Non-Assignment Sample Clauses
No assignment
No assignment clause samples
No Assignment .ExecutiverepresentsandwarrantsthatExecutive has made no assignment or other transfer, and covenants that Executive will make no assignment or other transfer, of any interest in any claim which Executive may have against the Company or any of the other Releasees (as defined in the Release).
11/06/2020 (Summit Midstream Partners, LP)
17. No Assignment . The Employee represents and warrants that Employee has made no assignment , and will make no assignment , of any claim, action, or right of any kind whatsoever, embodied in any of the matters referred to in this Agreement, and that no person or entity of any kind had or has any interest in any of the demands, obligations, actions, claims, debts, liabilities, rights, contracts, damages, attorneys’ fees, costs, expenses, losses, or claims referred to in this Agreement. By signing this Agreement, Employee has released all claims against the Releasees on behalf of Employee’s self, heirs, spouse, representatives, attorneys, advisors, family members, agents, or assigns.
05/01/2019 (NUVASIVE INC)
6. NO ASSIGNMENT . No party hereto may assign its rights, interests or obligations hereunder to any other person (except by operation of law) without the prior written consent of each other party hereto; provided, however, that the Guarantor may assign all or a portion of its obligations hereunder, with prior written notice to the Guaranteed Party accompanied by a guarantee in the form identical to this Limited Guarantee duly executed and delivered by the assignee, to an Affiliate of the Guarantor; provided, further, that no such assignment shall relieve the Guarantor of any liability or obligations hereunder except to the extent actually performed or satisfied by the assignee.
11/21/2017 (JA Solar Holdings Co., Ltd.)
5. No Assignment . This letter and the commitment of the Investor described herein shall not be assignable by Parent without the prior written consent of the Investor, and the granting of such consent in a given instance shall be solely in the discretion of the Investor and, if granted, shall not constitute a waiver of this requirement as to any subsequent assignment. The Investor may without the prior written consent of Parent assign some or all of its obligations under Section1 to any of its Affiliates if such assignment is not reasonably expected to have the effect of impairing or delaying the Closing or the funding of the Investor’s Commitment at the time set forth in Section1, but may not otherwise assign its rights or obligations hereunder. No assignment by the Investor of any of its obligations hereunder will relieve the Investor of its obligations under this letter. Any purported assignment in contravention of this Section5 shall be void.
07/17/2017 (NCI, Inc.)
12. No Assignment . This Note shall not be assignable by Payee without the prior written consent of Maker.
08/17/2018 (Collective Wisdom Technologies, Inc.)
C. No Assignment . A Participant or Participant’s beneficiary shall have no right to anticipate, alienate, sell, transfer, assign, pledge or encumber any right to receive any incentive made under the Plan, nor will any Participant or Participant’s beneficiary have any lien on any assets of any Participating Employer, or any affiliate thereof, by reason of any Award made under the Plan.
02/14/2017 (Vistra Energy Corp)
9) NO ASSIGNMENT . The Option Agreement and the Option Rights shall not be assignable, whether by operation of law or otherwise, and any attempt to do so shall be void.
08/19/2020 (SIGNET INTERNATIONAL HOLDINGS, INC.)
11. No Assignment . The Commitments evidenced by this Agreement shall not be assignable, in whole or in part, by Newco without each Fund’s prior written consent, and the granting of such consent in a given instance shall be solely in the discretion of such Fund, and, if granted, shall not constitute a waiver of this requirement as to any subsequent assignment. No assignment by any Fund shall relieve such Fund of any of its obligations under this Agreement (including, without limitation, with respect to the Commitment), and, without limitation of the foregoing, if any assignee is unable or unwilling to fund, including by reason of the failure to obtain any approvals required by any Governmental Authorities relating to such assignment, the assignor Fund shall fund the previously assigned portion of its Commitment. Any purported assignment of this Agreement or the Commitment in contravention of this Section11 shall be void.
10/30/2017 (Gigamon Inc.)
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Are Anti-Assignment Clauses Enforceable?
Written by: Brittainy Boessel
July 22, 2020
8 minute read
Contracts, in general, are freely assignable, which means that either party can transfer its contractual obligations or rights to a third party. But sometimes contracts include anti-assignment clauses to limit or prohibit assignment. Read on to discover the basics of assignment and anti-assignment clauses, what makes them unenforceable, and learn how to negotiate them.
What Is Assignment?
