Transfer and Assignment: Everything You Need to Know
A copyright transfer and assignment refers a copyright owner temporarily or permanently transfers part, or all, of his rights to another party. 3 min read
A copyright transfer and assignment refers to the different ways in which a copyright owner temporarily or permanently transfers part, or all, of his rights to another party.
The U.S. Constitution provides the basis for copyright protection. A copyright refers to the legal rights conferred on a person in recognition of his/her creative work. Copyrights protect original works of IP (intellectual property) whether it has been published or not. Ideas can't be copyrighted — what can be copyrighted is the way an individual chooses to express the creative idea.
Copyright Ownership
The owner of a copyright:
- Retains the right to lease or sell copies of his/her work to others or permit them to perform, record or display it in public.
- Decides whether others can revise portions, or all, of the work and whether they can make copies.
Copyright differs from patents and trademarks since patents provide protection to inventions while trademarks protect phrases/names used to identify specific products or services.
Copyright Transfer
A copyright transfer could be non-exclusive. Licensing agreements are one of the most common forms of a non-exclusive transfer of copyrights.
For example, most computer software sold on the open market are actually transfers of the owner's rights to other individuals for use of the software for a period of time.
However, the owner still retains ownership of the copyright. Licenses are usually non-transferable — meaning that the individual who purchased the software has no right to give, lend or sell the licensed item to third parties without the express consent of the copyright owner.
Copyright Assignment
Unlike a non-exclusive copyright transfer such as a licensing agreement, a copyright assignment is a form of exclusive copyright transfer. Copyright assignments could be made on part or on the entirety of an intellectual work. The copyright can be temporary — meaning that the copyright will return to its original owners after a specified duration.
It could also be permanent — meaning that the person receiving the copyright has the rights to use or distribute the copyrighted material as he or she sees fit. An instance of a permanent copyright assignment is a work-for-hire agreement stating that the copyright of the work belongs to the entity that is purchasing the work for hire and not the entity that created it.
The Recordation Process
The requirements for recordation include all applicable fees, a legible and complete copy of the property to be transferred, and the signature or certified true copy of the individual's signature assigning the copyright. Publishing or registration with the copyright office of the property to be transferred is not a requirement. The United States Copyright Office provides a cover sheet which can be used to submit the work for recordation. Although the use of this sheet is not mandatory, it is encouraged.
Although every assignment is a transfer of interest, not every transfer of interest can be called an assignment. It really depends on the intention of the copyright owner (i.e. the assignor). This means that a copyright assignment is dissimilar to other kinds of transfers such as a subrogation, a novation, or a sublease.
Subrogation
Subrogation refers to a substitution of one party for another. It is the equitable remedy where an individual steps into the position of another to take over all rights to a claim for monetary damages.
A sublease refers to a type of transfer where the tenant retains a partial right of reentry into the leased premises. However, if said tenant executes a transfer of the leasehold estate while retaining no reversionary interest nor right of reentry, such a transfer is called an assignment. Under a sublease agreement, the original tenant isn't released from the stipulations of the original lease. However, in a transfer, both the original tenant and the assignee are bound by the conditions stated in the original lease.
Although a copyright assignment and a novation have negligible differences, the distinction is an essential one. A novation refers to the mechanism whereby a contracting party transfers the entirety of its benefits and obligations to a third party. Under novation, the third party completely takes over the position of the original party under the contract. However, in an assignment, the position of the original contracting parties do not change and the privity of the contract is still in existence between them.
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Difference between Transfer and Assignment
19 Feb 2022 · 3 mins read
A single word may have more than one meanings. One might wonder how complex language is and how confusing words are. Transfer and assignment are such similar terms interchangeably used yet different in legal sense. The article discusses the meaning, types of assignment and how it is different from that of transfers.
In simple terms, assignment means the sale of IP i.e., the transfer of complete ownership to the assignee including the right to exclude others from infringing it. To constitute an assignment, the terms and conditions of contract under the Indian Contract Act, 1872. The agreement must be signed and written. The specific IP laws determine the features of such assignment in detail. In Copyright law partial assignment is also permitted under section 18, which requires to mention specifically the rights assigned. Also, it is necessary to mention the time period for which the assignment is made. In the absence of such time period, generally 5 years is taken as a limit. Assigner is the owner who assigns it to another person known as assignee.
