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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 and other dealings

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What does it do and why do I need it?

An assignment clause aims to control who performs a contract and who can receive benefits under the contract. It does not, however, mean that a party’s contractual obligations are transferred over, it simply means that the performance of such obligations can be delegated. This means that burdens cannot be assigned as a matter of law, but benefits can. 

Including such a clause is important if you wish to control who receives the benefit of your performance if you are the supplier, or if you are a customer, control who carries out the contract for you. This may be important to you, for instance, if you do not wish to deliver work to your competitors or you do not want a particular person in your supply chain.

If the contract is silent on assignment and other dealings, a party can normally assign, mortgage, charge or declare a trust over its rights under the contract, without the other party’s consent and use a subcontractor to perform (but not transfer) its contractual duties. In some cases, however, a restriction on subcontracting may be implied where personal performance is required for example.

In light of this, if the parties wish to restrict such abilities, they should do this expressly. Please note, however, a prohibition on assignment has no effect on assignment of a right to receive payment, this applies to many contracts for supply of goods, services or intangibles made between UK businesses on or after 31 December 2018. 

What should I look out for?

• Effect of an assignment breach - in most cases, a breach of an assignment restriction in the main contract may trigger termination rights or other remedies, may be valid between the assignor and assignee and it does not bind the original promisor who remains liable to the original promisee (the party receiving the benefit).
• Effect of a restriction of other dealings breach - if the wording specifically carves out restrictions on ‘mortgages, charges or trust of rights’ then it should be effective to stop the contracting party holding its rights in trust for a non-party. However, a restriction on an assignment/transfer alone might not have this effect. On the contrary, in relation to a subcontract, if a restriction was in place and there has been a breach, the subcontract is normally still valid, but the other party to the main contract may not be obliged to accept or pay for the subcontractor’s performance.
• Novation - if a party wants to actually transfer its obligations under the contract, as opposed to delegating their performance, it will need to do so by way of novation.
• Subcontracting of processing personal data - if, as part of subcontracting its obligations generally, the assigning/subcontracting party is subcontracting obligations to process personal data, it should note that the GDPR imposes conditions on sub-processing. The main contractor should check the data processing provisions and subcontracting provisions in the contract for provisions relating to sub-processing.
• Indemnities - in relation to subcontracting duties, the main contractor remains liable to the continuing party for the performance of any part of the contract that is still to be fulfilled. Therefore, a main contractor will therefore generally ask their subcontractor for an indemnity against any breach or failure to perform the contract. The indemnity will not usually cover liabilities incurred before the subcontracting took effect.

If you have any queries, please do not hesitate to contact Ben Taylor .

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Contract Assignment: New York | Practical Law

Contract Assignment: New York

Practical law state q&a w-000-2743  (approx. 13 pages).

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Validity of a Contract Assignment

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  What Is a Contract?

A contract is a legally binding arrangement between two or more parties. A contract supplies particulars of what the parties agree to perform or exchange. A contract may be in written or oral form. In most cases, to be legally binding, a contract must be in writing and signed by all parties concerned.

Courts typically require three things for a contract to be enforceable:

• Mutual assent, or agreement to the contract terms;
• A valid offer and acceptance; and
• Consideration.

Contracts are deemed the foundation of the business world. They may be easy or very complicated. Examples of contracts include employment contracts, real estate purchase agreements, and insurance arrangements.

Contracts must be entered into by all parties freely. All parties signing the contract must do so of their own free will and not under duress . Contracts can be used whenever parties want to document an agreement to ensure all parties’ rights are covered.

Drafting a contract refers to writing the terms and details of a contract to specify and summarize the legal responsibilities of all parties to the contract. This permits all parties to the contract to understand their duties and legal obligations to one another clearly.

Anyone can draft a contract, but it would be in the best interest of all parties involved to have an attorney draft a contract, particularly if it is intricate or complicated. For instance, a real estate agreement often involves multiple aspects, multiple parties, and intricate land descriptions. To ensure your sale or purchase, financial investment, and rights are shielded, having an attorney draft this type of agreement would be preferable.

A contract will also deliver sections outlining whether or not it may be canceled and how to revoke it. The agreement will also outline the results if a party breaches the contract terms. A well-written contract will contain explicit definitions of what comprises a breach of the agreement so all parties can support their responsibilities.

What Are the Elements of a Legally Binding Contract?

What is a contract assignment, when is a contract assignment valid, are there any limitations on contract assignments, what does a contract lawyer do, do i need a lawyer for help with a contract assignment.

To be legally binding, a contract is required to include certain elements. Some contracts must be in writing to be valid, such as contracts for money over $500.00. A contract must be created for a lawful purpose. For instance, an individual cannot contract to perpetrate a crime. It is essential to be familiar with the requirements of a valid contract.

A valid contract must include:

• An acceptance of the offer;
• A promise to perform;
• A valuable consideration ;
• A date, a time window, or an event when the performance must be satisfied;
• Terms and conditions of the performance; and
• Performance.

