Assignment clause
An assignment clause controls whether a party can transfer its rights or duties under a contract to someone else, and whether consent is needed.
What it means
An assignment clause says whether either party can hand its side of the contract to another person or company. Lawyers distinguish assigning rights, like the right to be paid, from delegating duties, like doing the work. Under general US rules many contracts can be transferred unless they say otherwise, with exceptions such as personal services, so most commercial contracts include an explicit clause.
Say a freelance developer signs a contract with a startup, and the startup is later sold. If the clause lets either party assign to a buyer of its business, the buyer steps into the contract automatically. If any assignment requires consent, the developer can refuse or negotiate new terms.
A common structure is “no assignment without consent, which will not be unreasonably withheld,” with exceptions for mergers, acquisitions, and affiliates. One-sided versions let the bigger party assign freely while the smaller party needs permission. Note that under US commercial law, a ban on assigning the right to receive payment is often unenforceable, which matters to businesses that sell or finance their invoices.
What to watch for
- Check whether both parties need consent to assign, or only you.
- Look for exceptions for mergers, acquisitions, sales of substantially all assets, or transfers to affiliates, and whether they apply to both sides.
- See whether consent can be refused for any reason or only on reasonable grounds.
- Check whether the party that assigns stays liable after the transfer or is released once the new party takes over.
- Read any change of control language alongside this clause, since a stock sale may not count as an assignment.
Example clause
Neither party may assign or transfer this Agreement, in whole or in part, without the prior written consent of the other party, which shall not be unreasonably withheld. Either party may, however, assign this Agreement without consent to a successor in a merger, acquisition, or sale of all or substantially all of its assets. Any attempted assignment in violation of this Section is void.
Neither side can hand the contract to someone else without permission, except when its whole business is sold or merged.