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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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The Law Dictionary

Your Free Online Legal Dictionary • Featuring Black’s Law Dictionary, 2nd Ed.

ASSIGNMENT Definition & Legal Meaning

Definition & citations:.

In contracts. 1. The act by which one person transfers to another, or causes to vest in that other, the whole of the right, interest, or property which he has in any realty or personalty, in possession or in action, or any share, interest, or subsidiary estate therein. Seventh Nat. Bank v. Iron Co. (C. C.) 35 Fed. 440; Haug v. Riley, 101 Ga. 372, 29 S. E. 44, 40 L It A. 244. More particularly, a written transfer of property, as distinguished from a transfer by mere delivery. 2. In a narrower sense, the transfer or making over of the estate, right, or title which one has in lands and tenements; and, in an especially technical sense, the transfer of the unexpired residue of a term or estate for life or years. Assignment does not include testamentary transfers. The idea of an assignment is essentially that of a transfer by one existing party to another existing party of some species of property or valuable interest, except in the case of an executor. Ilight v. Sackett, 34 N. Y. 447. 3. A transfer or making over by a debtor of all his property and effects to one or more assignees in trust for the benefit of his creditors. 2 Story, Eq. Jur.

This article contains general legal information but does not constitute professional legal advice for your particular situation. The Law Dictionary is not a law firm, and this page does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

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Assign is the act of transferring rights , property , or other benefits to another party (the assignee ) from the party who holds such benefits under contract (the assignor). This concept is used in both  contract  and property law . 

Contract Law  

Under contract law, when one party assigns a  contract , the assignment represents both: (1) an assignment of rights; and (2) a delegation of  duties . 

• For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C. 
• Here, A has both: (1) assigned A’s rights under the contract to the $50; and (2) delegated A’s  duty  to teach guitar, to C. 
• In this example, A is both the “assignor” and the “delegee” who delegates  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.

Assigning 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, they cannot assign their future right to an assignee. 

• That is, if A has not yet contracted with B to teach B guitar, A cannot assign their 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 them. 

• 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.

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. 

• Meaning 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. 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 another party (C) to take over the property. 
• In this scenario, A might choose between  assigning  and  subleasing  the property to C. 
• If  assigning , A would give C the entire balance of the term , with no reversion to anyone; whereas if  subleasing , A would give C the property for a limited period of the remaining term.
• Under assignment, C would have  privity  of  estate  with the landlord while under a sublease, C would not. 

[Last updated in June of 2022 by the Wex Definitions Team ]

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Assignment Law: Everything You Need to Know

In legal terms, the meaning of an assignment is a contractual obligation to transfer a property title or right from one party to another. 3 min read updated on September 19, 2022

The term assignment law is used in the law of real estate and in the law of contracts. In both instances, it relates to the transfer of rights held by one party (the assignor) to another party (the assignee).

Assignment Law

In legal terms, the meaning of an assignment is a contractual obligation to transfer a property title or right from one party to another. Generally, the assignment is transferred based on an entire interest in the property, chattel, estate, or other item assigned.

A grant is different from an assignment in that an assignment refers to the right to transfer the property. This is considered an intangible right. On the other hand, the grant is concerned about the physical transfer of property. This is a tangible right. For example, a payee can assign their rights to collect a note payment to a bank. 

The terms of the contract must be analyzed to determine if the right of assignment is prohibited. For example, a property owner may allow a lease to be assigned, ordinarily along with an assumption agreement, where the new tenant is now responsible for the payments and duties of the lease.

The holder of a trademark may transfer it, either by giving or selling their interest in the trademark to another party. This is referred to as an assignment. The party that receives the benefit is called the assignee. Once transferred, the assignee has the ability to exclude others from using their trademark.

In order for the assignment to be enforceable, it must be in writing and have the goodwill of the company attached to the mark. For an assignment to be effective, it must contain the fundamental aspects of a contract, such as:

• Parties with legal capacity
• Legality of object
• Consideration consent

A contract assignment occurs when a party assigns their contractual rights to a third party. The benefit 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. Essentially, 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.

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

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 that they cannot be delegated. Adding a clause in the contract to prevent a party from delegating their responsibilities and duties is highly recommended.

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.