The offer and acceptance segments of a contract are also known as the “meeting of the minds” or mutual agreement of the parties. All parties’ signing of the contract is often used to prove that agreement. In some circumstances, offers may have an expiration period, where the offer is open for a reasonable time. Some offers may not have a time limitation. Offers can be withdrawn until the time of acceptance.

Acceptance happens when the parties agree to the terms of the offer. If a modification is made to the offer terms, it would be deemed a counteroffer. Different states have various regulations in this area of contracts, so it is essential to review local laws.

For a contract to be proper, consideration must be supplied. When both parties agree to provide something of value in exchange for a benefit, consideration ensues. For instance, consideration must be something of value and can include money, a car, or manual labor.

For a contract to be proper, all parties must be legally competent . Some people cannot enter into contracts, such as minors or the mentally impaired. A party must be of sound mind and not under the influence of drugs or alcohol at contracting. All parties to a contract must be free from coercion at contracting. Contracts will be proclaimed void if there is a mistake, coercion, or deception by one or more parties.

In a contracts setting, an “assignment” refers to transferring benefits or rights granted by the contract terms from the receiving party to a different party. Therefore, contract assignments bring an additional party to the existent contract parties.

An illustration of this is where a contractor assigns their right to payments to another party. The other party would then be entitled to fees for the contractor’s work. This is different from a contract delegation , which transmits obligations rather than rights to another party. Assignment usually ensues because it involves some potential for profit for the party making the assignment.

Contract rights and benefits can lawfully be assigned so long as no prior agreement prohibits an assignment. All required is for the assigning party (the assignor) to agree with the assignee (the third party recipient) that they will be transmitting their rights to them. The original party rendering the payment (the “obligor”) doesn’t usually need to be told that an assignment has occurred.

When assigning contract rights to an assignee, an oral agreement may suffice. Yet, as in any deal, it’s best to reduce the assignment to writing so that the parties have a record of the agreement in the future.

The validity of an assignment may depend on the kind of language used in the written agreement. It needs to be in the present tense. That is, the assignor must state, “I am assigning my contract rights to X party,” rather than “I will be assigning my contract rights to X party”

Typically, the parties are free to make assignments, so long as they stick to the following rules:

• The assignment should be permitted according to local, state, and federal regulations (for instance, some states make it unlawful to allocate wages to another individual)
• The assignment should only shield present transfers of rights and not future transfers.
• If the contract contains a specific “no-assignment” condition or clause, then an assignment can’t be made (if one is made in such a case, it may comprise a breach of contract)
• The assignment should not substantially change the contract or subject the obligor to losses or financial risks.

Also, any time an assignment is made, the assignor implicitly warrants that the rights are accurate, that they own the assigned rights, and won’t interfere with the party’s new claim to the rights. Assignments become proper when formed (even if the recipient is not yet cognizant of the assignment).

The tasks and duties of a contract attorney include preparing contracts, checking contracts, and ensuring their clients’ rights are safeguarded. Contract attorneys are experienced in the prerequisites of contracts and how to make sure they will be enforceable. These types of arrangements must often include certain legal aspects and language.

A contract attorney will help a company or person include the essential terms needed for their business needs and include any legal language the person may not know is required.

Contract assignments can often become somewhat difficult, as they involve the privileges and responsibilities of many different parties. It’s in your best interests to speak with a contracts lawyer if you have any questions about a contract assignment.

Your lawyer will be able to examine the contract and the assignment terms to decide what your legal rights are. In the event of a lawsuit, your attorney can help represent your interests in court.

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Assignment of Contract Rights: Everything You Need to Know

The assignment of contract rights happens when one party assigns the obligations and rights of their part of a legal agreement to a different party. 3 min read updated on September 19, 2022

The assignment of contract rights happens when one party assigns the obligations and rights of their part of a legal agreement to a different party. 

What Is an Assignment of Contract?

The party that currently holds rights and obligations in an existing contract is called the assignor and the party that is taking over that position in the contract is called the assignee. When assignment of contract takes place, the assignor usually wants to hand all of their duties over to a new individual or company, but the assignee needs to be fully aware of what they're taking on. 

Only tangible things like property and contract rights can be transferred or assigned . Most contracts allow for assignment or transfer of contract rights, but some will include a clause specifying that transfers are not permitted. 

If the contract does allow for assignments, the assignor isn't required to have the agreement of the other party in the contract but may transfer their rights whenever they want. Contract assignment does not affect the rights and responsibilities of either party involved in the contract. Just because rights are assigned or transferred doesn't mean that the duties of the contract no longer need to be carried out. 

Even after the assignor transfers their rights to another, they still remain liable if any issues arise unless otherwise noted in an agreement with the other party. 

The purpose for the assignment of contract rights is to change the contractual relationship, or privity , between two parties by replacing one party with a new party. 

How Do Contract Assignments Work?