Assignment is different from that of licensing in a way that the latter only parts with certain rights and the ownership rests with the person who is ready to give away the rights.
The following are some of the common types of assignment:-
- Legal Assignment- When the transfer of existing registered IP is transferred, wherein the new owner acquires all rights, it is known as legal assignment.
- Equitable Assignment- It occurs when before the registration, the assigner is willing to transfer it to the assignee. Once the registration is done the assignee can acquire all the rights. Although the assignee cannot register himself as the proprietor but can show interest in the IP through a notice.
- Mortgage- It is the total or partial transfer of IP in return of a sum of money. Once the money is repaid, the IP is reinstated to its original owner.
On the other hand, transfer means to convey or remove from one person or place to another person. Transfer is of titles whereas the Assignment is for obligations and rights. 1
The term transfer is generally used for properties that can be possessed physically. For example, a car or house or those properties which can be represented by a legal instrument such as share certificate.
Assign is generally associated with intangible properties such as a debt, or benefits arising from contracts for example rental income under a lease agreement. 2
An assignment is thus different from other type of transfers such as subrogation, novation, sublease etc. Assignment is basically the transfer all rights, interests, titles which the assigner conveys to assignee and the latter stands in the shoes of the assigner. 3
Though the difference between novation and assignment is narrower, one ought to know the difference. “ Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party. ” 4
And for the transfer of the property, the Transfer of Property Act, 1882 applies. It extensively deals with various kinds of transfers. There are certain set rules for transfer of property. For instance, one needs to be of sound mind, not intoxicated, of legal age and must not be disqualified by law. The Act lists kinds of transfer such as lease, mortgage, exchange, gift and sale.
To sum up, though the words transfer and assignment is used interchangeably there is a difference between them. They are governed by different legislations and are used for different purposes. So one needs to be careful and understand all the legal provisions before transferring anything.
1 Difference between Assignment and transfer, UPCOUNSEL, (Nov 09, 2021, 5: 25 pm), https://www.upcounsel.com/difference-between-assignment-and-transfer . 2 Merchants Service Co. v. Small Claims Court, 35 Cal. 2d 109, 113-114 (Cal. 1950).. 3 Knott v. McDonald’s Corp., 985 F. Supp. 1222 (N.D. Cal. 1997). 4 Assignments: the basic law, STIMMEL LAW, (Nov 9, 2022, 5: 48 pm), https://www.stimmel-law.com/en/articles/assignments-basic-law .
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An assignment is the transfer of a property right, title, or interest under an agreement to some particular person.[i] However, in In re Ashford , 73 B.R. 37, 39 (Bankr. N.D. Tex. 1987) every transfer of interest is not an assignment. It depends on the intention of the assignor.[ii] Therefore an assignment is different from other types of transfers like a sublease, a novation, or a subrogation.
Although the difference between a novation and an assignment is relatively narrow, it is an essential one.[iii] “Novation is a mechanism where one party transfers all its obligations and benefits under a contract to a third party.”[iv] In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.” In an assignment, the parties to the contract do not change and privity of contract still exists between the original parties. The consent of the third party contracting is not necessary in an assignment . [v]
A sublease is the transfer when a tenant retains some right of reentry onto the leased premises.[vi] However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment.[vii] Further, in a sublease, the original tenant is not released from the obligations of the original lease. However, in an assignment, both the assignee as well as the original tenant, is bound by the covenants of the original lease.[viii]
Subrogation is the substitution of one person for another.[ix] It is an equitable remedy where one person steps into the place of another and takes over the right to a claim for monetary damages to the extent that the other could have asserted it.[x] In contrast, an assignment is a formal transfer of property or property rights.