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Content Approved by UpCounsel

• Legal Assignment
• Assignment of Rights and Obligations Under a Contract
• Assignment of Rights Example
• Assignment Legal Definition
• What Is the Definition of Assigns
• Consent to Assignment
• Assignment Of Contracts
• Delegation vs Assignment
• Assignment of Contract Rights
• What is an Assignment and Assumption Agreement

Assignment and Novation

What are assignment and novation clauses.

The two main legal tools for the transfer of the rights and/or obligations under a contract to another party are: assignment, for the transfer of benefits; and novation, for the transfer of rights/benefits and obligations. Each has unique features that must be taken into account when deciding which is the preferred option.

Assignment and novation clauses

Assignment, novation and other dealings boilerplate clauses, non-assignment clauses, withholding consent to an assignment.

The two main legal tools for the transfer of the rights and/or obligations under a contract to another party are:

• assignment, for the transfer of benefits; and
• novation, for the transfer of rights/benefits and obligations

Each has unique features that must be taken into account when deciding which is the preferred option.

Assignment clauses

A contracting party at common law has a general right to assign its rights without any consent or approval from the other party (unless by its very nature the right is personal). An assignment clause may be included in an agreement to exclude or limit this common law right. In order for the assignment of rights by one party to not be exercised unilaterally without the knowledge of the other party, it is common for contracts to include a provision that a party can only assign its rights under the contract with the consent of the other party.

After assignment, the assignee is entitled to the benefit of the contract and to bring proceedings (either alone or by joining the assignor depending in whether the assignment is legal or equitable) against the other contracting party to enforce its rights. The assignee does not become a party to the contract with the promisor. As the burden or obligations of the contract cannot be assigned, the assignor remains liable post assignment to perform any part of the contract that has not yet been performed.

Novation clauses

By executing a novation, a party can transfer both its rights/benefits and obligations. At common law, the obligations under a contract can only be novated with the consent of all original contracting parties, as well as the new contracting parties. This is because the novation extinguishes the old contract by creating a new contract.

A novation clause will usually provide that a party cannot novate a contract without the prior written consent of existing parties. Including a novation clause in an agreement is designed to prevent oral consent to a novation, or consent being inferred from a continuing party’s conduct. However, a court will look to the substance of what has occurred, and such a clause is not effective in all situations.

It is possible for a novation clause to prospectively authorise a novation to be made by another party unilaterally to a party chosen by the novating party. The courts will give effect to a novation made in this manner provided it is authorised by the proper construction of the original contract.

Option 1 – Assignment, novation and other dealings – consent required

A party must not assign or novate this [deed/agreement] or otherwise deal with the benefit of it or a right under it, or purport to do so, without the prior written consent of each other party [which consent is not to be unreasonably withheld/which consent may be withheld at the absolute discretion of the party from whom consent is sought].

Option 2 – Assignment, novation and other dealings – specifies circumstances in which consent can reasonably be withheld

(a)   [ Insert name of Party A ] may not assign or novate this [deed/agreement] or otherwise deal with the benefit of it or a right under it, or purport to do so, without the prior written consent of [ insert name of Party B ], which consent is not to be unreasonably withheld . 

(b) [ Insert name of Party A ] acknowledges that it will be reasonable for [ insert name of Party B ] to withhold its consent under this clause if:

(i)      [ Insert name of Party B ] is not satisfied with the ability of the proposed assignee to perform [ insert name of Party A ]’s obligations under this [deed/agreement];

(ii)      [ Insert name of Party B ] is not satisfied with the proposed assignee’s financial standing or reputation;

(iii)     the proposed assignee is a competitor of [ insert name of Party B ]; or

(iv)       [ Insert name of Party B ] is in dispute with the proposed assignee .

Click  here  for information on how to use this boilerplate clause.

A non-assignment clause prevents a party or parties from assigning the benefit of the contract. Non-assignment clauses are generally effective if they have been clearly drafted.

Contracts commonly provide for assignment with the consent of the other party. Such provisions usually provide that consent must not be unreasonably withheld and, where there is no such proviso, one may be implied. Accordingly, if it is intended that a party may withhold its consent to an assignment for any reason whatsoever (including on unreasonable grounds) clear contractual language should be used.

A purported assignment that contravenes such contractual restriction may constitute a breach of contract and result in an ineffective assignment.

The ‘reasonableness’ of withholding consent to an assignment is assessed by an objective standard and given a broad and common sense meaning.

