This contract tip is about the risks of assignment without restrictions.
The general rule (with exceptions) is that contracts are freely assignable unless the contract says otherwise. Most vendors and customers do include some assignment restrictions.
Here are the four core parts of these provisions:
1. What is restricted? - “Neither Party may assign or delegate this Agreement nor any of its rights and obligations.” Assigning the entire contract is different from assigning rights, which is different from delegating obligations. Address all three.
2. Are any narrower assignments permitted? - Add “provided, however, either Party may assign [any of its rights][or obligations][this Agreement] to [its Affiliate][other].”
3. Is that narrower assignment conditioned? - Add “only [upon notice to][with the consent of] the other Party [, which shall not be unreasonably denied, delayed or conditioned].”
4. What if there is a violation? - Add “Any attempted assignment or transfer violating this Section shall be null and void.” Without language to this effect, the court may award damages but still enforce the unapproved assignment.
Finally, remember that an assignment does NOT relieve an assignor of its obligations. Only a novation does that.
What other points would you add to a checklist about assignment provisions?