[i] http://www.lectlaw.com/def/a080.htm
[ii] In re Ashford , 73 B.R. 37, 39 (Bankr. N.D. Tex. 1987)
[iii] http://www.netlawman.co.uk/info/novation-assignment.php
[vi] http://www.dallaslandlordlawyer.com/Sublease_and_Assignment.htm
[ix] http://www.answers.com/topic/subrogation
[x] Jones Cooling & Heating, Inc. v. Booth , 99 N.C. App. 757, 759 (N.C. Ct. App. 1990)
Inside Distinction Between Assignment And Other Transfers
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Transfer and Assignment definition
Examples of transfer and assignment in a sentence.
Any recommendations and/or suggestions on individual transfers shall be submitted in writing to the CO prior to the transfer or assignment.(c) Transfer and Assignment of Subcontracts.
If Transferee is acting in a representative capacity for a corporation, pay internship, trust, or other entity, or as agent for any person or entity, Transferee has full authority to execute this Transfer and Assignment in such capacity.
Transferee understands the meaning and legal consequences of the representations and warranties set forth above, and Transferee agrees to indemnify and hold harmless the Company from and against any and all loss, damage, claim, expense or liability (including, without limitation, court costs and attorneys fees and expenses) due to, or arising out of, a breach of representation or warranty of Transferee contained in this Transfer and Assignment .
Transferee understands the meaning and legal consequences of the representations and warranties set forth above, and Transferee agrees to indemnify and hold harmless the Fund from and against any and all loss, damage, claim, expense or liability (including, without limitation, court costs and attorneys fees and expenses) due to, or arising out of, a breach of representation or warranty of Transferee contained in this Transfer and Assignment .
Transferee acknowledges that if Transferee participates in the Distribution Reinvestment Plan or makes subsequent purchases of shares of the Fund, including purchases made pursuant to the Automatic Investment Program, Transferee agrees that, if Transferee can no longer make the representations or warranties set forth in this Transfer and Assignment , Transferee is required to promptly notify the Fund and Transferee’s Broker-Dealer in writing.
SIGNED: DATE: DEPOSIT PAID: (Room/Key)FEES PAID: FEES OWED: ROOM RENTED: DATE NEEDED: TIME: RENTER: CONTACT PERSON: ADDRESS: HOME PHONE: CITY: ZIP: WORK PHONE: DESCRIPTION OF ACTIVITY: DAY/DATE REQUESTED: TIME: NUMBER OF PEOPLE ATTENDING EVENT: OTHER RENTALS: Stage Projector Table Cloths Vinyl Floor Cover AREA OF STAGE NEEDED TO BE SET UP: Thank you for choosing the Seneca Shaver Complex for your activities.
During the contract year, the district may choose to fill a vacancy by adhering to the posting, interviewing and hiring process according to the articles of Transfer and Assignment ; thus, said position is considered filled and need not become a vacancy the following contract year.
Notwithstanding the above language, with regard to teacher assignment, Article VII, Teacher Transfer and Assignment shall govern the rights of the parties.IT IS FURTHER AGREED that the teacher may be assigned to a position other than the above at the beginning of the school year for sound education-related needs of the District, as may be done also for like reasons during the school year.
Concurrently with the transactions described immediately above, TRLTII shall pursuant to the Pledged Equipment Transfer and Assignment Agreement sell the Pledged Units described on Schedule 1-B hereto to the Lessee by delivery of the Pledged Equipment Xxxx of Sale and shall make an assignment of the Existing Pledged Equipment Leases to the Lessee by delivery of the TRLTII Pledged Equipment Assignment.
If Transferee is acting in a representative capacity for a corporation, partnership, trust, or other entity, or as agent for any person or entity, Transferee has full authority to execute this Transfer and Assignment in such capacity.
More Definitions of Transfer and Assignment
Related to transfer and assignment.
Xxxx of Sale and Assignment and Assumption Agreement has the meaning set forth in Section 3.2(b).
Addendum and Assignment Agreement The Addendum and Assignment Agreement, dated as of January 31, 1995, between MLCC and the Master Servicer.
Assignment and Assumption Agreement means the Assignment and Assumption Agreement substantially in the form of Exhibit K (appropriately completed).
