assignment of contract consent

Assignment of Contract

Jump to section, what is an assignment of contract.

An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.

How Does Assignment of Contract Work?

An assignment of contract is simpler than you might think.

The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.

When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement . Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer. However, the general rule is that contracts are freely assignable unless there is an explicit provision that says otherwise.

In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment ” to notify any other contract signers of the change.

The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. If the assignment is valid, the assignor is not required to obtain the consent or signature of the other parties to the original contract for the valid assignment to take place.

Check out this article to learn more about how assigning a contract works.

Contract Assignment Examples

Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:

Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.

Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.

Here is an article where you can find out more about contract assignments.

Assignment of Contract in Real Estate

Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts .

This process is called real estate wholesaling.

Real Estate Wholesaling

Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.

The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.

This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.

This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.

But how do real estate wholesalers find these properties?

It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:

• Direct mailers
• Place newspaper ads
• Make posts in online forums
• Social media posts

The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.

Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to another person, they are always upfront about during the preliminary phases of the sale.

In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.

After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.

Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.

If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.

One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.

On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.

Learn more about assignment of contract in real estate by checking out this article .

Who Handles Assignment of Contract?

The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract , post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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Assignability Of Contracts: Everything You Need to Know

The assignability of contracts is when one side of a contract agreement transfers the contract to another entity, so that the new entity fulfills the terms of the contract. 3 min read updated on February 01, 2023

The assignability of contracts is when one side of a contract agreement transfers the contract to another entity, so that the new entity fulfills the terms of the contract. Being able to assign contracts depends on a variety of factors, mainly the language contained in the contract. 

How Contract Assignments Work

Some contracts prohibit assignment altogether, while others may allow it with the other party's consent. An example of a basic contract assignment may look like this: 

• Bob contracts with a dairy to deliver a gallon of cream to his house every day. 
• The dairy assigns Bob's contract to another dairy. 
• As long as Bob is notified of the change in provider and gets his gallon of cream every day, his contract is with the new dairy.

Because the law has a preference for the free alienation of property, parties are free to assign contract rights and delegate contractual obligations. 

Assigning a contract to another doesn't always take away the assigning party's liability. Some contracts include a clause that at least one of the original parties guarantees performance — or fulfills the contract terms — no matter what the assignment.

The performance, however, can't be changed in contract assignment. There's a limit to substitution, so the new party has no power to change the performance per the rights stated in the contract. For example, if the obliging party has pledged to perform only if some event happens (with no certainty that it will happen), no assignment should increase the risk to the obliging party if the event doesn't happen through no fault of the obligor.

The nature of a contract's obligations determines its assignability.

When Assignments Won't Be Enforced

In certain cases, contracts can't be assigned.

• A clause in the contract prohibits assignment. This is usually called an anti-assignment clause.
• Assignments can't take place if they materially alter what's expected under the contract. If the assignment affects the expected performance as outlined in the contract, lowers the value of returns (including anticipated returns), or increases risks for the other contract party (the one who's not assigning contractual rights), it's unlikely that any court will enforce the arrangement.
• If an assignment violates public policy or the law, it won't be enforced. For instance, the federal government prohibits certain claim assignments against the government, and many states prohibit an employee from assigning future wages.

Other assignments may not be illegal, but they could still violate public policy. As an example, personal injury claims can't be assigned because doing so might encourage litigation.

When looking into whether one party can transfer a contract or some rights and obligations in the contract, the transferring party has to check into applicable laws and statutes. That party must also check the contract's express language to determine whether or not it can transfer the assignment without obtaining consent from the non-transferring party.

If the contract requires that consent is given and the transferring party doesn't get that consent, it risks a contract breach as well as an invalid, ineffective transfer.

How to Assign a Contract

Follow these steps to assign contracts, when it's allowed for you to do so.

• Carefully study the contract for prohibitions or limitations, such as anti-assignment clauses. In some cases, there isn't a separate anti-assignment clause, but it may be stated in another way, such as language that says, "This contract may not be assigned."
• Execute the assignment. As long as you're free to assign the contract, prepare and enter into the assignment, which is basically an agreement transferring your rights and obligations.
• Notify the obligor, or the non-transferring party. After you assign contract rights to the assignee, notify the other party that was the original contractor, also known as the obligor. This notice relieves you of any liability as stated in the contract, as long as the contract doesn't say differently — for instance, the contract states that you, as the assignor, guarantee performance under the contract. 

Before trying to assign a contract to a third party, it's very important to understand if you're allowed to do so. You'll have to research legal statutes as well as the language in the contract to ensure you follow rules and regulations. Otherwise, you risk a breach of contract .

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Request for Consent to Assignment of Contract | Practical Law

Request for Consent to Assignment of Contract

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Assignment provisions in contracts

Author’s note, Nov. 22, 2014: For a much-improved update of this page, see the Common Draft general provisions article .

(For more real-world stories like the ones below, see my PDF e-book, Signing a Business Contract? A Quick Checklist for Greater Peace of Mind , a compendium of tips and true stories to help you steer clear of various possible minefields. Learn more …. )

Table of Contents

Legal background: Contracts generally are freely assignable

When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor , has transferred its rights under the contract to someone else, known as the assignee , and also has delegated its obligations to the assignee.

Under U.S. law, most contract rights are freely assignable , and most contract duties are freely delegable, absent some special character of the duty, unless the agreement says otherwise. In some situations, however, the parties will not want their opposite numbers to be able to assign the agreement freely; contracts often include language to this effect.

Intellectual-property licenses are an exception to the general rule of assignability. Under U.S. law, an IP licensee may not assign its license rights, nor delegate its license obligations, without the licensor’s consent, even when the license agreement is silent. See, for example, In re XMH Corp. , 647 F.3d 690 (7th Cir. 2011) (Posner, J; trademark licenses); Cincom Sys., Inc. v. Novelis Corp. , 581 F.3d 431 (6th Cir. 2009) (copyright licenses); Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp. , 284 F.3d 1323 (Fed. Cir. 2002) (patent licenses). For additional information, see this article by John Paul, Brian Kacedon, and Douglas W. Meier of the Finnegan Henderson firm.

Assignment consent requirements

Model language

[Party name] may not assign this Agreement to any other person without the express prior written consent of the other party or its successor in interest, as applicable, except as expressly provided otherwise in this Agreement. A putative assignment made without such required consent will have no effect.

Optional: Nor may [Party name] assign any right or interest arising out of this Agreement, in whole or in part, without such consent.

Alternative: For the avoidance of doubt, consent is not required for an assignment (absolute, collateral, or other) or pledge of, nor for any grant of a security interest in, a right to payment under this Agreement.

Optional: An assignment of this Agreement by operation of law, as a result of a merger, consolidation, amalgamation, or other transaction or series of transactions, requires consent to the same extent as would an assignment to the same assignee outside of such a transaction or series of transactions.