An assignment is like a transfer. If an agreement permits assignment, a party could assign — or transfer — its obligation to another party. The second party — the one to whom the contract was assigned — would then be required to provide the products or services.
Assignments don’t necessarily relieve liability for the party who transfers the agreement. Depending on the contract, the party who assigned its obligations may remain a guarantor of— or responsible for—the performance of the third party assigned the work. In other words, the party to the contract (the assignor) would be responsible for breaches committed by the party to which it assigned its performance (the assignee). To remove itself from the liability of the agreement, the assignor would need to seek a novation , which cancels the first contract and creates a new contract between the party that is the assignee and the original counterparty to the contract.
What is an Anti-Assignment Clause?
Anti-assignment clauses—also sometimes referred to as assignment clauses or non-assignment clauses—can appear in various forms. Essentially, they prevent one or both contracting parties from assigning some or all of their respective contractual obligations or rights to a third party.
Anti-Assignment Language to Look for in a Contract
When reading through your contract, you can typically find a separate paragraph entitled “Assignment,” “Non-assignment,” or “Anti-assignment.” Sometimes you’ll find the assignment language buried within a “Miscellaneous Provisions” section, which contains all the boilerplate language of a contract, such as severability and waiver provisions.
Contracts include two primary types of anti-assignment clauses. The first type categorically precludes all assignments of rights and duties. It usually reads something like this: “Neither Party may assign, delegate, or transfer this agreement or any of its rights or obligations under this agreement.”
The second type prohibits assignments unless the assigning party obtains the prior written consent of the other party. It usually reads something like this: “Neither this agreement nor any right, interest, or obligation herein may be assigned, transferred, or delegated to a third party without the prior written permission of the other party, and whose consent may be withheld for any reason.”
Some clauses may state that a change of control, such as a merger, consolidation, or acquisition, is considered an assignment. Read carefully , because you want to ensure that you won’t be in breach if you transfer the contract to an affiliate.
Additionally, check the termination section of your agreement. Some termination clauses may state that a non-assigning party may terminate the contract in the event of a non-permitted assignment. Or a termination clause may state that the agreement automatically terminates upon such a transfer.
Without an anti-assignment provision, contracts are generally assignable even absent the consent of the counterparty. The Uniform Commercial Code (UCC), a group of laws governing the sale of goods, prefers the free transferability of all types of property, including contracts.
Still, courts normally enforce anti-assignment clauses that are negotiated and agreed upon by both parties, depending on the applicable law, the jurisdiction governing the contract, and the language agreed upon in the contract. Be aware though that courts tend to narrowly interpret anti-assignment clauses. For instance, an anti-assignment clause may prohibit assignment but fail to state that an assignment in violation of the contract will be invalid. In this case, a party may be able to file a suit for breach of contract, but the court may not permit it to invalidate the assignment.
Even without a solid anti-assignment clause, there may still be an opportunity to prevent certain assignments. Courts may not enforce assignments to which the counterparty did not consent, even in the absence of a valid anti-assignment clause, especially if the contract is personal in nature. Some obligations can be performed equally well by a third party, such as a requirement to make payments. But a personal obligation involves a special relationship between parties or requires special levels of expertise, discretion, or reputation. For example, personal service contracts, including employment agreements, are personal enough in nature that they’re not transferable unless the non-transferring party consents.
In general, assignment is not enforceable when:
- The contract prohibits and voids assignment
As discussed above, contract provisions can prohibit and void an assignment.
- The assignment materially changes the contract
If the assignment would significantly impact the performance of the contract — for instance, if it greatly increases the risks or burden imposed on the other party — then a court would likely not enforce the assignment.
- The assignment violates the law
Certain laws prevent assignments. For example, some states legislate that an employee cannot assign its future wages to a third party.
- The assignment violates public policy
If the assignment would harm public policy interests, it will be void. For instance, victims may not assign their personal injury claims to third parties to discourage excessive litigation.
Negotiating Anti-Assignment Clauses
In certain situations, the inclusion of an anti-assignment clause may not be in a party’s best interests. If a party depends on a unique service provider or a specific person to perform, then it must make sure that that service provider or person can’t assign work to an unknown third party without its consent. For instance, if you pay a premium to hire a renowned jazz band to perform at your charity gala, you don’t want a local high school garage band to show up instead. In any situation involving unique services or providers, make sure you have the right to consent prior to any assignment under the agreement.