The relevant factors in assessing reasonableness will differ in each case and heavily depend on the particular circumstances, including the nature and object of the specific contract and the purpose of the non-assignment clause.  Relevant factors may include any defaults in obligations under the contract and the solvency and identity of the assignee.

A party’s actions in withholding consent will generally be considered unreasonable if the grounds relied upon to support the withholding are:

• extraneous or disassociated from the subject matter of the contract;
• materially inconsistent with any provision(s) of the contract; or
• based on collateral or improper considerations.

It is advisable, where withholding consent to an assignment, to clearly set out the reasons for withholding consent in a letter to the other party.

Case Assignment & Its Constitutional Implications

Oct 4, 2024 Brooke D. Coleman Add a Comment

• Brooke D. Coleman

Which judge decides a case? This evergreen civil procedure question occupies many a civil procedure class. Discussions of Erie and related topics often focus on the litigating parties’ motivations and whether their filings were strategic, gamesmanship, or some mix of both. In Constitutional Case Management , Katherine Macfarlane shifts our focus to the courts themselves by exploring the mechanisms courts use to assign cases.

Macfarlane begins by exploring and questioning the source of case assignment power. Article III empowers Congress to create inferior courts, which includes the power to structure the lower federal judicial system. This power includes case assignment. For example, Congress has adopted laws allowing federal judges to sit by designation. These statutes, which authorize judges appointed to a specific federal court to temporarily sit elsewhere, change the cases they would otherwise hear in their home courts.

Congress also can establish rules governing litigation in the courts it has established. For example, 28 U.S.C. § 137 requires courts comprised of more than one judge to distribute cases “as provided by the rules and orders of the court.” Federal Rule of Civil Procedure 83(a) further requires that any district court rules must be approved by a majority of that court’s judges. Macfarlane reveals, though, that absent a clear local rule, some courts read § 137 to allow the district’s Chief Judge to assign cases unilaterally via general order. Macfarlane questions the constitutionality of that practice. Unlike a local rule enacted under Rule 83(a), a general order lacks public comment, engagement by the local bar, and a vote by all district judges.

Macfarlane then reviews local assignment rules and general orders in three federal districts. Her results demonstrate the widespread effect of these case-assignment mechanisms. While recent high-profile case-assignment controversies have made national news , her study shows that these problems also affect lower-profile, but still quite important, cases such as pro se habeas petitions.

Although specifics of Macfarlane’s study are too numerous to address in this summary, her research demonstrates a handful of interesting trends. Single-judge divisions within a district are more common than we might think. Courts create exceptions to random case assignment through general orders rather than Rule 83’s local rulemaking process. And notably, it is difficult to locate the case assignment practices of each federal district. With respect to this latter trend, the Western District of Texas has more than 166 general orders available online and the Southern District of Florida has thousands. These orders (in these and other districts in the study) establish a patchwork of case-assignment provisions. Some place certain substantive cases with specific judges; some divide by percentage the kinds of cases each judge will hear; and some divide the work based on divisions within the district as well as substantive areas.

While as a matter of policy Macfarlane may prefer that case assignments be random as opposed to directed through these various orders, that is not the substantial contribution of her article. By situating certain case-assignment mechanisms within the constitutional authority of Congress, and therefore under Rule 83, Macfarlane reveals a promising argument for challenging any directed assignment of cases within district courts. For example, in the mifepristone case, plaintiffs could have challenged the district court’s decision by questioning the constitutionality of how the case was assigned to that judge in a single-judge division.

Macfarlane is not alone in questioning the legitimacy of certain case-assignment provisions. Congress and the Judicial Conference have attempted reforms, although Congress has not passed any laws and at least one judicial district has ignored the Conference’s recent directives. Until courts adopt reforms, Macfarlane’s article offers a novel argument for challenging certain case-assignment provisions on a case-by-case basis. She adds a richness to our recurring “which judge” discussion, and I commend it to all as a piece they just might like lots.

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• Professor Katherine Macfarlane’s Constitutional Case Management Article Reviewed at Jotwell - Top 10 Best Car Accident Lawyers Riverside CA - […] “Constitutional Case Management” was recently reviewed by Professor Brooke D. Coleman at Jotwell. Coleman is Vice Dean for Academic…

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