• An assignment-consent requirement like this can give the non-assigning party a chokehold on a future merger or corporate reorganization by the assigning party — see the case illustrations below.

• A party being asked to agree to an assignment-consent requirement should consider trying to negotiate one of the carve-out provisions below, for example, when the assignment is connection with a sale of substantially all the assets of the assignor’s business {Link} .

Case illustrations

The dubai port deal (ny times story and story ).

In 2006, a Dubai company that operated several U.S. ports agreed to sell those operations. (The agreement came about because of publicity and political pressure about the alleged national-security implications of having Middle-Eastern companies in charge of U.S. port operations.)

A complication arose in the case of the Port of Newark: The Dubai company’s lease agreement gave the Port Authority of New York and New Jersey the right to consent to any assignment of the agreement — and that agency initially demanded $84 million for its consent.

After harsh criticism from political leaders, the Port Authority backed down a bit: it gave consent in return for “only” a $10 million consent fee, plus $40 million investment commitment by the buyer.

Cincom Sys., Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009) (affirming summary judgment)

A customer of a software vendor did an internal reorganization. As a result, the vendor’s software ended up being used by a sister company of the original customer. The vendor demanded that the sister company buy a new license. The sister company refused.

The vendor sued, successfully, for copyright infringement, and received the price of a new license, more than $450,000 as its damages. The case is discussed in more detail in this blog posting.

The vendor’s behavior strikes me as extremely shortsighted, for a couple of reasons: First, I wouldn’t bet much on the likelihood the customer would ever buy anything again from that vendor. Second, I would bet that the word got around about what the vendor did, and that this didn’t do the vendor’s reputation any good.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, No. 5589-VCP (Del. Ch. Apr. 8, 2011) (denying motion to dismiss).

The Delaware Chancery Court refused to rule out the possibility that a reverse triangular merger could act as an assignment of a contract, which under the contract terms would have required consent. See also the discussion of this opinion by Katherine Jones of the Sheppard Mullin law firm.

Assignment with transfer of business assets

Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party’s business.

Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party’s business to which this Agreement specifically relates.

Optional: The assignee must not be a competitor of the non-assigning party.

• A prospective assigning party might argue that it needed to keep control of its own strategic destiny, for example by preserving its freedom to sell off a product line or division (or even the whole company) in an asset sale.

• A non-assigning party might argue that it could not permit the assignment of the agreement to one of its competitors, and that the only way to ensure this was to retain a veto over any assignment.

• Another approach might be to give the non-assigning party, instead of a veto over asset-disposition assignments, the right to terminate the contract for convenience . (Of course, the implications of termination would have to be carefully thought through.)

Assignment to affiliate

[Either party] may assign this Agreement without consent to its affiliate.

Optional: The assigning party must unconditionally guarantee the assignee’s performance.

Optional: The affiliate must not be a competitor of the non-assigning party.

Optional: The affiliate must be a majority-ownership affiliate of the assigning party.

• A prospective assigning party might argue for the right to assign to an affiliate to preserve its freedom to move assets around within its “corporate family” without having to seek approval.

• The other party might reasonably object that there is no way to know in advance whether an affiliate-assignee would be in a position to fulfill the assigning party’s obligations under the contract, nor whether it would have reachable assets in case of a breach.

Editorial comment: Before approving a blanket affiliate-assignment authorization, a party should consider whether it knew enough about the other party’s existing- or future affiliates to be comfortable with where the agreement might end up.

Consent may not be unreasonably withheld or delayed

Consent to an assignment of this Agreement requiring it may not be unreasonably withheld or delayed.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are to be treated as direct damages.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are not subject to any exclusion of remedies or other limitation of liability in this Agreement.

• Even if this provision were absent, applicable law might impose a reasonableness requirement; see the discussion of the Shoney case in the commentary to the Consent at discretion provision.

• A reasonableness requirement might not be of much practical value, whether contractual or implied by law. Such a requirement could not guarantee that the non-assigning party would give its consent when the assigning party wants it. And by the time a court could resolve the matter, the assigning party’s deal could have been blown.

• Still, an unreasonable-withholding provision should make the non-assigning party think twice about dragging its feet too much, becuase of the prospect of being held liable for damages for a busted transaction. Cf. Pennzoil vs. Texaco and its $10.5 billion damage award for tortious interference with an M&A deal.

• Including an unreasonable-delay provision might conflict with the Materiality of assignment breach provision, for reasons discussed there in the summary of the Hess Energy case.

Consent at discretion

A party having the right to grant or withhold consent to an assignment of this Agreement may do so in its sole and unfettered discretion.

• If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include that in the contract language. Otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law (see the next bullet). On the other hand, asking for such language but not getting it could be fatal to the party’s case that it was implicitly entitled to withhold consent in its discretion.

• If a commercial- or residential lease agreement requires the landlord’s consent before the tentant can assign the lease, state law might impose a reasonableness requirement. I haven’t researched this, but ran across an unpublished California opinion and an old law review article, each collecting cases. See Nevada Atlantic Corp. v. Wrec Lido Venture, LLC, No. G039825 (Cal. App. Dec. 8, 2008) (unpublished; reversing judgment that sole-discretion withholding of consent was unreasonable); Paul J. Weddle, Pacific First Bank v. New Morgan Park Corporation: Reasonable Withholding of Consent to Commercial Lease Assignments , 31 Willamette L. Rev. 713 (1995) (first page available for free at HeinOnline ).

Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)

In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a proposed sublease. The supreme court noted that the contract specifically gave Shoney’s the right, in its sole discretion , to consent to any proposed assignment or sublease.

Significantly, prior case law from Alabama was to the effect that a refusal to consent would indeed be judged by a commercial-reasonableness standard. But, the supreme court said, “[w]here the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be construed as written.” Shoney’s LLC v. MAC East, LLC , No. 1071465 (Ala. Jul. 31, 2009) (on certification by Eleventh Circuit), cited by MAC East, LLC v. Shoney’s [LLC] , No. 07-11534 (11th Cir. Aug. 11, 2009), reversing No. 2:05-cv-1038-MEF (WO) (M.D. Ala. Jan. 8, 2007) (granting partial summary judgment that Shoney’s had breached the contract).

Termination by non-assigning party

A non-assigning party may terminate this Agreement, in its business discretion , by giving notice to that effect no later than 60 days after receiving notice, from either the assigning party or the assignee, that an assignment of the Agreement has become effective.

Consider an agreement in which a vendor is to provide ongoing services to a customer. A powerful customer might demand the right to consent to the vendor’s assignment of the agreement, even in strategic transactions. The vendor, on the other hand, might refuse to give any customer that kind of control of its strategic options.

A workable compromise might be to allow the customer to terminate the agreement during a stated window of time after the assignment if it is not happy with the new vendor.

Assignment – other provisions

Optional: Delegation: For the avoidance of doubt, an assignment of this Agreement operates as a transfer of the assigning party’s rights and a delegation of its duties under this Agreement.