Another example of the importance of assignability is in mergers and acquisitions. When a company purchases another business, the acquired business’s existing customer base and supplier contracts make it more valuable . Consequently, if a party hopes to eventually sell its business, it would want the right to assign its existing contracts to the buyer. Otherwise, potential buyers may be scared off because of the time and money it will take to transfer the existing agreements. Plus, the existence of anti-assignment clauses may heavily impact the selling price. If it’s possible you may sell your business, ensure that you have the right to assign your contracts and that consent is not solely within the discretion of the counterparty.
If you want the right to assign the contract, but your agreement does not permit assignments, you’ll need to negotiate with your counterparty on this point. If the clause in your agreement prohibits all assignments, try to include a carve out by allowing assignment of your rights and obligations upon the prior written consent of the other party. Add that the counterparty shall not unreasonably withhold or delay consent. You may also want to carve out an exception to the anti-assignment clause by excluding assignments between affiliates or necessitated by change of control transactions, such as mergers or acquisitions.
Courts tend to construe anti-assignment and anti-delegation clauses narrowly. As mentioned, a number of courts have held that an anti-assignment clause does not remove the power of a party to assign the contract and invalidate the contract unless the provision explicitly states that such assignments will be invalid or void. Thus, if you want to make an assignment that violates your agreement, rather than creating an opportunity for a breach of contract case, explicitly state in your contract that such assignments are invalid or void.
If you don’t want the counterparty to be able to assign its rights or obligations, state your preference clearly in your agreement with one of these options.
- Require consent always
Include a clause such as, “Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, and any assignment or delegation that violates this provision shall be void.”
- Don’t require consent for affiliates or successors
Include a clause such as, “Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, except that no consent is required (a) for assignment to an entity in which the transferring party owns greater than 50 percent of the assets; or (b) in connection with any sale, transfer, or disposition of all or substantially all of its business or assets; provided that no such assignment will receive an assigning party of its obligations under this agreement. Any assignment or delegation that violates this provision shall be void.”
- Require consent to be given reasonably
Include a clause such as, “Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, whose consent shall not be unreasonably withheld or delayed. Any assignment or delegation that violates this provision shall be void.”
Note that you will not be able to prevent assignments resulting from court orders or by operation of law, such as those ordered through a bankruptcy hearing.
When you enter a contractual relationship, make sure to clearly determine your rights and obligations, as well as those of the other party. If it may be important for your business to have the right to assign all or parts of the contract, negotiate for the removal of the anti-assignment clause, or request changes to it to provide sufficient flexibility for you to assign.
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Assignment or no-assignment of contracts?
Many contracts will provide for a prohibition to assign the rights and obligations under the agreement – so-called assignment clauses . Normally, each party should be able to negotiate that the approval of the other party to an assignment will not be unreasonably withheld or delayed:
Assignment. No Party shall assign its rights or obligations under this Agreement in whole or in part, without the prior written approval of the other Party, which approval shall not be unreasonably withheld, conditioned or delayed.
Carve-outs allowing assignment . In many cases, the parties would like to make an extra carve-out for intra-group restructurings of activities or the performance under the contract by an affiliate, whether for tax or other geographical reasons. This would be the typical example for the applicability of shall not be unreasonably withheld .
However, contracting parties may seek more certainty. Uncertainty becomes particularly problematic when a party prepares a divestment of the business. Obviously, when the new investor in such business is a competitor of the customer, the latter’s refusal to unconditionally approve assignment is reasonable. In other cases, the parties want to be free to assign the agreement (i.e. the rights and related obligations) as part of a sale of the entire business to which such agreement relates. The uncertainty may be covered by a specific exception:
…, except that Seller may assign its rights and obligations under this Agreement in connection with a sale of all or a substantial part of its business to which such rights and obligations pertain.
The more complete version will also require a re-assignment in case of divestment of the Affiliated Company and have an additional provision:
Seller shall procure that an assignee Affiliate assigns back the assigned rights and obligations, immediately prior to such assignee ceasing to be an Affiliate of it.
Personal nature of the contract . The exception and related assign-back provision can, of course, accommodate both parties. Note, however, that there is a greater logic that a purchaser does not want to source from its competitors or from suppliers with a questionable background (e.g. suppliers obtaining products manufactured by children or in an environment-polluting way) than vice versa. Child labour or pollution of the environment are matters that a company would typically want to control upwards the product chain and not down. For a discussion of the wording shall not be unreasonably withheld, conditioned or delayed , click here .