Assignment and Assumption Agreements means each of the Assignment and Assumption Agreements to be executed between a Trustee and trustee of the relevant Successor Trust in accordance with the relevant Trust Agreement, as the same may be amended, modified or supplemented from time to time.
Assignment and Assumption of Lease has the meaning set forth in Section 3.02(a)(iv).
Qualified assignment agreement means an agreement providing for a qualified assignment within the meaning of section 130 of the United States Internal Revenue Code, United States Code Title 26, as amended from time to time;
Permitted Assignment means a Permitted Subsidiary Assignment or a Permitted Third-Party Assignment.
Assignment Agreement means an Assignment and Assumption Agreement substantially in the form of Exhibit E, with such amendments or modifications as may be approved by Administrative Agent.
IP Assignment a collateral assignment or security agreement pursuant to which an Obligor grants a Lien on its Intellectual Property to Agent, as security for its Obligations. IRS: the United States Internal Revenue Service.
IP Assignment Agreement means the Intellectual Property Assignment agreement set forth as Exhibit D hereto.
Assignment and Conveyance Agreement As defined in Subsection 6.01.
Assignment and Assumption means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.
Trademark Assignment has the meaning set forth in Section 3.2(c).
Assignment and Conveyance An assignment and conveyance of the Mortgage Loans purchased on a Closing Date in the form annexed hereto as Exhibit 4.
Trademark Assignment Agreement has the meaning set forth in Section 2.5(b).
Assignment Agreements The following Assignment, Assumption and Recognition Agreements, each dated as of March 29, 2006, whereby certain Servicing Agreements solely with respect to the related Mortgage Loans were assigned to the Depositor for the benefit of the Certificateholders:
Affiliated Lender Assignment and Assumption means an assignment and assumption entered into by a Lender and an Affiliated Lender (with the consent of any party whose consent is required by Section 9.05) and accepted by the Administrative Agent in the form of Exhibit A-2 or any other form approved by the Administrative Agent and the Borrower.
Assignment Date means the Anniversary Date or such earlier date as shall be acceptable to the Company, the relevant Assignors, the relevant Assignees and the Administrative Agent.
assignment shall have their respective meanings defined in the Investment Company Act of 1940 and the rules and regulations thereunder, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act; and the phrase "specifically approve at least annually" shall be construed in a manner consistent with the Investment Company Act of 1940 and the rules and regulations thereunder.
Conveyancing and Assumption Instruments means, collectively, the various agreements, instruments and other documents heretofore entered into and to be entered into to effect the transfer of Assets and the assumption of Liabilities in the manner contemplated by the Distribution Agreement, or otherwise arising out of or relating to the transactions contemplated in the Distribution Agreement.
Assignment and Acceptance Agreement means an Assignment and Acceptance Agreement among a Lender, an Assignee and the Agent, substantially in the form of Exhibit A.
Intellectual Property Assignment Agreement has the meaning set forth in Section 7.2(c)(viii).
Purchase Agreement Assignment means the Purchase Agreement Assignment (US Airways, Inc. Trust No. N___U_), dated as of the date of the Lease, between Lessee and Lessor, as the same may be amended, supplemented or modified from time to time, with a form of Consent and Agreement to be executed by the Seller attached thereto.
Lender Assignment Agreement means a Lender Assignment Agreement substantially in the form of Exhibit D hereto.
First Assignment means: the relevant Assignment; or if, prior to the relevant Assignment: the Agency Worker has worked in any assignment in the same role with the relevant Hirer as the role in which the Agency Worker works in the relevant Assignment; and the relevant Qualifying Period commenced in any such assignment, that assignment (an assignment being (for the purpose of this defined term) a period of time during which the Agency Worker is supplied by one or more Temporary Work Agencies to the relevant Hirer to work temporarily for and under the supervision and direction of the relevant Hirer);
Transferee Letter has the meaning assigned to that term in Section 11.04(a).
- Practical Law
Practical Law UK Glossary 1-107-6442 (Approx. 4 pages)
- Lending: General
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- General Contract and Boilerplate
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Transfer or assign?