Optional: Promise to perform: For the avoidance of doubt, an assignee’s acceptance of an assignment of this Agreement constitutes the assignee’s promise to perform the assigning party’s duties under the Agreement. That promise is enforceable by either the assigning party or by the non-assigning party.

Optional: Written assumption by assignee: IF: The non-assigning party so requests of an assignee of this Agreement; THEN: The assignee will seasonably provide the non-assigning party with a written assumption of the assignor’s obligations, duly executed by or on behalf of the assignee; ELSE: The assignment will be of no effect.

Optional: No release: For the avoidance of doubt, an assignment of this Agreement does not release the assigning party from its responsibility for performance of its duties under the Agreement unless the non-assigning party so agrees in writing.

Optional: Confidentiality: A non-assigning party will preserve in confidence any non-public information about an actual- or proposed assignment of this Agreement that may be disclosed to that party by a party participating in, or seeking consent for, the assignment.

The Delegation provision might not be necessary in a contract for the sale of goods governed by the Uniform Commercial Code, because a similar provision is found in UCC 2-210

The Confidentiality provision would be useful if a party to the agreement anticipated that it might be engaging in any kind of merger or other strategic transaction.

Materiality of assignment breach

IF: A party breaches any requirement of this Agreement that the party obtain another party’s consent to assign this Agreement; THEN: Such breach is to be treated as a material breach of this Agreement.

A chief significance of this kind of provision is that failure to obtain consent to assignment, if it were a material breach, would give the non-assigning party the right to terminate the Agreement.

If an assignment-consent provision requires that consent not be unreasonably withheld , then failure to obtain consent to a reasonable assignment would not be a material breach, according to the court in Hess Energy Inc. v. Lightning Oil Co. , No. 01-1582 (4th Cir. Jan. 18, 2002) (reversing summary judgment). In that case, the agreement was a natural-gas supply contract. The customer was acquired by a larger company, after which the larger company took over some of the contract administration responsibilities such as payment of the vendor’s invoices. The vendor, seeking to sell its gas to someone else at a higher price, sent a notice of termination, on grounds that the customer had “assigned” the agreement to its new parent company, in violation of the contract’s assignment-consent provision. The appeals court held that, even if the customer had indeed assigned the contract (a point on which it expressed considerable doubt) without consent, the resulting breach of the agreement was not material, and therefore the vendor did not have the right to terminate the contract.

See also (list is generated automatically) :

• Notebook update: Reverse triangular merger might be an assignment of a contract, requiring consent Just updated the Notebook with a citation to a case in which the Delaware Chancery Court refused to rule out the possibility that a reverse...
• Assignment-consent requirements can cause serious problems in future M&A transactions A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a...
• SCOTX rejects implied obligation not to unreasonably withhold consent to assignment of contract In a recent Texas case, two sophisticated parties in the oil and gas busi­ness — let’s call them Alpha and Bravo — were negotiating a contract....
• Ken Adams and the marketplace of ideas I (used to) comment occasionally at Ken Adams’s blog. Recent examples: Here, here, here, here, and here. Ken and I disagree on a number of issues; some...

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Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

Get your assignment of agreement

by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

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Updated on: November 24, 2023 · 3 min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

• The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
• The assignor must agree to assign their rights and duties under the contract to the assignee.
• The assignee must agree to accept, or "assume," those contractual rights and duties.
• The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

• First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
• All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
• Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

• Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
• The effective date of the assignment and assumption agreement
• Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
• Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
• Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
• A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Assignment Agreement Template

Use our assignment agreement to transfer contractual obligations.

Updated February 1, 2024 Written by Josh Sainsbury | Reviewed by Brooke Davis

An assignment agreement is a legal document that transfers rights, responsibilities, and benefits from one party (the “assignor”) to another (the “assignee”). You can use it to reassign debt, real estate, intellectual property, leases, insurance policies, and government contracts.

What Is an Assignment Agreement?

What to include in an assignment agreement, how to assign a contract, how to write an assignment agreement, assignment agreement sample.

Partnership Interest

An assignment agreement effectively transfers the rights and obligations of a person or entity under an initial contract to another. The original party is the assignor, and the assignee takes on the contract’s duties and benefits.

It’s often a requirement to let the other party in the original deal know the contract is being transferred. It’s essential to create this form thoughtfully, as a poorly written assignment agreement may leave the assignor obligated to certain aspects of the deal.

The most common use of an assignment agreement occurs when the assignor no longer can or wants to continue with a contract. Instead of leaving the initial party or breaking the agreement, the assignor can transfer the contract to another individual or entity.

For example, imagine a small residential trash collection service plans to close its operations. Before it closes, the business brokers a deal to send its accounts to a curbside pickup company providing similar services. After notifying account holders, the latter company continues the service while receiving payment.

Create a thorough assignment agreement by including the following information:

• Effective Date:  The document must indicate when the transfer of rights and obligations occurs.
• Parties:  Include the full name and address of the assignor, assignee, and obligor (if required).
• Assignment:  Provide details that identify the original contract being assigned.
• Third-Party Approval: If the initial contract requires the approval of the obligor, note the date the approval was received.
• Signatures:  Both parties must sign and date the printed assignment contract template once completed. If a notary is required, wait until you are in the presence of the official and present identification before signing. Failure to do so may result in having to redo the assignment contract.

Review the Contract Terms

Carefully review the terms of the existing contract. Some contracts may have specific provisions regarding assignment. Check for any restrictions or requirements related to assigning the contract.

Check for Anti-Assignment Clauses

Some contracts include anti-assignment clauses that prohibit or restrict the ability to assign the contract without the consent of the other party. If there’s such a clause, you may need the consent of the original parties to proceed.

Determine Assignability

Ensure that the contract is assignable. Some contracts, especially those involving personal services or unique skills, may not be assignable without the other party’s agreement.

Get Consent from the Other Party (if Required)

If the contract includes an anti-assignment clause or requires consent for assignment, seek written consent from the other party. This can often be done through a formal amendment to the contract.

Prepare an Assignment Agreement

Draft an assignment agreement that clearly outlines the transfer of rights and obligations from the assignor (the party assigning the contract) to the assignee (the party receiving the assignment). Include details such as the names of the parties, the effective date of the assignment, and the specific rights and obligations being transferred.

Include Original Contract Information

Attach a copy of the original contract or reference its key terms in the assignment agreement. This helps in clearly identifying the contract being assigned.

Execution of the Assignment Agreement

Both the assignor and assignee should sign the assignment agreement. Signatures should be notarized if required by the contract or local laws.

Notice to the Other Party

Provide notice of the assignment to the non-assigning party. This can be done formally through a letter or as specified in the contract.

File the Assignment

File the assignment agreement with the appropriate parties or entities as required. This may include filing with the original contracting party or relevant government authorities.

Communicate with Third Parties

Inform any relevant third parties, such as suppliers, customers, or service providers, about the assignment to ensure a smooth transition.