Assignment and transaction financing (pledge) . In case of private equity and other leveraged transactions, the purchaser may need to be able to assign its rights (and obligations) freely under the share purchase agreement, in order to be able to obtain financing more easily. In such case, the seller would keep some control over the financing parts of the transaction by a restrictive assignment clause.
The caveat that assignment shall not unreasonably be withheld or conditioned will give the seller at least the opportunity to review the financing obligations and analyse the potential consequences of an assignment of the rights (and obligations) under the share purchase agreement to the banks and other lenders involved. A relaxed assignment clause facilitating the purchaser would be as follows:
Assignment. No Party may assign or transfer any of its rights or obligations under this Agreement without the prior written approval of the other Party, except that: (a) each Party may assign any of its rights under this Agreement to its Affiliates; and (b) Purchaser may assign any of its rights under this Agreement to any of its lenders or to any person acquiring all or substantially all of the rights or assets of Target after the Completion Date, provided, however, that no such assignment shall relieve an assigning Party of its obligations under this Agreement. For the avoidance of doubt, Purchaser may grant security interests in its rights under this Agreement to its lenders.
Note that an assignment clause does not relieve the parties to an assignment from fulfilling the requirements of the applicable law to such assigned rights and obligations. In order to give an assignment of rights its full effect (i.e. enforceability against the debtor and an obligation on the debtor to perform vis-à-vis the assignee only) most jurisdictions require a (written) assignment notice to the debtor [1] .
Contract law and assignment of obligations . An assignment of obligations would usually be subject to the consent of the debtor although under English law a distinction is drawn between novation and the assignment of a contract; whereby the latter does not require consent although will only be effective so as to assign the ‘benefit’ and not the ‘burden’ of the contract.
[1] See CFR Section III.5.1 (Art. III. – 5:104 ff.) and compare the U.N. Convention on the Assignment of Receivables in International Trade (12 December 2004).
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What is an Anti-Assignment Clause?
7 december 2020.
When business owners are negotiating contracts to gear up for the sale of their business, they are rightly concerned with key questions such as the sale price for the business including assets such as how much the sale will cost them and what happens if something goes wrong. At the end of the contracts, there are usually several pages of type that usually look like boilerplate. Inside those clauses is usually something called an assignment clause, or more accurately, an anti-assignment clause.
It’s one of those clauses that everyone glosses over – after all, it’s just standard legal text, right?
For a business owner hoping to sell their business, an anti-assignment clause can dissuade potential buyers and play a crucial role in the selling price of a business. If this sounds familiar and you’re in the process of negotiating the merger or acquisition of your business, read on – we’ve put together a practical guide to anti-assignment clauses and what to look out for.
What is an assignment clause?
The anti-assignment clause states that neither party can transfer or assign the agreement without the consent of the other party. On a basic level, that makes sense – after all, if you sign a contract with a specific party, you don’t expect to be entering into an agreement with a third party you didn’t intend to be.
However, when you sell your business, you will want to transfer ownership of those contracts to the buyer. If your contracts all contain an anti-assignment clause, they effectively restrict you from transferring ownership to the interested party. Now, you’re presented with a new challenge altogether – before you can focus on the sale of your business, you must first renegotiate the terms of your contracts with each party.
Language to look out for in anti-assignment clauses
If you’re thinking about selling your business or even have potential buyers interested, it’s better to know in advance if you’ve got anti-assignment clauses in your contracts. There are generally two types of anti-assignment clause to look out for. The first relates to the complete bar on assignment of rights and responsibilities and is typically worded in this way, or similar:
“Neither Party may assign, delegate, or transfer this agreement or any of its rights or obligations under this agreement.”
The second type prevents the transfer of rights or duties without prior written consent of the other party. This will read along the lines of:
“Neither this agreement nor any right, interest, or obligation herein may be assigned, transferred, or delegated to a third party without the prior written consent of the other party, and whose consent may be withheld for any reason.”
So, where the first prohibits assignment altogether, the second prohibits assignment unless permission is sought in advance. Some clauses may even explicitly state that a change of control such as a merger or acquisition is an assignment. The last thing you want is to cause a dispute by breaching the contract, but if you’ve already agreed to these terms, you’ll have to open a fresh set of negotiations with the contracting party before you sell the company.
Assignment clauses in M&A: what’s the problem?
