Assignment, or assignation,A Scots law term: see Small Business, Enterprise and Employment Act 2015, Section 1, accessed on 4 February 2026 is a legal term used in the context of the laws 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.For the assignment of claim see Trans-Lex.org An assignment may not transfer a duty, burden or detriment without the express agreement of the assignee. The right or benefit being assigned may be a gift (such as a waiver) or it may be paid for with a contractual consideration such as money.
The rights may be vested or contingent,. and may include an equitable interest. Mortgages and loans are relatively straightforward and amenable to assignment. An assignor may assign rights, such as a mortgage note issued by a third party borrower, and this would require the latter to make repayments to the assignee.
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.
Procedure An assignment does not necessarily have to be made in writing; however, the assignment agreement must show an intent to transfer rights. The effect of a valid assignment is to extinguish privity (in other words, contractual relationship, including right to sue) between the assignor and the third-party obligor and create privity between the obligor and the assignee.
Liabilities and duties 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 which limit the liability of the assignee, often to facilitate credit, as assignees are typically lenders.Assignee Liability: Through the Minefield. Arnstein & Lehr LLP. Notable examples include a provision in the Truth in Lending ActSee 15 U.S.C. 1641(a). and provisions in the Consumer Leasing Act and the Home Ownership Equity Protection Act. The Assignment of Claims Act of 1940 Chapter 779: An Act to assist in the national-defense program by amending sections 3477 and 3737 of the Revised Statutes to permit the assignment of claims under public contracts, 8 October 1940, accessed 26 May 2024 was passed to provide legal protection for financial institutions funding wartime defense contracts.Law Review Editors, The Assignment of Claims Act of 1940: Assignee v. Surety, University of Chicago Law Review, published 9 January 1952, accessed 26 May 2024
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.Commercial Paper: Holder in Due Course & Defenses . As a response, the United States Federal Trade Commission promulgated Rule 433, formally known as the "Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses", which "effectively abolished the [holder in due course] doctrine in consumer credit transactions". In 2012, the commission reaffirmed the regulation.FTC Opinion Letter Affirms Consumers' Rights under the Holder Rule . FTC.
Assignment of contract rights
After the assignment of contractual rights, the assignee will receive all benefits that had accrued to the assignor. For example, if A contracts to sell his car for $100 to B, A may assign the benefits (the right to be paid $100) to C. In this case, Party C is not a third party beneficiary, because the contract was not made for C's benefit. Assignment takes place after the contract was formed; they may not precede them.
When assignment will be permitted 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. An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality. Certain kinds of performance, therefore, cannot be assigned, because they create a unique relationship between the parties to the contract. For example, the assignment of a legal malpractice claim is void since an assignee would be a stranger to the attorney-client relationship, who was owed no duty by the attorney and would imperil the sanctity of the highly confidential and fiduciary relationship existing between attorney and client.
Torts are not assignable as public policy, and various statutes may prohibit assignment in certain instances. In addition, the Restatement (Second) of Contracts lists prohibitions in §317(2)(a) based upon the effect to the non-assigning party (obligor), with similar prohibitions in the Uniform Commercial Code §2-210.Chapter 18: Assignment and Delegation. LexisNexis study outline. For example, UCC §2-210 states the following:Uniform Commercial Code § 2-210. Delegation of Performance; Assignment of Rights.
Equipment Lease Agreements typically contain language prohibiting the lessee from assigning the lease to a third party. For example, "You have no right to sell, transfer, assign, sublease, or encumber the equipment or this agreement" protects the Lessor’s collateral and credit underwriting guidelines in the event the lessee ever wants to transfer the lease to another party. However, it is possible to assign the lease, but the new party (assignee) will be subject to the lessor’s credit evaluation process and approval. Even if the assignee is approved, the existing lessee’s (assignor’s) personal guarantee(s), if any, might not be released unless the assignee’s credit stature is extremely strong.
Legislation preventing assignment The US Congress first restricted the assignment of claims against the United States government in 1846, when it passed "An Act in Relation to the Payment of Claims".Ch. 66, 9 Stat. 41 (1846)United States Court of Appeals for the Federal Circuit, Dominion Resources, Inc., Dominion Nuclear Connecticut, Inc., and Virginia Electric and Power Company v United States, Gajarsa's opinion, page 2, decided on 25 April 2011, accessed on 18 June 2024 Title 41 of the United States Code § 6305 now provides the federal prohibition on transfers of government contracts, stating that the governmental entity which originally issued a contract must agree to any transfer or it is automatically invalid by law.41 U.S. Code § 6305 - Prohibition on transfer of contract and certain allowable assignments, accessed on 25 January 2021.
Requirements for an effective assignment For assignment to be effective, it must occur in the present: a promise to make a future assignment has no legal effect.US Legal.com, Assignments, accessed 29 June 2023 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. Although this prevents a party from assigning the benefits of a contract that has not yet been made, a court of equity may enforce such an assignment where an established economic relationship between the assignor and the assignee raised an expectation that the assignee would indeed form the appropriate contract in the future.
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. Instead, it merely gives the other party the ability to sue for breach of contract if such an assignment is made. However, an assignment of a contract containing such a clause will be ineffective if the assignee knows of the non-assignment clause, or if the non-assignment clause specifies that "all assignments are void".
Two other techniques to prevent the assignment of contracts are rescission clauses or clauses creating a condition subsequent. The former would give the other party to the contract the power to rescind the contract if an assignment is made; the latter would rescind the contract automatically in such circumstances.
Requirement of a writing There are certain situations in which the assignment must be in writing. Assignment of wages; additionally, statutes may prohibit this assignment Assignment of any interest in real property Assignment of choses in action worth over $500
Delegation 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.
Remedies Legal remedies may be available if the non-assigning party's rights are affected by the assignment.
Revocability 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. There are some exceptions to the revocability of a donative assignment: The assignment cannot be revoked if the obligor has already performed The assignment cannot be revoked if the assignee has received a token chose (chose being derived from the French word for "thing", as in a chose of action) - a physical object that signifies a right to collect, such as a stock certificate or the passbook to a savings account. The assignment cannot 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.
Breach and defenses 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. Furthermore, the obligor can raise against the assignee counterclaims and setoffs that the obligor had against the assignor. For example, suppose that A makes a contract to paint B's house in exchange for $500. A then assigns the right to receive the $500 to C, to pay off a debt owed to C. However, A does such a careless job painting the house that B has to pay another painter $400 to correct A's work. If C sues B to collect the debt, B can raise his counterclaim for the expenses caused by the poor paint job, and can reduce the amount owed to C by that $400, leaving only $100 to be collected.