An assignment is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party - the assignor - to another party - the assignee. The legal nature of the assignment determines some additional rights and liabilities that accompany the act.
Assignment of contract rights
Assignment of rights under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if party A contracts to wash party B's car for $10, party A can later assign the benefits of the contract - the right to be paid $10 - to party C. In this scenario, party A has become the assignor, party B has become an obligor, and party C is the assignee. Such an assignment may be donative (essentially given as a gift), or it may be contractually exchanged for consideration. It is important to note, however, that party C is not a third party beneficiary, because the contract itself was not made for the purpose of benefitting party C.
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 can not 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, can not be assigned, because they create a unique relationship between the parties to the contract. For example, if party A contracts to hire an attorney to represent party A in a civil case for a fee of $1000, party A can not then assign his contractual right to legal representation to another party.
Requirements for an effective assignment
For assignment to be effective, it must occur in the present. No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee. A promise to assign in the future has no legal effect. 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, or of the entire contract, to another. However, such a clause does not necessarily destroy the power of either party to make an assignement. 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 recission 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
- Assignment of any interest in real property
- Assignment of choses of action worth over $5,000
- Assignment as collateral for a loan or debt
Revocability
Assignments made for consideration are irrevocable, meaning that the assignor permanently gives up the legal right take back the assignment once it has been made. Donative assignments, on the other hand, are generally revokable, 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 can not be revoked if the obligor has already performed
- The assignment can not 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 can not be revoked if the assignor has set forth in writing the assignment of a simple chose - a contract right not embodied in any for of token.
- Estoppel can prevent the revocation of a donative assignment if the asignee changed their position in reliance on the assignment.
Finally, the death or declaration of bankruptcy by the assignor will automatically revoke the assignment by operation of law.
Breach and defenses
Cause of action for breach lies with the assignee.
If the contract had a provision that made the assignment ineffective, the assignee could sue the assignor for breach of an implied warranty that the right to assign was not subject to defenses. Similarly, the assignee could also sue under an implied warranty theory if the assignor wrongfully revoked the assignment.
Successive assignments
Occasionally, an unscrupulous assignee will assign the exact same rights to multiple parties (usually for some consideration). In that case, the rights of the assignee depend on the revocability of the assignment, and on the timing of the assignments relative to certain other actions.
In a quirk left over from the common law, if the assigment was donative, the last assignee is the true owner of the rights. However, if the assignment was for consideration, the first assignee to actually collect against the assigned contract is the true owner of the rights.
Compare: 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 also bars delegation.
Assignment of property rights
In the law of real property, an assignment is the complete transfer of the right to possess property. With an assignment, the assignor transfers the complete remainder of the interest to the assignee. The assignor must not retain any sort of reversionary interest in the right to possess. The assignee's interest must abut the interest of the next person to have the right to possession. If any time or interest is reserved by a tenant assignor, than the act is an not an assignment, but instead is a sublease.
The liability of the assignee depends upon the the contract formed when the assignment takes place. However, in general, the assignee has privity of estate with a lessor. With privity of estate comes the duty to perform certain obligations under covenant, e.g. pay rent.
If the assignor agrees to continue paying rent to the lessor and subsequently defaults, the lessor can sue both the assignor under the original contract signed with the lessor as well as the assignee because by taking possession of the property interest, the assignee has obligated himself to perform duties under covenant such as the payment of rent.