Due diligence is the bread and butter of any merger or acquisition. Rather than a leap of faith, due diligence ensures the purchase of a business is a calculated decision with minimal risk to the buyer. Typically carried out by specialist lawyers, the process is designed to lift the hood on the target business to determine the valuation of assets and liabilities and identify any glaring issues that could leave the buyer open to risk.
During the due diligence process, the buyer will look through all of the major contracts the business has open, and specifically keep a close eye out for assignment clauses.
Despite the virtual environment that many businesses have been forced to operate in in 2020, most companies will have commercial leases for the premises from which they typically work. Almost all leases have an anti-assignment clause, and this is a perfect example of an instance that is often overlooked by commercial tenants when selling a business which includes a leasehold property. This transfer of ownership may well be prohibited under an anti-assignment clause so that prior to the sale of the business, you would be required to ask permission from your landlord. The issue here is that the landlord may well see this as the perfect opportunity to renegotiate and secure a better deal for themselves. What’s worse, if they don’t sign off on the transfer, you’ll have an obstruction on your hands that will stand in the way of the sale.
In any case, an unexpected anti-assignment clause usually winds up being a last-minute hitch in the sale, and it never comes at a good time. Whether it delays the sale or obstructs it altogether, overlooking an anti-assignment clause can cost you considerably in an M&A transaction.
What makes anti-assignment clauses enforceable?
Generally speaking, an anti-assignment clause will be enforced by the courts if it was agreed upon by both parties to the contract. Many contracts exclude or qualify the right to assignment – according to the courts, a clause that states that a party to a contract may not assign the benefit of that contract without the consent of the other party is legally effective and will extend to all rights and benefits arising under the contract.
Courts won’t always enforce assignments to which the counterparty did not give permission, even where there is no anti-assignment clause that specifies this provision.
How to negotiate anti-assignment clauses
The best practice for business owners is to be vigilant when negotiating new contracts and ensure that any anti-assignment clauses still allow for the transfer of ownership when they decide to sell the business.
Remember, even though the buyer is purchasing the assets of the business, this usually means that all of the contracts of the business go with it because the business remains intact. Therefore, the best way forward is to negotiate these clauses upfront from the outset of the relationship, so that when you do decide to sell your business, you automatically have permission to transfer the ownership without having to delay the sale by entering into fresh negotiations.
If your agreement does not permit assignments, it’s worth seeking the advice and support of a specialist lawyer who can help protect your interests through negotiation with your counterparty on this point. You may be able to include a provision that allows for assignment of your rights and obligations upon the prior written consent of the other party. Your lawyer will likely advise you to carve out a specific provision to prohibit the counterparty from unreasonably withholding or delaying consent or making it subject to unreasonable conditions – an issue which, if not provided for within the contract, can cause serious delay and disruption to the sale of your business. Further, it may be beneficial to add an extra element to the contract that makes exceptions to the clause for assignments between affiliates. If you’re planning to sell your business, this would be the right place to carve out an exception within the clause to the change of control via a merger or acquisition.
It’s important to bear in mind that anti-assignment clauses tend to be viewed narrowly by courts, and that there have been several instances whereby anti-assignment clauses have not been enforced since the clause itself did not explicitly state that the assignment of rights, duties or payment would render the contract void or invalid. So, if you’re in the process of negotiating an agreement and wish to protect your interests through the addition of an anti-assignment clause, it’s critical that you include the consequences of assignment within the clause itself and state that assignments would invalidate or be in breach of the contract.
If you do not wish for the counterparty to be able to transfer the legal obligation to perform their duties as stated in the contract to a third party, this must be explicitly stated in one of three ways:
- Specify the need for consent
There’s no need to be unreasonable – you can protect your interests while still giving the counterparty the space to re-negotiate should they wish to assign rights by including a clause that asks for consent.
- Provide an exemption to consent for affiliates, successors or new owners
Ask your lawyer to draft an exception into the clause that permits assignment to affiliates or successors to the counterparty, such as:
“Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, except that no consent is required (a) for assignment to an entity in which the transferring party will own greater than 50 per cent of the shares or other interests; or (b) in connection with any sale, transfer, or disposition of all or substantially all of its business or assets; provided that no such assignment will relieve an assigning party of its obligations under this agreement. Any assignment or delegation that violates this provision shall be void.”