Keep Copies for Records

Keep copies of the assignment agreement, original contract, and any related communications for your records.

Here’s a list of steps on how to write an assignment agreement:

Step 1 – List the Assignor’s and Assignee’s Details

List all of the pertinent information regarding the parties involved in the transfer. This information includes their full names, addresses, phone numbers, and other relevant contact information.

This step clarifies who’s transferring the initial contract and who will take on its responsibilities.

Step 2 – Provide Original Contract Information

Describing and identifying the contract that is effectively being reassigned is essential. This step avoids any confusion after the transfer has been completed.

Step 3 – State the Consideration

Provide accurate information regarding the amount the assignee pays to assume the contract. This figure should include taxes and any relevant peripheral expenses. If the assignee will pay the consideration over a period, indicate the method and installments.

Step 4 – Provide Any Terms and Conditions

The terms and conditions of any agreement are crucial to a smooth transaction. You must cover issues such as dispute resolution, governing law, obligor approval, and any relevant clauses.

Step 5 – Obtain Signatures

Both parties must sign the agreement to ensure it is legally binding and that they have read and understood the contract. If a notary is required, wait to sign off in their presence.

Related Documents

• Sales and Purchase Agreement : Outlines the terms and conditions of an item sale.
• Business Contract : An agreement in which each party agrees to an exchange, typically involving money, goods, or services.
• Lease/Rental Agreement : A lease agreement is a written document that officially recognizes a legally binding relationship between two parties -- a landlord and a tenant.
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The document above is a sample. Please note that the language you see here may change depending on your answers to the document questionnaire.

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Consent to assignment

Consent to assignment clause samples

3. FieldPoint’s Consent to Assignment. FieldPoint hereby consents to this assignment by Assignor to Assignee as provided in this Agreement. Such consent is expressly conditioned upon Assignee’s acknowledgment and agreement that neither this consent nor anything contained in this Agreement shall be deemed to modify, alter, amend, or waive any provisions of the Agreement.

04/11/2017 (FIELDPOINT PETROLEUM CORP)

2. Consent to Assignment. Notwithstanding any other provision of this Agreement, each party hereto hereby consents to the assignment, grant, pledge, conveyance and transfer by the other party hereto, for the benefit of any lender, agent or other secured party under any financing arrangement to which the Partnership is a party, of a lien, security interest or other encumbrance on and continuing security interest in all of such other party’s estate, title and interest in its Interest and the exercise by each such secured party of its rights and remedies in connection therewith, including, without limitation, the right to exercise the voting and consensual rights and other powers with respect to such Interest and the right to foreclose upon, or exercise a power of sale with respect to, such Interest and to cause such secured party or any third party designee or purchaser of such Interest to become an additional or substitute partner in the Partnership.

06/15/2018 (Cheniere Energy Partners, L.P.)

1. Consent to Assignment. The undersigned hereby acknowledges and consents to the assignment of the Power Plant Equipment Lease to Buyer and the assumption of the Power Plant Equipment Lease by Buyer in conjunction with Buyer’s acquisition of the Hotel. The undersigned waives any and all rights of notice relating to such assignment and any right to terminate the Power Plant Equipment Lease as a result of such assignment and any default, event of default or defense to enforceability that may otherwise arise as a result of such assignment.

09/27/2016 (Playa Hotels & Resorts B.V.)

3. Consent to Assignment. Assignor hereby consents to the admittance of Assignee as a substitute member of the Company. Assignor hereby waives all provisions, if any, in the Limited Liability Company Agreement of the Company or provided in the Delaware Limited Liability Company Act or any other applicable law, that would prohibit, delay, require notice of, grant rights in connection with, or require compliance with any other requirements in connection with, such assignment and admission.

06/29/2018 (Berry Petroleum Corp)

3.Consent to Assignment. Citi consents to the assignment and assumption of the Agreement from Polaris India to Virtusa India , and with respect to Polaris India, the assignment and assumption of any Transactional Document executed by Polaris India to Virtusa India, and Citi acknowledges the rights, responsibilities, and authority of Virtusa India as though Virtusa India were the original party under the Agreement and Transactional Documents to which Polaris India was a party. Other than as set forth above, for the other Transactional Documents to which an Affiliate of Polaris India was a party, such Transactional Documents are not assigned but rather shall now reflect the changed name of such Affiliate per the table above.

07/31/2020 (VIRTUSA CORP)

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Understanding the Contractor’s Consent: The Hidden Dangers in a Common Form

The “Contractor’s Consent to Assignment” or “Contractor’s Consent” is a common form requested at the start of a commercial construction project and required by the lender. Many times, owners will wait until the prime contract is signed to present contractors with this document, which they present as a matter of housekeeping.

The purpose of the Contractor’s Consent is to allow the owner’s bank to assume ownership in the event that the owner defaults on its loan in order to allow the bank to compel the contractor complete the project. These documents serve a legitimate purpose in ensuring that the bank will not be left with a hole in the ground; however, the contracts have significant legal consequences and often include substantial waivers and promises that contractors would never accept during negotiation of the prime contract.

When reviewing these documents, contractors should keep an eye out for the following clauses, which can drastically affect their rights regardless of whether the owner actually comes to default on their loan.

Limitation on Change Orders

Most Contractor’s Consent forms include provisions barring a contractor from entering into an agreement with the owner to amend the Construction Contract without the written approval of the lender. These provisions ensure that the business terms of a deal the bank is financing don’t change without the bank’s express consent.

While reasonable in purpose, these provisions can present a problematic roadblock as project schedules rarely allow for the additional time needed to obtain these approvals, and the stated obligation means that even legitimate change orders signed by the owner for work already performed may be deemed invalid if the contractor did not wait for the bank’s approval.

To correct this provision, contractors should request that approvals either be limited to change orders exceeding a certain threshold amount for individual change orders or exceeding a total amount for all changes. This not only allows the project to keep moving without unnecessary delays, but also ensures that significant changes won’t be made without the bank’s knowledge.

Limitation on Termination Right

Many forms also include language that restricts the contractor’s right to suspend or terminate the contract without the bank’s approval. Contractors should strongly resist such provisions, as they need the ability to stop work (and to stop incurring obligations to their subcontractors) in the instance they are not being paid—regardless of whether the owner is making its loan payments.

To address this concern, most banks will allow contractors to amend these provisions to suspend or terminate, but only after they have given the bank advance notice. This adjustment helps both the contractor and the bank, giving the contractor the ability to put more pressure on the owner by notifying the bank of any default and to stop work if needed, while simultaneously allowing the bank to receive earlier notice of problems on the project.

Waiver or Subrogation of Mechanics’ Lien Rights

Many banks ask the contractor to waive their mechanics’ lien rights (or allow the bank to step in front of the lien) as part of the Contractor’s Consent. Contractors should push back strongly on such provisions as liens are powerful and are often the only way to receive payment if the owner becomes bankrupt. In many instances, banks will agree—albeit reluctantly—to accept this change, but contractors should expect some pushback, and this may be a sticking point.

