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Sunday, September 9, 2012

Assignment -- what the heck is that? (contracts)

A former client of ours revisited our shop this week, and asked for help in modifying an employment agreement. Nothing unusual about that -- but the requested paragraph was rather interesting. He asked us to modify/update his Assignment terms.

In contracting, the terms "Assignment" refers to the right of one or more of the parties in the contract to "assign" (give their rights, privileges, or duties to another) their portion of the contract to a third party. Why would anyone want to do that?

Restatement (2nd) of Contracts, chapter 15, deals with assignment of both duties and rights under a contract.

Assignments are generally important to folks for two reasons (most common -- this is not exclusive): (a) death of a party and the liability of the estate, and (b) right of sale of the contract (such as a business).

If one party to an agreement dies, who is responsible for fulfilling the obligations or receiving the rights/privileges of the contract? Generally, it goes to the estate. That is where the terms, "to his (her) heirs and assigns" comes in. This gives full rights to any person that succeeds the party in the agreement. Usually, this is used for real property (land, or vehicles are most common), but can relate to anything in which a clear path of assignment should lie in the event of death (or even disability, if so indicated).

In business, it is not so simple. Suppose you are an independent contractor who is tasked with providing IT services at a government installation. As an independent contractor, you are in charge of the manner and mode of your services delivery. Do you have the right to "assign" another person from your shop to go to the government agency and perform the work? This is, of course, an assignment of duties. On paper, you should be able to do this. However, most contracting agreements provide a block to assignments on the part of the person doing the contractor work. If that block is NOT there, you would be absolutely legally entitled to make the assignment. Might be a short lived contract, but it would be legal.

Another area you often see assignments are in favor of the employer. Often, when an employer sells his/her business, contracts with employees or contractors are expected to continue. However, absent a clause permitting unfettered assignment of the rights and privileges of the contract to the new owner (an assignment), each contract would have to be re-negotiated with each respective employee/contractor, and the new employer would have no privity (see previous article on privity) with the current employees/contractors.

Assignment is usually a small paragraph, and can be written very plainly. An example might be (in this case, decidedly pro-employer):

1. The company may assign its rights and entitlements under this Agreement to any third party (for example, if the Company is sold) without further notice or requirement to you.

2. Because of the sensitive and critical nature of the work, and your job skills, you may not assign your duties and/or responsibilities to a third party without the express, written consent of the Company.

Do you have a business contract that would benefit from a thorough review? Missing an assignment clause or other critical element of a business agreement? Contact us! We'll take a look and let you know. Equally, as an employee or contractor, it is very important that you understand what you are signing/agreeing to. Let us help you review your agreement and ensure that you are not being snookered!


Sean R. Hanover, Esq
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