- Require reasonable consent
Just as you would not wish for consent to be held back from you unreasonably in the renegotiation of contract terms prior to a sale, your assignment clause should make clear that you will not unreasonably withhold or delay consent should the third party request permission to assign their legal obligations. This may read something like this:
“Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, whose consent shall not be unreasonably withheld or delayed. Any assignment or delegation that violates this provision shall be void.”
Whatever the circumstances, we strongly recommend calling upon a contract law specialist, whether you’re undergoing due diligence in the run up to an M&A transaction, are considering selling your business or are negotiating new contracts with customers and suppliers. Our lawyers bring in-depth expertise in the area of anti-assignment clauses and will work closely with you to protect your interests and ensure no clauses in your contracts negatively impact the sale of your company.
For a free consultation, get in touch with our team through the contact form below or using our online chat service.
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Assignment clause defined.
Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.
In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.
Here’s an article about assignment clauses.
Assignment Clause Explained
Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.
Here’s another article about assignment clauses.
Purpose of Assignment Clause
The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.
Assignment Clause Examples
Examples of assignment clauses include:
- Example 1 . A business closing or a change of control occurs
- Example 2 . New services providers taking over existing customer contracts
- Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
- Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger
Here’s an article about the different types of assignment clauses.
Assignment Clause Samples
Sample 1 – sales contract.
Assignment; Survival . Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.
Reference :
Security Exchange Commission - Edgar Database, EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.
Sample 2 – Purchase and Sale Agreement
Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.
Security Exchange Commission - Edgar Database, EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.
Sample 3 – Share Purchase Agreement
Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.
Security Exchange Commission - Edgar Database, EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.
Sample 4 – Asset Purchase Agreement
Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.
Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.
Sample 5 – Asset Purchase Agreement
Assignment; Binding Effect; Severability
This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.
Security Exchange Commission - Edgar Database, EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.
Common Contracts with Assignment Clauses
Common contracts with assignment clauses include:
- Real estate contracts
- Sales contract
- Asset purchase agreement
- Purchase and sale agreement
- Bill of sale
- Assignment and transaction financing agreement
Assignment Clause FAQs
Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:
What is an assignment clause in real estate?
Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.
What does no assignment clause mean?
No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.
What’s the purpose of the transfer and assignment clause in the purchase agreement?
The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.
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Assignability Of Contracts: Everything You Need to Know
The assignability of contracts is when one side of a contract agreement transfers the contract to another entity, so that the new entity fulfills the terms of the contract. 3 min read
The assignability of contracts is when one side of a contract agreement transfers the contract to another entity, so that the new entity fulfills the terms of the contract. Being able to assign contracts depends on a variety of factors, mainly the language contained in the contract.
How Contract Assignments Work
Some contracts prohibit assignment altogether, while others may allow it with the other party's consent. An example of a basic contract assignment may look like this:
- Bob contracts with a dairy to deliver a gallon of cream to his house every day.
- The dairy assigns Bob's contract to another dairy.
- As long as Bob is notified of the change in provider and gets his gallon of cream every day, his contract is with the new dairy.
Because the law has a preference for the free alienation of property, parties are free to assign contract rights and delegate contractual obligations.
Assigning a contract to another doesn't always take away the assigning party's liability. Some contracts include a clause that at least one of the original parties guarantees performance — or fulfills the contract terms — no matter what the assignment.
The performance, however, can't be changed in contract assignment. There's a limit to substitution, so the new party has no power to change the performance per the rights stated in the contract. For example, if the obliging party has pledged to perform only if some event happens (with no certainty that it will happen), no assignment should increase the risk to the obliging party if the event doesn't happen through no fault of the obligor.
The nature of a contract's obligations determines its assignability.
When Assignments Won't Be Enforced
In certain cases, contracts can't be assigned.
- A clause in the contract prohibits assignment. This is usually called an anti-assignment clause.
- Assignments can't take place if they materially alter what's expected under the contract. If the assignment affects the expected performance as outlined in the contract, lowers the value of returns (including anticipated returns), or increases risks for the other contract party (the one who's not assigning contractual rights), it's unlikely that any court will enforce the arrangement.
- If an assignment violates public policy or the law, it won't be enforced. For instance, the federal government prohibits certain claim assignments against the government, and many states prohibit an employee from assigning future wages.
Other assignments may not be illegal, but they could still violate public policy. As an example, personal injury claims can't be assigned because doing so might encourage litigation.
When looking into whether one party can transfer a contract or some rights and obligations in the contract, the transferring party has to check into applicable laws and statutes. That party must also check the contract's express language to determine whether or not it can transfer the assignment without obtaining consent from the non-transferring party.