Waiver of Unpaid Amounts

Nearly all Contractor’s Consent forms include language that requires the contractor to continue performance once the bank takes place of an owner, as long as the bank pays all bills from that point forward. While this may seem reasonable on the surface, this provision leaves the contractor unpaid for all amounts owed at the time of the default, and these amounts almost always remain unsatisfied.

Instead, contractors should insist that if the bank assumes the contract, then the bank must also assume the owner’s obligations—including payment of outstanding amounts. Again, banks will push back on this modification to the terms but, in the end, most will accept some version of this provision.

Ability to Sell and Assign

Many forms include language allowing the bank to sell or assign the project to a third party in the event of an owner default. Because most banks are not in the business of owning and operating projects, this can leave the contractor at significant risk if the bank selects either a disreputable owner for the new assignment or an entity presenting a payment risk.

To avoid this risk, contractors should insist that they must be allowed to accept or reject the bank’s chosen assignee, with the caveat that approval will not unreasonably be withheld.

Contractors should be aware that some banks will balk at some of these positions, and negotiation may be tense at a time when all parties are anxious for the project to start. Nonetheless, contractors that insist on fair contracts will have greater protections and will be in better position to avoid the significant pitfalls that could otherwise result.

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Out-law / your daily need-to-know.

Out-Law Guide 4 min. read

Assignment and novation

19 Aug 2011, 4:40 pm

Assignment involves the transfer of an interest or benefit from one person to another. However the 'burden', or obligations, under a contract cannot be transferred.

Assignment in construction contracts

As noted above only the benefits of a contract can be assigned - not the burden. In the context of a building contract:

• the employer may assign its right to have the works constructed, and its right to sue the contractor in the event that the works are defective – but not its obligation to pay for the works;
• the contractor may assign its right to payment of the contract sum - but not its obligation to construct the works in accordance with the building contract or its obligation to meet any valid claims, for example for defects.

After assignment, the assignee is entitled to the benefit of the contract and to bring proceedings against the other contracting party to enforce its rights. The assignor still owes obligations to the other contracting party, and will remain liable to perform any part of the contract that still has to be fulfilled since the burden cannot be assigned. In practice, what usually happens is that the assignee takes over the performance of the contract with effect from assignment and the assignor will generally ask to be indemnified against any breach or failure to perform by the assignee.  The assignor will remain liable for any past liabilities incurred before the assignment.

In construction contracts, the issue of assignment often arises in looking at whether collateral warranties granted to parties outside of the main construction contract can be assigned.

Funders may require the developer to assign contractual rights against the contractor and the design team as security to the funder, as well as the benefit of performance bonds and parent company guarantees. The developer may assign such rights to the purchaser either during or after completion of the construction phase.

Contractual assignment provisions

Many contracts exclude or qualify the right to assignment, and the courts have confirmed that a clause which provides that a party to a contract may not assign the benefit of that contract without the consent of the other party is legally effective and will extend to all rights and benefits arising under the contract, including the right to any remedies. Other common qualifications on the right to assign include:

• a restriction on assignment without the consent of the other party, whether or not such consent is not to be unreasonably withheld or delayed;
• only one of the parties may assign;
• only certain rights may be assigned – for example, warranties and indemnities may be excluded;
• a limit on the number of assignments - as is almost always the case in respect of collateral warranties;
• a right to assign only to a named assignee or class of assignee.

Note that in some agreements where there is a prohibition on assignment, it is sometimes possible to find the reservation of specific rights to create a trust or establish security over the subject matter of the agreement instead.

Legal and equitable assignment

The Law of Property Act creates the ability to legally assign a debt or any other chose in action where the debtor, trustee or other relevant person is notified in writing. If the assignment complied with the formalities in the Act it is a legal assignment, otherwise it will be an equitable assignment.

Some transfers can only take effect as an equitable assignment, for example:

• an oral assignment;
• an assignment by way of charge;
• an assignment of only part of the chosen in action;
• an assignment of which notice has not been given to the debtor;
• an agreement to assign.

If the assignment is equitable rather than legal, the assignor cannot enforce the assigned property in its own name and to do so must join the assignee in any action. This is designed to protect the debtor from later proceedings brought by the assignor or another assignee from enforcing the action without notice of the earlier assignment.

Security assignments

Using assignment as a way of taking security requires special care, as follows:

• if the assignment is by way of charge, the assignor retains the right to sue for any loss it suffers caused by a breach of the other contract party;
• if there is an outright assignment coupled with an entitlement to a re-assignment back once the secured obligation has been performed, it is an assignment by way of legal mortgage.

Please see our separate Out-Law guide for more information on types of security.

Restrictions on assignment

There are restrictions on the assignment of certain types of interest on public policy grounds, as follows:

• certain personal contracts – for example, a contract for the employment of a personal servant or for the benefit of a motor insurance policy cannot be assigned;
• a bare cause of action or 'right to sue' where the assignee has no commercial interest in the subject matter of the underlying transaction cannot be assigned;
• certain rights conferred by statute – for example, a liquidator's powers to bring wrongful trading proceedings against a director – cannot be assigned;
• an assignment of a contract may not necessarily transfer the benefit of an arbitration agreement contained in the contract;
• the assignment of certain rights is regulated – for example, the assignment of company shares or copyright.

If you want to transfer the burden of a contract as well as the benefits under it, you have to novate. Like assignment, novation transfers the benefits under a contract but unlike assignment, novation transfers the burden under a contract as well.

In a novation the original contract is extinguished and is replaced by a new one in which a third party takes up rights and obligations which duplicate those of one of the original parties to the contract. Novation does not cancel past rights and obligations under the original contract, although the parties can agree to novate these as well.

Novation is only possible with the consent of the original contracting parties as well as the new party. Consideration (the 'price' paid, whether financial or otherwise, by the new party in return for the contract being novated to it) must be provided for this new contract unless the novation is documented in a deed signed by all three parties.

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Don’t Confuse Change of Control and Assignment Terms

• David Tollen
• September 11, 2020

An assignment clause governs whether and when a party can transfer the contract to someone else. Often, it covers what happens in a change of control: whether a party can assign the contract to its buyer if it gets merged into a company or completely bought out. But that doesn’t make it a change of control clause. Change of control terms don’t address assignment. They say whether a party can terminate if the other party goes through a merger or other change of control. And they sometimes address other change of control consequences.

Don’t confuse the two. In a contract about software or other IT, you should think through the issues raised by each. (Also, don’t confuse assignment of contracts with assignment of IP .)

