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The examples and perspective in this article deal primarily with the United States and do not represent a worldwide view of the subject. An assignment is a legal term used in the context of the law of contract and of property. In both instances, assignment is the process whereby a person, the assignor, transfers rights or benefits to another, the assignee. The rights may be vested or contingent, and may include an equitable interest. Mortgages and loans are relatively straightforward and amenable to assignment. A related concept of assignment is novation wherein, by agreement with all parties, one contracting party is replaced by a new party. While novation requires the consent of all parties, assignment needs no consent from other non-assigning parties.
However, in the case of assignment, the consent of the non-assigning party may be required by a contractual provision. Unless the contractual agreement states otherwise, the assignee typically does not receive more rights than the assignor, and the assignor may remain liable to the original counterparty for the performance of the contract. The assignor often delegates duties in addition to rights to the assignee, but the assignor may remain ultimately responsible. However, in the United States, there are various laws that limit the liability of the assignee, often to facilitate credit, as assignees are typically lenders. In other cases, the contract may be a negotiable instrument in which the person receiving the instrument may become a holder in due course, which is similar to an assignee except that issues, such as lack of performance, by the assignor may not be a valid defense for the obligor. After the assignment of contractual rights, the assignee will receive all benefits that had accrued to the assignor.
The common law favors the freedom of assignment, so an assignment will generally be permitted unless there is an express prohibition against assignment in the contract. Where assignment is thus permitted, the assignor need not consult the other party to the contract. Torts are not assignable as public policy, and various statutes may prohibit assignment in certain instances. Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. Equipment Lease Agreements typically contain language prohibiting the lessee from assigning the lease to a third party. For assignment to be effective, it must occur in the present. No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee.
A promise to assign in the future has no legal effect. A contract may contain a non-assignment clause, which prohibits the assignment of specific rights and some various rights, or of the entire contract, to another. However, such a clause does not necessarily destroy the power of either party to make an assignment. Two other techniques to prevent the assignment of contracts are rescission clauses or clauses creating a condition subsequent. There are certain situations in which the assignment must be in writing.
A parallel concept to assignment is delegation, which occurs when one party transfers his duties or liabilities under a contract to another. A delegation and an assignment can be accomplished at the same time, although a non-assignment clause may also bar delegation. Legal remedies may be available if the nonassigning party’s rights are affected by the assignment. Assignments made for consideration are irrevocable, meaning that the assignor permanently gives up the legal right to take back the assignment once it has been made. Donative assignments, on the other hand, are generally revocable, either by the assignor giving notice to the assignee, taking performance directly from the obligor, or making a subsequent assignment of the same right to another.
The assignment can not be revoked if the assignor has set forth in writing the assignment of a simple chose – a contract right embodied in any form of token. Estoppel can prevent the revocation of a donative assignment if the assignee changed their position in reliance on the assignment. A cause of action for breach on the part of the obligor lies with the assignee, who will hold the exclusive right to commence a cause of action for any failure to perform or defective performance. At this stage, because the assignee “stands in the shoes” of the assignor, the obligor can raise any defense to the contract that the obligor could have raised against the assignor.
When the assignor makes the assignment, he makes with it an implied warranty that the right to assign was not subject to defenses. If the contract had a provision that made the assignment ineffective, the assignee could sue the assignor for breach of this implied warranty. Similarly, the assignee could also sue under this theory if the assignor wrongfully revoked the assignment. Occasionally, an unscrupulous assignor will asof the assignment, and on the timing of the assignments relative to certain other actions.
In a quirk left over from the common law, if the assignment was donative, the last assignee is the true owner of the rights. However, if the assignment was for consideration, the first assignee to actually collect against the assigned contract is the true owner of the rights. Under the modern American rule, now followed in most U. Earlier donative assignees for whom the assignment was made irrevocable can bring an action for the tort of conversion, because the assignment was technically their property when it was given to a later assignee.
Later assignees for consideration have a cause of action for breaches of the implied warranty discussed above. Real property rights can be assigned just as any other contractual right. However, special duties and liabilities attach to transfers of the right to possess property. With an assignment, the assignor transfers the complete remainder of the interest to the assignee. The assignor must not retain any sort of reversionary interest in the right to possess. The liability of the assignee depends upon the contract formed when the assignment takes place. However, in general, the assignee has privity of estate with a lessor.
With privity of estate comes the duty on the part of the assignee to perform certain obligations under covenant, e. Similarly, the lessor retains the obligations to perform on covenants to maintain or repair the land. If the assignor agrees to continue paying rent to the lessor and subsequently defaults, the lessor can sue both the assignor under the original contract signed with the lessor as well as the assignee because by taking possession of the property interest, the assignee has obliged himself to perform duties under covenant such as the payment of rent. Unlike a Novation where consent of both the lessor and lesse is required for the third party to assume all obligations and liabilities of the original lessee, an assignment does not always need the consent of all parties. If the contract terms state specifically that the lessor’s consent is not needed to assign the contract, then the lesee can assign the contract to whomever the lesee wants to. Absent language to the contrary, a tenant may assign their rights to an assignee without the landlord’s consent.