A common – and often confusing – feature of English legal terminology is that two or more words are used to describe what appears to be the same noun, adjective or verb. So we see two or more words describing nouns, such as “goods and chattels” and “will and testament”; two or more words describing adjectives, such as “null and void”, “in full force and effect” and “fit and proper”; and two or more words describing actions, such as “give, devise and bequeath” and “sell, transfer and assign”.
Often referred to as synonym strings, this practice can be attributed to a couple of factors. The first factor is the subtle difference in the traditional legal meaning of words. For example, “will” was traditionally used in relation to real (or immovable) property, and “testament” was traditionally used in relation to personal (or movable) property. Along similar lines, “devise” was used in relation to the testamentary gift of real property and “bequeath” was used in relation to the testamentary gift of personal property.
In the context of modern contracts, many of these traditional legal distinctions are no longer relevant. For example, each of the words “representations” and “warranties” traditionally referred to different concepts and gave rise to different remedies. However, they still appear in contracts as a matter of convention, even where they refer to the same concept (see Lexicon in China Business Law Journal volume 1, issue 3, page 78, entitled Warranties and misrepresentations).
The second factor causing synonym strings is historical and linguistic in nature. After the Normans conquered England in 1066, Norman French or “law French” became the language of the law, together with Latin. The use of Latin and law French was subsequently prohibited by a statute in 1731, which introduced English as the language of the law and the courts.
Despite the adoption of English as the language of the law, many lawyers continued to use the French words alongside their English equivalents in contracts and other legal documents. For example, the English word “goods” was inserted in the phrase “goods and chattels” and the English word “give” was inserted in the phrase “give, devise and bequeath”.
In this column, we look at the use of the words “transfer” and “assign” in common law jurisdictions, and the equivalent terms in China. We will also look at the assignment of contractual rights under English law and PRC law.
In all common law jurisdictions, each of the words “transfer” and “assign” is commonly used to describe the act by which ownership of an asset is passed from one party to another. The asset might be a right or interest in relation to tangible property, such as a house or car, or a right or interest in relation to intangible property, such as a contractual right or claim.
Although the words are often used interchangeably, “transfer” has traditionally been used in connection with property that is capable of being physically possessed (e.g. a house or car) and property where ownership is represented by a legal instrument (e.g. a share certificate).
“Assign”, on the other hand, has traditionally been used in relation to intangible property rights, such as a debt or the benefits arising under a contract (e.g. the rental income under a lease agreement).
Assignment of debts, contractual rights under English law
From a public policy perspective, the transfer of an asset that is capable of being physically possessed is much less complicated than the assignment of an asset that consists of a claim or right under a contract.
This is because a tangible asset has a separate existence, which is not dependent on the acts or obligations of a third party. As long as the person in possession of the asset is also its owner and has clean title to the asset, no third parties will be adversely affected by the transfer.
In the case of the assignment of a debt or the benefits arising under a contract, however, the asset consists of a right to claim payment from a third party (i.e. the debtor or obligor).
The third party will be affected by the assignment, as it may be asked by the assignee to make payments to itself in place of the assignor. It will also be adversely affected if the assignment means that it loses the right to set off any payment obligations owing by the assignor against its own payment obligations.
Before the statutory development that occurred under the Judicature Act 1873, an assignment of a debt or contractual right was recognised in equity as an equitable assignment (see Lexicon in China Business Law Journal volume 3, issue 5, page 74, entitled Law or equity?).
Under an equitable assignment, the assignee could not enforce the debt or contractual right directly against the debtor or the obligor. However, it could require the assignor to sue the debtor or the obligor in the assignor’s name to recover payment on behalf of the assignee.
The Judicature Act (now section 136 of the Law of Property Act) introduced the concept of a legal assignment. Under a legal assignment, the assignee is able to step into the shoes of the assignor and claim payment directly from the debtor or the obligor if four conditions are satisfied: (1) the assignment is absolute (i.e. it is not part of a security arrangement); (2) the assignment is in writing; (3) the whole of the debt is assigned; and (4) written notice has been given to the debtor or the obligor. The relevant part of section 136 is set out below (note that a “legal thing in action” is a right that has no physical existence and can only be enforced through legal action).