Here’s an assignment clause:

Assignment. Neither party may assign this Agreement or any of its rights or obligations hereunder without the other’s express written consent, except that either party may assign this Agreement to the surviving party in a merger of that party into another entity or in an acquisition of all or substantially all its assets. No assignment becomes effective unless and until the assignee agrees in writing to be bound by all the assigning party’s obligations in this Agreement. Except to the extent forbidden in this Section __, this Agreement will be binding upon and inure to the benefit of the parties’ respective successors and assigns.

As you can see, that clause says no assignment is allowed, with one exception:

• Assignment to Surviving Entity in M&A: Under the clause above, a party can assign the contract to its buyer — the “surviving entity” — if it gets merged into another company or otherwise bought — in other words, if it ceases to exist through an M&A deal (or becomes an irrelevant shell company).

Consider the following additional issues for assignment clauses:

• Assignment to Affiliates: Can a party assign the contract to its sister companies, parents, and/or subs — a.k.a. its “Affiliates”?
• Assignment to Divested Entities: If a party spins off its key department or other business unit involved in the contract, can it assign the contract to that spun-off company — a.k.a. the “divested entity”? That’s particularly important in technology outsourcing deals and similar contracts. They often leave a customer department highly dependent on the provider’s services. If the customer can’t assign the contract to the divested entity, the spin-off won’t work; the new/divested company won’t be viable.
• Assignment to Competitors: If a party does get any assignment rights, can it assign to the other party’s competitors ? (If so, you’ve got to define “Competitor,” since the word alone can refer to almost any company.)
• All Assignments or None: The contract should usually say something about assignments. Otherwise, the law might allow all assignments. (Check your jurisdiction.) If so, your contracting partner could assign your agreement to someone totally unacceptable. (Most likely, though, your contracting partner would remain liable.) If none of the assignments suggested above fits, forbid all assignments.

Change of Control

Here’s a change of control clause:

Change of Control. If a party undergoes a Change of Control, the other party may terminate this Agreement on 30 days’ written notice. (“Change of Control” means a transaction or series of transactions by which more than 50% of the outstanding shares of the target company or beneficial ownership thereof are acquired within a 1-year period, other than by a person or entity that owned or had beneficial ownership of more than 50% of such outstanding shares before the close of such transactions(s).)

• Termination on Change of Control: A party can terminate if controlling ownership of the other party changes hands.

Change of control and assignment terms actually address opposite ownership changes. If an assignment clause addresses change of control, it says what happens if a party goes through an M&A deal and no longer exists (or becomes a shell company). A change of control clause, on the other hand, matters when the party subject to M&A does still exist . That party just has new owners (shareholders, etc.).

Consider the following additional issues for change of control clauses:

• Smaller Change of Ownership: The clause above defines “Change of Control” as any 50%-plus ownership shift. Does that set the bar too high? Should a 25% change authorize termination by the other party, or even less? In public companies and some private ones, new bosses can take control by acquiring far less than half the stock.
• No Right to Terminate: Should a change of control give any right to terminate, and if so, why? (Keep in mind, all that’s changed is the party’s owners — possibly irrelevant shareholders.)
• Divested Entity Rights: What if, again, a party spins off the department or business until involved in the deal? If that party can’t assign the contract to the divested entity, per the above, can it at least “sublicense” its rights to products or service, if it’s the customer? Or can it subcontract its performance obligations to the divested entity, if it’s the provider? Or maybe the contract should require that the other party sign an identical contract with the divested entity, at least for a short term.

Some of this text comes from the 3rd edition of The Tech Contracts Handbook , available to order (and review) from Amazon  here , or purchase directly from its publisher, the American Bar Association, here.

Want to do tech contracts better, faster, and with more confidence? Check out our training offerings here: https://www.techcontracts.com/training/ . Tech Contracts Academy has  options to fit every need and schedule: Comprehensive Tech Contracts M aster Classes™ (four on-line classes, two hours each), topical webinars (typically about an hour), customized in-house training (for just your team).   David Tollen is the founder of Tech Contracts Academy and our primary trainer. An attorney and also the founder of Sycamore Legal, P.C. , a boutique IT, IP, and privacy law firm in the San Francisco Bay Area, he also serves as an expert witness in litigation about software licenses, cloud computing agreements, and other IT contracts.

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Assignment of Rights Contract Clauses (121)

Grouped into 3 collections of similar clauses from business contracts.

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Request for Consent to Assignment of Contract

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Patent Assignment Agreement Notarization Process

The notarization of a patent assignment agreement is a critical step in the transfer of intellectual property ownership. It involves verifying the identities of signatories, certifying the authenticity of the agreement, and ensuring compliance with applicable laws. The notarization process requires specific documents, including the agreement itself, identification documents, and proof of ownership. The Notary Public plays a crucial role in verifying identities, preventing fraud, and upholding the highest standards of professionalism. By understanding the notarization process, individuals and companies can ensure a smooth transfer of intellectual property ownership and protect their rights. To explore the intricacies of this process, continue with a comprehensive review of the steps involved.

Table of Contents

Understanding Patent Assignment Agreements

A patent assignment agreement is a legal contract that transfers ownership of a patent or patent application from one entity to another, granting the assignee the right to exercise all rights and responsibilities associated with the intellectual property. This agreement is vital for maintaining patent protection, as it safeguards that the assignee can exercise control over the intellectual property, including the right to manufacture, use, and sell the patented invention. The assignment agreement also enables the assignee to pursue legal action against infringers, thereby protecting the intellectual property from unauthorized use. A well-drafted patent assignment agreement is imperative for companies, inventors, and innovators seeking to transfer ownership of their patents or patent applications. By executing this agreement, parties can guarantee a smooth transfer of rights, maintaining the integrity of their intellectual property and securing patent protection. The agreement serves as a vital tool in the management and commercialization of intellectual property, facilitating the exchange of valuable technology and innovations between entities.

Required Documents for Notarization

To validate the legitimacy and enforceability of a patent assignment agreement, certain documents must be prepared and notarized, thereby authenticating the transfer of patent ownership and protecting the interests of all parties involved. These documents serve as evidence of the assignment and confirm that the transfer of patent rights is legitimate and legally binding.

The following documents are typically required for notarization:

• The patent assignment agreement itself, which outlines the terms and conditions of the transfer
• Identification documents for all parties involved, such as passports or driver's licenses, for identity verification
• Proof of ownership documents, such as patent certificates or previous assignment agreements, for document authentication
• Any additional documents required by local authorities or specific to the jurisdiction in which the patent is registered

Signature Requirements and Roles

The execution of a patent assignment agreement requires the signatures of all parties involved, including the assignor and assignee, as well as any witnesses or notaries, to confirm their acceptance of the terms and conditions outlined in the agreement. These signatures serve as a legal acknowledgment of the parties' understanding and consent to the transfer of patent rights. In today's digital age, digital signatures have become a common practice, offering a convenient and efficient way to execute agreements. Electronic authentication methods, such as encrypted digital certificates, can be used to verify the authenticity of digital signatures. It is vital to confirm that all parties comprehend their responsibilities and obligations in the signing process, including the assignor, assignee, witnesses, and notaries. Clear designation of signature blocks and instructions can facilitate a smooth signing process. Ultimately, the signature requirements and functions in a patent assignment agreement are pivotal in establishing a legally binding contract that effectively transfers patent rights.

