Assignment Clauses: Can Your Contract Be Transferred?

What Is an Assignment Clause?

An assignment clause determines whether and how one party can transfer their rights or obligations under a contract to a third party. If you "assign" a contract, you hand off your position in the agreement to someone else.

Why Assignment Clauses Matter

Without an assignment clause, contract rights are generally assignable under common law. Assignment clauses typically add restrictions. This matters because:

• Your vendor could transfer your service contract to a company you have never worked with
• Your employer could be acquired and your employment agreement assigned to the new parent company
• A landlord could sell a property and your lease transfers to a new owner
• You might want to transfer a contract to a partner or successor

Common Types

• No assignment without consent: Neither party can transfer the contract without the other's written approval. This is the most common structure.
• Consent not to be unreasonably withheld: The other party must have a legitimate reason to refuse an assignment request.
• Freely assignable: Either party can transfer the contract without restrictions. Less common but sometimes seen in commercial agreements.
• Anti-assignment: The contract explicitly prohibits any transfer. Courts do not always enforce these strictly.
• Change of control exception: The contract can be assigned in the event of a merger, acquisition, or sale of substantially all assets without needing consent.

What to Watch For

• One-sided assignment rights: The other party can assign freely while you cannot
• Silent on change of control: If the clause does not address mergers or acquisitions, your contract could be transferred through a corporate transaction without your input
• No consent standard: "Consent required" without specifying it will not be unreasonably withheld gives the other party broad veto power
• Delegation of duties: Assignment of rights is different from delegation of duties. Even if rights are assigned, the original party may remain responsible for performance unless the clause addresses delegation

When to Consult a Lawyer

Consider consulting an attorney if you are negotiating a long-term contract and want to ensure you have flexibility to transfer your position, or if the other party is seeking broad assignment rights that could result in you working with an unknown entity.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.