第136条 据法财产的法定转让 (1) 转让人以书面形式作出并亲笔签署（其意并非只是以押记形式作出）的债权或其他据法财产的绝对转让，如果转让人已就该项绝对转让向该等债权或据法财产的债务人、受托人或其他义务人给予明确的书面通知，则该绝对转让具有法律效力并且自上述通知之日起向受让人转移和转让以下权利： (a) 该等债权或据法财产的法律权利； (b) 该等债权或据法财产的所有法律或其他救济措施； (c) 无须转让人的同意而直接确认债务人已妥为清偿该等债务或据法财产 … 136 Legal assignments of things in action. (1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law … to pass and transfer from the date of such notice: (a) the legal right to such debt or thing in action; (b) all legal and other remedies for the same; and (c) the power to give a good discharge for the same without the concurrence of the assignor …
The above section – and its equivalent in other common law jurisdictions – is one of the most important statutory provisions in commerce, as it underpins the trade in financial assets and supports many financial transactions, such as securitisation.
There is, however, a complex question that has not been conclusively answered in many common law jurisdictions: what is the legal position if the contract creating the debt prohibits an assignment by the creditor or provides that an assignment of the debt will not be effective without the consent of the debtor?
If a creditor assigns a debt in breach of a contractual prohibition, there are three possible outcomes:
- the assignment is wholly ineffective;
- the assignment is ineffective against the debtor but effective between the assignor and the assignee; or
- the assignment is wholly effective, both against the assignor and also the debtor (once written notice is given).
The question involves important issues of public policy, as it creates a conflict between two fundamental principles – namely, the principle of freedom of trade (under which the owners of financial assets should be able to sell them freely and without restriction) and the principle of freedom of contract (under which the parties to a contract should be free to determine their respective rights and obligations without undue interference from the law).
In England, the position is not settled.
The weight of legal opinion is in favour of treating the assignment as effective between the assignor and the assignee, but not between the assignee and the debtor. In the US, on the other hand, the law has decided in favour of freedom of trade by treating the assignment as fully effective. Article 9-138(4) of the Uniform Commercial Code provides that a term in any contract between a debtor and an assignor is ineffective if it prohibits the assignment of the debt or requires the debtor’s consent to an assignment.
As is the case in the English language, there are also several words in the Chinese language that describe the act by which tangible or intangible property rights are passed from one party to another.
These include “ 转让 ”, “ 转移 ” (or “ 移转 ” and “ 让与 ”). Some of the contexts in which these words are used are explained below.
“ 转让 ” and “ 转移 ” are often used interchangeably to refer to both the transfer of rights and the transfer of obligations from one party to another party.
See, for example, articles 84 and 88 of the PRC Contract Law, which respectively refer to the transfer of obligations and concurrent transfer of rights and obligations.
“ 转移 ” is often used to refer to the transfer of title. For example, article 130 of the PRC Contract Law provides that “a sales contract is a contract whereby the seller transfers title to the subject matter to the buyer, who pays the price”.
The term “ 让与 ” is often used to describe the assignment of contractual rights or the assignment of debts.
Assignment of debts or contractual rights under PRC law
Similar to article 136 of the Law of Property Act in England, articles 79 and 80 of the PRC Contract Law make provision for an assignment of contractual rights as follows:
第七十九条 债权人可以将合同的权利全部或者部分转让给第三人，但有下列情形之一的除外： (一）根据合同性质不得转让； (二）按照当事人约定不得转让； (三）依照法律规定不得转让。 第八十条 债权人转让权利的，应当通知债务人。未经通知，该转让对债务人不发生效力。 债权人转让权利的通知不得撤销，但经受让人同意的除外。 Article 79 An obligee may assign its rights under a contract in whole or in part to a third person, except in any of the following circumstances: (i) the rights are not capable of assignment in light of the nature of the contract; (ii) in accordance with the agreement between the parties, the rights may not be assigned; (iii) the law provides that the rights may not be assigned. Article 80 Where an obligee assigns its rights, it must notify the obligor. An assignment that is not notified is not binding upon the obligor. A notice of assignment of rights given by the obligee may not be revoked, except with the consent of the assignee.