If the contract requires that consent is given and the transferring party doesn't get that consent, it risks a contract breach as well as an invalid, ineffective transfer.
How to Assign a Contract
Follow these steps to assign contracts, when it's allowed for you to do so.
- Carefully study the contract for prohibitions or limitations, such as anti-assignment clauses. In some cases, there isn't a separate anti-assignment clause, but it may be stated in another way, such as language that says, "This contract may not be assigned."
- Execute the assignment. As long as you're free to assign the contract, prepare and enter into the assignment, which is basically an agreement transferring your rights and obligations.
- Notify the obligor, or the non-transferring party. After you assign contract rights to the assignee, notify the other party that was the original contractor, also known as the obligor. This notice relieves you of any liability as stated in the contract, as long as the contract doesn't say differently — for instance, the contract states that you, as the assignor, guarantee performance under the contract.
Before trying to assign a contract to a third party, it's very important to understand if you're allowed to do so. You'll have to research legal statutes as well as the language in the contract to ensure you follow rules and regulations. Otherwise, you risk a breach of contract .
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Northern Europe
New interpretation of non-assignment clauses relevant for securitisation and factoring.
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Supreme Court 21 March 2014, ECLI:NL:HR:2014:682 (Coface/Intergamma)
On 21 March 2014, the Supreme Court ruled that a breach of a non-assignment clause results in a breach of contract, but is unlikely to affect the valid transfer (and pledge) of the assigned rights.
The judgement is relevant to parties involved in various types of financing, such as securitisations, factoring and reverse factoring, in which the assignment of rights is an essential requirement. Rights governed by Dutch law subject to a non-assignment clause were traditionally considered unsuitable for these types of financing. This judgement challenges that traditional thinking. The judgement has the potential to significantly expand the number of claims that are suitable for securitisations, factoring and reverse factoring.
Since 2005, Intergamma had been purchasing electronics from the AFK group on Intergamma's general terms and conditions of purchase. The non-assignment clause in these terms and conditions prohibited the vendor (AFK Group) from transferring all or part of its rights and obligations to third parties without Intergamma's prior written consent. In violation of that prohibition, AFK Germany, the entity in the AFK group to which Intergamma made payments, assigned its claims against Intergamma to Coface in 2008 under a factoring agreement without seeking Intergamma's consent.
When Intergamma made payments early in 2009 to AFK Holland, another part of the AFK group, Coface invoked the assignment and asserted that the payments to AFK Holland did not release Intergamma from its payment obligations. Intergamma refused to pay Coface, and relied on the non-assignment clause which, according to Intergamma, meant that the assignment of AFK Germany's claims to Coface in 2008 was void.
Interpretation of the non-assignment clause: presumption that it only affects contracting parties
The key issue before the court was the effect of the non-assignment clause. Did it have the effect of invalidating the entire transfer of rights to Coface (ie did it have proprietary effect)? Or did it merely mean that AFK Germany was in breach of contract, but that the rights remained with Coface (ie that the clause had only contractual effect)?
The Supreme Court ruled that, in principle, there is a presumption that a non-assignment clause only takes effect under the law of obligations:
" A clause like the one at issue, which is also intended by its nature to affect the legal position of third parties that have no knowledge of the intention of the contracting parties, and which serves to uniformly govern their legal position, must be construed according to objective standards, with due observance of the Haviltex standard. 1
The point of departure when interpreting clauses that exclude assignment of a claim must be that they only have effect under the law of obligations, unless their wording - construed according to objective standards – indicates that they were also intended to have effect under the law of property as referred to in Article 3:83, paragraph 2, of the Dutch Civil Code. "
The case will now be referred back to the Hague Court of Appeal for it to decide whether the non-assignment clause in Intergamma's general terms and conditions was intended to have effect only under the law of obligations, or to have proprietry effect too.
Implications
A non-assignment clause which prohibits a party from assigning its rights (eg "the Seller shall not assign its rights") will, if breached, generally result in a breach of contract but will not affect the assignee's rights. The rights subjected to the clause are still transferred. Should a proprietary effect, ie actual non-transferability, be required, the non-assignment clause will need to explicitly state this (eg "The rights under this agreement are non-transferable").