The Notarization Process Step-by-Step

In the notarization process, a Notary Public plays a vital part in verifying the identities of the signatories and certifying the authenticity of the patent assignment agreement. The notarization procedure involves a series of steps that must be carefully followed to validate the document. By examining the Notary Public's function and the notarization procedure, we can gain a thorough understanding of this essential step in the patent assignment process.

Notary Public Role

Executed in front of a notary public, the patent assignment agreement undergoes a rigorous notarization process. The notary public plays a crucial role in verifying the identities of the signatories and ensuring that they sign the agreement voluntarily. The notary public is responsible for maintaining the integrity of the notarization process, adhering to strict Notary Ethics, and upholding the highest standards of professionalism.

The notary public's role extends beyond mere witnessing of signatures. They must:

• Verify the identities of the signatories through valid government-issued identification
• Ensure the signatories are signing voluntarily and without duress
• Witness the signatures and affix their own signature and seal
• Maintain accurate records of the notarization, including the date, time, and location of the signing

Notary Fees are typically applicable for the services rendered, and the notary public must disclose these fees upfront to the parties involved. By engaging the services of a notary public, the parties to the patent assignment agreement can ensure that the notarization process is conducted with the highest level of integrity and authenticity.

Notarization Procedure Overview

Upon presentation of the patent assignment agreement, the notarization process commences with the notary public reviewing the document to verify its completeness and accuracy. This step is vital to guarantee that all required information is provided and that the agreement conforms to the relevant legal standards.

Next, the notary public will confirm the identities of the signatories, typically through government-issued identification documents. This verification process is vital to establish the authenticity of the signatures and prevent potential fraud.

The signatories will then affix their electronic signatures to the agreement, which must comply with the applicable electronic signature laws and regulations. The notary public will also attach their electronic signature, accompanied by their unique identification number, to authenticate the document and confirm its legitimacy.

Notary Public Role and Responsibilities

In the context of a patent assignment agreement, the notary public plays a vital part in authenticating and validating the document. As a neutral third-party witness, the notary is responsible for verifying the identities of the signatories and overseeing the notarization process to prevent fraud and guarantee compliance with applicable laws. The notary's legal proficiency and oversight of the notarization process are vital in establishing the credibility of the patent assignment agreement.

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Notary's Legal Expertise

A notary public, acting as an impartial third-party witness, plays a vital function in validating the authenticity and validity of the patent assignment agreement by verifying the identities of the parties involved and attesting to their signatures. This responsibility requires a notary to possess a certain level of legal knowledge, which is fundamental in preventing fraudulent activities and complying with jurisdictional laws.

A notary's legal knowledge is vital in several aspects, including:

• Understanding the nuances of patent assignment agreements and their legal implications
• Recognizing potential red flags, such as forged signatures or incomplete documentation
• Applying knowledge of Notary Ethics, such as maintaining impartiality and confidentiality
• Being aware of Jurisdictional Limits, guaranteeing that the notarization process adheres to local laws and regulations

Notarization Process Oversight

During the notarization process, the notary public assumes a vital function in authenticating the patent assignment agreement's authenticity and validity by carefully overseeing the entire process. This supervision is imperative to verify that the agreement is legally binding and compliant with regulatory requirements.

The notary public's function involves verifying the identities of the signatories, ascertaining that they are of sound mind and under no coercion, and witnessing the signing of the agreement. This process is pivotal in maintaining the integrity of the patent assignment agreement and preventing fraudulent activities.

Filing the Notarized Agreement

The notarized patent assignment agreement must be filed with the relevant authorities, such as the United States Patent and Trademark Office (USPTO), to confirm its validity and enforceability. This step is imperative in making certain that the agreement is legally binding and recognizable by the relevant parties.

Once the agreement is notarized, it is necessary to file it with the USPTO to update their records and reflect the changes in patent ownership. This filing process typically involves submitting the notarized agreement along with the required filing fees. It is fundamental to verify that the agreement is accurately and completely filed to avoid any potential issues or disputes.

• Filing fees must be paid in full to complete the filing process
• The notarized agreement should be stored in a secure document storage system for future reference
• The filing process should be completed within the specified timeframe to avoid delays
• The USPTO may request additional documentation or information to support the filing

Frequently Asked Questions

Can electronic signatures be used for patent assignment agreements?.

Electronic signatures can be used for patent assignment agreements, leveraging digital authentication and advanced signature security measures to guarantee authenticity, integrity, and non-repudiation, thereby meeting the legal and regulatory requirements for enforceable agreements.

Who Bears the Cost of Notarization Fees in a Patent Assignment?

In general, the distribution of notarization fees is negotiable between parties, and liability typically falls on the assignor, although it may be stipulated in the agreement that the assignee bears the cost, highlighting the importance of clear fees distribution terms.

Is Notarization Required for All Types of Patent Assignments?

Notarization requirements for patent assignments vary across jurisdictions, influenced by historical context and nuanced jurisdictional issues, making it crucial to examine specific laws and regulations to determine whether notarization is mandatory for all types of assignments.

Can a Patent Assignment Agreement Be Notarized Remotely?

In the digital age, remote notarization is possible through virtual verification and online authentication platforms, enabling secure and efficient notarization of patent assignment agreements without physical presence, validating authenticity and legitimacy.

What Happens if a Notarized Agreement Is Lost or Destroyed?

In the event a notarized agreement is lost or destroyed, Document Recovery efforts may be undertaken to recreate the original. However, Legal Ramifications may arise if authenticity cannot be verified, potentially compromising the agreement's validity and enforceability.

Parties To Arbitration In Nigeria: Exploring The Concept And Legal Bases Of 'Non-Signatory Parties' In Arbitration

Contributor.

UNDERSTANDING ARBITRATION BASICS

Arbitration is a widely recognized alternative dispute resolution method based on the consent of the involved parties. Unlike court litigation, arbitration requires voluntary agreement, meaning parties cannot be forced into arbitration without their consent. This consent is usually demonstrated through an arbitration clause or agreement, highlighting the parties' intention to resolve disputes through arbitration. This principle aligns with the doctrine of privity of contract, which states that only those who are parties to a contract can enforce or be bound by it. According to the Arbitration and Mediation Act 2023 (AMA), only parties bound by the arbitration agreement can be joined to the arbitration. 1

Initially, it was assumed that only signatories to an arbitration agreement were bound by its terms. However, over time, various statutes, legal theories, and principles have expanded the scope of those who may be considered bound by an arbitration agreement, even if they did not sign it. These individuals or entities are referred to as "non-signatory parties" throughout this article. These theories, rooted in common law contract principles, have been applied in arbitration to address the inclusion of third parties in arbitration proceedings.