Under article 79(ii), contractual rights may not be assigned if there is a prohibition against assignment in the contract. As a result, PRC law has taken the opposite position to the law in the US by providing that an assignment in breach of a contractual prohibition is wholly ineffective.
It will be interesting to see if PRC law becomes more flexible in the future and provides for a special set of rules in the case of commercial transactions.
If it does, it will be interesting to see whether it adopts a position similar to that in jurisdictions like England, where the assignment is effective between the assignor and the assignee, but not against the debtor, or a position similar to that in the US and France, where the assignment is wholly effective both against the assignor and the debtor (once written notice is given).
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A former partner of Linklaters Shanghai, Andrew Godwin teaches law at Melbourne Law School in Australia, where he is an associate director of its Asian Law Centre. Andrew’s new book is a compilation of China Business Law Journal’s popular Lexicon series, entitled China Lexicon: Defining and translating legal terms. The book is published by Vantage Asia and available at law.asia.
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Assignments: The Basic Law
The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.
As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.
The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.
Basic Definitions and Concepts:
An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).
An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.
The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.
Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.
No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.
Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)
The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.
The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)
The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.
More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.
And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.
Novation Compared to Assignment:
Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”
A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.
Equitable Assignments:
An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.
In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.
An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.
Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .
But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.
Enforceability of Assignments:
Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.
In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.
After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.
Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.
Assignment of Contractual Rights:
Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.
If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.
In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).
On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.
The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.
Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.
A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.
Noncompete Clauses and Assignments:
Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.
A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.
Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.
Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.
A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.
Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.
A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.
Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.
It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)
It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.
Conclusion:
In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.
As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.
One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.
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Assignment is a legal term whereby an individual, the “assignor,” transfers rights, property, or other benefits to another known as the “ assignee .” This concept is used in both contract and property law. The term can refer to either the act of transfer or the rights /property/benefits being transferred.
Contract Law
Under contract law, assignment of a contract is both: (1) an assignment of rights; and (2) a delegation of duties , in the absence of evidence otherwise. For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C. That is, this assignment is both: (1) an assignment of A’s rights under the contract to the $50; and (2) a delegation of A’s duty to teach guitar to C. In this example, A is both the “assignor” and the “delegee” who d elegates the duties to another (C), C is known as the “ obligor ” who must perform the obligations to the assignee , and B is the “ assignee ” who is owed duties and is liable to the “ obligor ”.
(1) Assignment of Rights/Duties Under Contract Law
There are a few notable rules regarding assignments under contract law. First, if an individual has not yet secured the contract to perform duties to another, he/she cannot assign his/her future right to an assignee . That is, if A has not yet contracted with B to teach B guitar, A cannot assign his/her rights to C. Second, rights cannot be assigned when they materially change the obligor ’s duty and rights. Third, the obligor can sue the assignee directly if the assignee does not pay him/her. Following the previous example, this means that C ( obligor ) can sue B ( assignee ) if C teaches guitar to B, but B does not pay C $50 in return.
(2) Delegation of Duties
If the promised performance requires a rare genius or skill, then the delegee cannot delegate it to the obligor. It can only be delegated if the promised performance is more commonplace. Further, an obligee can sue if the assignee does not perform. However, the delegee is secondarily liable unless there has been an express release of the delegee. That is, if B does want C to teach guitar but C refuses to, then B can sue C. If C still refuses to perform, then B can compel A to fulfill the duties under secondary liability.
Lastly, a related concept is novation , which is when a new obligor substitutes and releases an old obligor. If novation occurs, then the original obligor’s duties are wiped out. However, novation requires an original obligee’s consent .
Property Law
Under property law, assignment typically arises in landlord-tenant situations. For example, A might be renting from landlord B but wants to another party (C) to take over the property. In this scenario, A might be able to choose between assigning and subleasing the property to C. If assigning , A would be giving C the entire balance of the term, with no reversion to anyone whereas if subleasing , A would be giving C for a limited period of the remaining term. Significantly, under assignment C would have privity of estate with the landlord while under a sublease, C would not.