The Supreme Court's ruling places increased emphasis on the precise wording of a non-assignment clause. Obligors who want a non-assignment clause to have absolute effect vis-à-vis third parties and contracting parties should review their contracts or general terms and conditions and make changes if necessary. The text must either explicitly state that an assignment prohibition has effect under the law of property. A clause must state that the claim itself cannot be transferred.
The ruling also affects finance parties. Before this judgment, it was generally assumed that every non-assignment clause took effect under the law of property unless the text of the clause contained indications that the prohibition only had consequences under the law of obligations. This judgment suggests the opposite, thus potentially widening the pool of rights suitable for securitisations, factoring etc.
Under Dutch law, if there is a dispute about the meaning of a contract provision, a Dutch court will ascertain this meaning by applying the following standard: what could the parties reasonably have understood that provision to mean and what could they reasonably have expected from each other? For this "Haviltex standard", all facts and circumstances are relevant, including the conduct of the parties before and after entering into the contract. For more information, please see our article "Plain Meaning of the Words Not Always Determinative for Commercial Contracts" in the EFLR of June 2013.
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Business Law Breakdown: Will Boilerplate Assignment Clauses Wreck the Sale of Your Business?
January 17, 2020 by Richards Rodriguez & Skeith
When business owners are negotiating contracts, they’re rightly concerned with things like how much they are going to get paid, how much they have to pay, who’s responsible for what, and what happens if something goes wrong. At the end of the contracts, however, there are several pages of type called “boilerplate”. Inside those boilerplate clauses, there is often a clause that is called an assignment clause, which might be better called a “no assignment clause”.
What is a No Assignment Clause?
That no assignment clause says that neither party can transfer or assign this agreement without the written consent of the other party. If you look at the assignment clause, that generally makes sense, because you may not want to be in a contract with a new person that you didn’t initially know about.
Let’s say that some of the most important contracts in your business have a no-assignment clause in them. If this is the case, an issue may come up in the sale, since in that sale you are transferring those contracts to the buyer. If the no assignment clause says you can’t do that, now you have a whole new negotiation to open up with the person on the other side of the contract before you can actually sell your business to the buyer.
When Does this Come Up?
In due diligence, the buyer will look through all of the major contracts for the business, and specifically take a look for these assignment clauses. For example, for a lot of businesses leases of real estate are very important, and almost all leases will say that they can’t be assigned to a new tenant. Well, when the buyers created a new company for your business, there is a new tenant. In this situation, you will have to go to the landlord to get the landlord’s prior approval before selling your business.
Often times, this can end up being a last-minute hitch in the sale of the business, and you’re in this uncomfortable position where you’re not even telling your employees that you are thinking about selling the business, but now you have to go tell your landlord and try to renegotiate.
The issue with the landlord or anyone on the other side of any other contract is that if they know that you have to get their permission to assign the contract because of a sale, they’ll often take it as an opportunity to renegotiate and make a better deal for themselves. This also can take a lot of time, which doesn’t lend itself to actually getting a deal closed for the sale of the business.
What are Assignment Clause Best Practices?
The best practice with assignment clauses is, when you’re actually negotiating the contract, to make sure that the assignment clause allows you to transfer key contracts when you sell your business. You might be thinking that if a buyer is purchasing the equity of your business, that you don’t have to worry about this issue. When you sell the equity of your business, usually all of the contracts of the business go along with the equity, because the business remains intact. However, some assignment clauses understand that this is a possibility, and say things like “The change of ownership of the business is actually an assignment that you need the permission of the landlord or the person on the other side of the contract to approve.”
The best practice for assignment clauses is to negotiate them up front, so that when you sell your business you automatically have the permission to transfer the agreement.
For more information on this topic, contact us today.
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Anti-assignment clauses—also sometimes referred to as assignment clauses or non-assignment clauses—can appear in various forms. Essentially
Many contracts will provide for a prohibition to assign the rights and obligations under the agreement – so-called assignment clauses.
The anti-assignment clause states that neither party can transfer or assign the agreement without the consent of the other party.
No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another. What's the purpose of the transfer and assignment
An anti-assignment clause prevents either of the parties to a contract from assigning tasks to a third party without the consent of the non-assigning party.
A clause in the contract prohibits assignment. This is usually called an anti-assignment clause. · Assignments can't take place if they materially alter what's
A non-assignment clause which prohibits a party from assigning its rights (eg "the Seller shall not assign its rights") will, if breached, generally result in a
That no assignment clause says that neither party can transfer or assign this agreement without the written consent of the other party.