracts with party Y, stating that Y will build their house. X can then assign their rights to the building to another party (Z) if they choose to do so. Here, X is called the “assignor,” while Z is called the “assignee.”

When Can a Party Assign Contractual Rights to Another Party?

Contractual rights may be assigned to another party at any time unless:

  • The contract prohibits the assignment of contractual rights
  • The assignment would fundamentally change certain duties or risks involved in the contract
  • The assignment has to do with future rights derived from a future, non-existent contract
  • The assignment is legally prohibited by law

Aside from these situations, contract assignments are allowed and frequently occur in many situations. This is especially common in contracts involving sub-contracts and building projects.

Does a Contract Assignment Need to Be in Writing?

An oral agreement is usually sufficient for a contract assignment to be valid. The original party (the obligor) does not need to be informed of the assignment. In any contract situation, it’s best if the agreement is reduced to writing and signed by all parties. By doing this, everyone will be on the same page, and a record of interactions can be maintained in case of a lawsuit.

Do I Need a Lawyer for Help with Contract Assignments?

Contract rights often contain many terms, which can get more complex when other parties enter the picture. You may need to hire a contract lawyer for advice and guidance if you have any questions, concerns, or disputes involving contract assignments.

A qualified lawyer can assist with drafting documents, reviewing agreements, and other tasks. Furthermore, your lawyer can represent you in court if you need to file a legal claim. An issue that involves a large amount of money or evidence that the contract is invalid can easily get out of hand.

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