[Last updated in May of 2020 by the Wex Definitions Team ]
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What Is an Assignment of Contract?
Assignment of contract explained.
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Assignment of contract allows one person to assign, or transfer, their rights, obligations, or property to another. An assignment of contract clause is often included in contracts to give either party the opportunity to transfer their part of the contract to someone else in the future. Many assignment clauses require that both parties agree to the assignment.
Learn more about assignment of contract and how it works.
What Is Assignment of Contract?
Assignment of contract means the contract and the property, rights, or obligations within it can be assigned to another party. An assignment of contract clause can typically be found in a business contract. This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark , and copyright) agreements.
How Does Assignment of Contract Work?
An assignment may be made to anyone, but it is typically made to a subsidiary or a successor. A subsidiary is a business owned by another business, while a successor is the business that follows a sale, acquisition, or merger.
Let’s suppose Ken owns a lawn mowing service and he has a contract with a real estate firm to mow at each of their offices every week in the summer. The contract includes an assignment clause, so when Ken goes out of business, he assigns the contract to his sister-in-law Karrie, who also owns a lawn mowing service.
Before you try to assign something in a contract, check the contract to make sure it's allowed, and notify the other party in the contract.
Assignment usually is included in a specific clause in a contract. It typically includes transfer of both accountability and responsibility to another party, but liability usually remains with the assignor (the person doing the assigning) unless there is language to the contrary.
What Does Assignment of Contract Cover?
Generally, just about anything of value in a contract can be assigned, unless there is a specific law or public policy disallowing the assignment.
Rights and obligations of specific people can’t be assigned because special skills and abilities can’t be transferred. This is called specific performance. For example, Billy Joel wouldn't be able to transfer or assign a contract to perform at Madison Square Garden to someone else—they wouldn't have his special abilities.
Assignments won’t stand up in court if the assignment significantly changes the terms of the contract. For example, if Karrie’s business is tree trimming, not lawn mowing, the contract can’t be assigned to her.
Assigning Intellectual Property
Intellectual property (such as copyrights, patents, and trademarks) has value, and these assets are often assigned. The U.S. Patent and Trademark Office (USPTO) says patents are personal property and that patent rights can be assigned. Trademarks, too, can be assigned. The assignment must be registered with the USPTO's Electronic Trademark Assignment System (ETAS) .
The U.S. Copyright Office doesn't keep a database of copyright assignments, but they will record the document if you follow their procedure.
Alternatives to Assignment of Contract
There are other types of transfers that may be functional alternatives to assignment.
Licensing is an agreement whereby one party leases the rights to use a piece of property (for example, intellectual property) from another. For instance, a business that owns a patent may license another company to make products using that patent.
Delegation permits someone else to act on your behalf. For example, Ken’s lawn service might delegate Karrie to do mowing for him without assigning the entire contract to her. Ken would still receive the payment and control the work.
Do I Need an Assignment of Contract?
Assignment of contract can be a useful clause to include in a business agreement. The most common cases of assignment of contract in a business situation are:
- Assignment of a trademark, copyright, or patent
- Assignments to a successor company in the case of the sale of the business
- Assignment in a contract with a supplier or customer
- Assignment in an employment contract or work for hire agreement
Before you sign a contract, look to see if there is an assignment clause, and get the advice of an attorney if you want to assign something in a contract.
Key Takeaways
- Assignment of contract is the ability to transfer rights, property, or obligations to another.
- Assignment of contract is a clause often found in business contracts.
- A party may assign a contract to another party if the contract permits it and no law forbids it.
Legal Information Institute. " Assignment ." Accessed Jan. 2, 2021.
Legal Information Institute. " Specific Performance ." Accessed Jan. 2, 2021.
U.S. Patent and Trademark Office. " 301 Ownership/Assignability of Patents and Applications [R-10.2019] ." Accessed Jan. 2, 2021.
Licensing International. " What is Licensing ." Accessed Jan. 2, 2021.
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