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. Quite often, such relief is granted to avoid fraud or unjust enrichment. If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. 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.
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. Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y. Note that obtaining an assignment through fraudulent means invalidates the assignment. 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.
Assignments won’t stand up in court if the assignment significantly changes the terms of the contract.
For example, if Karrie’s business is tree trimming, not lawn mowing, the contract can’t be assigned to her.
Many assignment clauses require that both parties agree to the assignment.
Let’s suppose Ken owns a lawn mowing service and he has a contract with a real estate firm to mow all their offices each week in the summer.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 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. 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.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. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred.An assignment may be made to anyone, but it is typically to a subsidiary or a successor.A successor might be a business (Company B) that buys a business (Company A).You may have come across an “assignment of contract” clause in a business contract.This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark, and copyright) agreements.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. Novation Compared to Assignment: Although the difference between a novation and an assignment may appear narrow, it is an essential one. Fraud destroys the validity of everything into which it enters. The validity and effect of an assignment is determined by the law of the place of assignment. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York.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. 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. “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 the original party as a party to the contract. 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. It vitiates the most solemn contracts, documents, and even judgments., 79 Cal. 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. The judgment required the husband to pay a certain yearly sum to the wife.