Assignment In Contract Law

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For the assignee to be held liable under the contract, the assignee must clearly assume the obligations.

Regardless of whether you assign the obligations under the contract to the assignee, you remain secondarily liable to the original contracting party if the assignee fails to perform the assumed obligations.

You will also see carveouts that preserve the right to assign the contract to certain parties, including subsidiaries.

In certain situations where the parties have unequal bargaining power or a particularly compelling reason, you may see a unilateral clause that either allows one party to assign, restricts one parties’ ability to assign, or allows one party to assign and restricts the ability of the other party to assign.

For example, a typical assignment clause carveout may give each party the ability to assign the contract if there is a change of control or sale of substantially all of the company’s assets.

This carveout gives each party the right to assign the contract—generally without the consent of the other party—as part of a fundamental corporate change (a merger, acquisition, or other similar change of control).

This means the other party to the contract can still bring a claim for damages against you after you’ve assigned the contract to the assignee.

You may be able to recover damages from the assignee as long as the assignee clearly assumed your obligations under the contract and failed to adhere to those obligations.

But you would generally still be liable to the original party you contracted with.

In short, you do not absolve yourself of liability under a contract simply because you assign it to another party.


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