This article aims to analyze these theories and their relevance in Nigeria in the context of the AMA. By understanding these concepts, parties can better navigate the complexities of arbitration and ensure that their interests are adequately protected.

LEGAL THEORIES ON 'NON-SIGNATORY PARTIES' TO AN ARBITRATION

Despite arbitration's consensual nature, arbitrators increasingly face requests involving either signatories seeking to join non-signatories to the arbitration proceedings or non-signatories seeking to invoke an arbitration clause. These applications are usually based on the following legal theories:

The agency theory stems from contract law and binds a principal to actions, including contracts executed by their agent. In arbitration, a non-signatory can be joined as a party if their agent, acting on their behalf, is a signatory to the arbitration agreement. While there is limited local case law on this theory's application to non-signatories in arbitration, the Court of Appeal implicitly supported this theory in Mekwunye v. LOTUS Capital Ltd & Ors. 2 The court suggested that agents and privies of signatories to an arbitration clause are deemed signatories to the arbitration agreement. This means they can be considered eligible to participate in arbitration proceedings. Additionally, the court dismissed the argument that a third party cannot be part of the agreement, indicating that multiple parties can be involved in arbitration under one contract if there is mutual consent to arbitration. 3

This decision indicates that the agency theory can justify the inclusion of non-signatories in arbitration proceedings, provided there is sufficient consent and agency relationship.

Assignment and Novation

Through assignment and novation, rights and obligations under a contract can be transferred to a third party without needing the original counter-party's consent. This concept serves as an exception to the doctrine of privity of contract, allowing the assignee to enforce the contract's terms against the original counterparty. Choses in action, which can be assigned, include debts, shares, negotiable instruments, insurance policies, bills of lading, patents, and copyrights. The Court of Appeal in Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd 4 defined assignment as transferring rights, property, or title to someone else for their benefit.

Generally, at common law, contract obligations cannot be transferred to a third party without novation, which requires the consent of all parties involved. Executing an arbitration agreement is usually considered a legal obligation rather than a right, meaning it cannot be transferred without consent.

For example, if a creditor with an arbitration clause in a debt agreement assigns the right to debt repayments to a third party, the third-party assignee does not inherit the obligation to refer disputes to arbitration. The assignee only receives the rights and benefits from the original contract. However, if a dispute arises and the original debtor chooses to pursue the third-party assignee, the debtor must submit the dispute to arbitration if the original contract includes an arbitration clause. In this scenario, the third-party assignee has the discretion to choose whether to participate in arbitration and cannot be compelled to do so.

Single Economic Unit

The Single Economic Unit (SEU) theory, also known as the "group of companies doctrine," was first established in the French case Dow Chemical v Isover Saint Gobain 5 . In this case, the claimant's parent company and another subsidiary were allowed to join the arbitration proceedings despite not being signatories to the arbitration agreement and the defendant's objection. The International Chamber of Commerce's tribunal permitted the joinder based on the grounds that the claimant and the parties sought to be joined constituted "one and the same economic entity" despite their distinct corporate personalities.

The tribunal set out three conditions for applying the SEU doctrine:

• Group Structure: There must be a tightly-knit group of companies, regardless of their distinct corporate personalities.
• Active Role: The non-signatory must have played an active role in the conclusion, performance, and termination of the contract containing the arbitration clause.
• Mutual Intention: There must be evidence of mutual intention or understanding among the parties that the group of companies is considered a "unity bound by the arbitration agreement."

While there is no reported case in Nigeria where the SEU doctrine has been applied, the legal rationale behind it is similar to the alter ego doctrine used in piercing the corporate veil, which is applicable in Nigeria. This similarity suggests that the SEU doctrine could potentially be applicable in Nigeria. However, criticisms against the doctrine persist, mainly due to concerns that parent companies might become susceptible to being joined in arbitration proceedings because of commercial contracts executed by their subsidiaries.

BEYOND SIGNATURES: INCLUSIVE ARBITRATION PRACTICES

Arbitration relies heavily on the consent of the involved parties, traditionally shown by their signatures on an arbitration agreement. However, as highlighted in this article, there are several legally recognized ways to establish consent. The Arbitration and Mediation Act (AMA) takes a broad and inclusive stance on the joinder of parties, allowing those proven to be bound by the arbitration agreement to join the proceedings. This approach means that not only signatories, but also other entities or individuals shown to be bound by the agreement may be included, embracing the legal doctrines discussed.

Moreover, entities or individuals who consent to join the arbitration with the original signatories' agreement are also bound by the arbitration agreement and can participate in the proceedings. It's essential to note that for arbitration conducted outside Nigeria, if a non-signatory is joined against their will, enforcing the award against them in Nigeria might face challenges in local courts. Therefore, it's crucial for all parties to seek adequate legal advice to navigate these complexities effectively.

PRACTICAL GUIDELINES FOR MANAGING THE INCLUSION OF NON-SIGNATORY PARTIES IN ARBITRATION

Understanding how to effectively manage the inclusion of non-signatory parties in arbitration is crucial for businesses and individuals involved in contractual agreements.

a. Contract Drafting and Review: It is essential to draft arbitration clauses with precise language that specifies the parties and their roles. This helps prevent future disputes. Including provisions that address the potential inclusion of non-signatory parties adds clarity and reduces ambiguity.

b. Risk Management: Consider the wider implications of contractual agreements and prepare for possible arbitration with entities beyond the immediate signatories. This helps in assessing and managing potential risks effectively.

c. Dispute Resolution Strategy

• Clear Strategies: Developing a clear and comprehensive dispute resolution plan that considers various scenarios, including the involvement of third parties, is beneficial.
• Unified Approach: For those involved in groups or networks, aligning dispute resolution strategies ensures a cohesive approach to arbitration. This reduces the risk of conflicting outcomes and enhances the effectiveness of the arbitration process.

By focusing on these practical guidelines, all parties involved in arbitration can better navigate the complexities of involving non-signatory parties. This proactive approach helps in minimizing conflicts and ensuring efficient dispute resolution.

SIMPLIFYING ARBITRATION COMPLEXITIES

Navigating the complexities of arbitration, especially regarding the inclusion of non-signatory parties, can be challenging. At SimmonsCooper Partners, we understand these challenges and offer comprehensive advisory services, including conducting contract audits to ensure that arbitration clauses and agreements are clear, up-to-date, and reflective of current structures. For further legal advice, please contact Olayinka Alao or Daniel Adegbamigbe.

1 See Section 40 of the Arbitration and Mediation Act 2023

2 (2018) LPELR-45546 (CA)

3 Per Abubakar JCA (Pp. 34-36 paras F-D)

4 (2009) LPELR-4381(CA)

5 Dow Chemical France & Ors v Isover Saint Gobain, ICC Case No. 4131, Interim Award of 23 September 1982

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Litigation, Mediation & Arbitration

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