Assignment
An assignment clause sets out whether, and on what conditions, a party can transfer its rights or obligations under the contract to someone else.
What it does
A contract is a relationship between specific parties. Assignment is the transfer of one party’s position to a third party: a buyer of the business, a group company, a financier, or a successor entity. The default legal position varies by jurisdiction, so contracts state the rule expressly.
The most common formulation is that neither party may assign without the other’s prior written consent, often with the qualifier that consent must not be unreasonably withheld. Variants allow assignment freely to affiliates, or to a purchaser of all or substantially all of the assigning party’s business, without consent.
Strictly, only rights can be assigned. Transferring obligations needs the other party’s agreement, called novation. In practice, assignment clauses cover both.
Many clauses also address change of control: what happens when the party itself is not transferred, but its ownership is. A change of control clause may treat a sale of the company as if it were an assignment, and give the other side a right to consent or to terminate.
Example wording
Neither party may assign, transfer, or otherwise deal with any of its rights or obligations under this Agreement without the prior written consent of the other party, such consent not to be unreasonably withheld or delayed. Either party may, without consent, assign this Agreement to an affiliate or to a successor in connection with a merger, acquisition, or sale of all or substantially all of its assets, provided that the assignee assumes all obligations under this Agreement in writing.
Risks for SMBs
Blocking a sale of the business. A buyer of an SMB will want its customer and supplier contracts to transfer. If each contract requires consent to assign, and there are dozens of them, the buyer’s lawyers will find the gap and the seller has to chase consents at the worst possible time. Negotiating a carve-out for sale of the business, up front, avoids this.
The counterparty changes without warning. A supplier that is bought by a competitor, or a customer that is acquired by a company you would not have chosen to work with, can appear on the other side of your contract with no say from you. A change of control clause with a termination right protects against this.
Affiliate assignment to a shell. A free right to assign to affiliates lets a counterparty move the contract to an under-capitalised group company. Require the assignor to remain liable, or the assignee to meet a financial test.
Confusing assignment with subcontracting. Assignment transfers the contract. Subcontracting keeps the contract in place but lets someone else do the work. The two need different clauses. See subcontracting.
Licences and personal contracts. Software licences are often expressly non-transferable. A buyer of an SMB may find it cannot use the software the business depends on without a new licence. See license grant.
Common variants and negotiation points
- Consent not unreasonably withheld. This is the standard middle ground. Add “or delayed” and a deadline for responding to a consent request.
- Sale of business carve-out. Allow assignment without consent to a buyer of the whole business, subject to written assumption of the obligations. This is reasonable for both sides.
- Change of control. A termination right on change of control is common in supplier templates. Customers should ask for it to be mutual, or limited to a change of control in favour of a competitor.
- Continuing liability. Where assignment to an affiliate is permitted, the original party should stay liable, or guarantee the affiliate’s performance.
- Assignment of receivables. Suppliers often need to assign the right to be paid to a factoring company or bank. A carve-out for assignment of payment rights avoids a consent request every time.
Related clauses
- Subcontracting: delegating performance without transferring the contract.
- License grant: licences are usually non-transferable unless the clause says otherwise.
- Termination for cause: unauthorised assignment is often listed as a material breach.
- Amendment: a novation is effectively an amendment agreed by all three parties.
This page is general information about a common contract clause. It is not legal advice and does not account for your jurisdiction, industry, or the specific contract in front of you. Talk to a qualified lawyer before relying on it.
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