Contract assignments are handled differently depending on certain aspects of the agreement and other factors. The language of the original contract plays a huge role because some agreements include clauses that don't allow for the assignment of contract rights or that require the consent of the other party before assignment can occur.

For example, if Susan has a contract with a local pharmacy to deliver her prescriptions each month and the pharmacy changes ownership, the new pharmacy can have Susan's contract assigned to them. As long as Susan continues to receive her medicine when she needs it, the contract continues on, but now Susan has an agreement with a new party. 

Some contracts specify that the liability of the agreement lies with the original parties, even if assignment of contract takes place. This happens when the assignor guarantees that the assignee will continue to perform  the duties required in the contract. That guarantee makes the assignor liable. 

Are Assignments Always Enforced?

Assignments of contract rights are usually enforceable, but will not be under these circumstances:

• Assignment is prohibited in the contract language, which is called an anti-assignment clause.
• Assignment of rights changes the foundational terms of the agreement.
• The assignment is illegal in some way.

If assignment of contract takes place, but the contract actually prohibits it, the assignment will automatically be voided. 

When a transfer of contract rights will somehow change the basics of the contract, assignment cannot happen. For instance, if risks are increased, value is decreased, or the ability for performance is affected, the assignment will probably not be enforced by the court. 

Basic Rights of Contract Assignments

Most contracts allow for assignments, but you'll want to double check a contract before signing if this is something you anticipate happening during the lifespan of your agreement. Contract law does impose strict rules and regulations regarding the assignment of contract rights, so it's important to be sure that any transfers of rights are fully legal before acting on them. 

Any business agreements should always outline provisions for contract assignments and be well-drafted to be sure that the agreement is effective and enforceable. 

Why Use Contract Assignments?

When an assignor hands over their contracts rights to an assignee, they are signing away their obligation to perform and putting that obligation on a new party. The other party involved in the contract should see no difference in how the agreement plays out. If performance is negatively affected by the assignment of rights, something is wrong. 

If a party in a contract can no longer perform their duties, it is better to assign their contractual rights to a party who can carry out the duties rather than breach contract. 

If you need help with the assignment of contract rights, you can  post your legal need  on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb. 

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A Guide to Understanding Anti-Assignment Clauses

Introduction

With the increasing trend of globalization in the business world, Israeli companies and investors are commonly entering into agreements with U.S.-based entities. One of the most frequently found clauses in U.S. commercial agreements is an anti-assignment provision that prevents either or both of the parties from assigning the agreement to a third party prior to receiving the consent of the non-assigning party. Many transactions will also require the due diligence review of a large number of U.S. commercial agreements that the target has entered into. The following post will provide an overview and general guidance on the proper analysis of anti-assignment clauses.

Silent Provision and Change of Control Provision

In the event that an agreement does not contain an anti-assignment provision, a contract is generally assignable without the consent of the non-assigning party. See  Peterson v. District of Columbia Lottery and Charitable Games Control Board , 673 A.2d 664 (D.C. 1996) (“The right to assign is presumed, based upon principles of unhampered transferability of property rights and of business convenience.”) Exceptions include where the assignment affects the duties of the other party to the contract, where the contract is considered to be a personal contract and when the assignment violates public policy (i.e. tort liability).

On the other hand, many contracts contain provisions that not only prevent the assignment of the contract, but also state that a change of control of the target is deemed an assignment or the contract contains a separate clause requiring consent in the event of a change of control. This type of provision will often be triggered in transactions in which a buyer is acquiring the target company. A careful review of change of control clauses is thus especially imperative and often very fact specific to the deal at hand.

Deal Structures

One of the commonly used anti-assignment provisions reads as follows: “No party may assign any of its rights under this Agreement, by operation of law or otherwise, to a third party without the prior written consent of the non-assigning party.” In the situation where the target has entered into agreements that contain this clause, whether or not an assignment is considered to have taken place in the event of the acquisition of the target will largely depend on the specific deal structure of the transaction.

The commonly used deal structures are an asset acquisition, a stock acquisition and a merger.

• Asset Acquisition : In an asset acquisition the buyer only acquires those assets and liabilities of a target that are specifically listed in the Asset Purchase Agreement. Any agreement that has an anti-assignment clause will be triggered in the event of an asset acquisition. Indeed, one of the disadvantages of structuring a corporate acquisition as an asset acquisition is that contracts that will be transferred must be assigned
• Stock Acquisition : In a stock acquisition, a buyer acquires a target’s stock directly from the selling shareholders. After the closing of the Stock Purchase Agreement, the target will continue as it existed prior to the acquisition with respect to its ownership of asset and liabilities. Thus, in essence, the anti-assignment clause was never triggered in the first place. See  Baxter Pharm. v. ESI Lederle , 1999 WL 160148 (Del. Ch. 1999).
• A direct merger occurs when the target merges with and into the buyer, and the buyer continues as the surviving entity. In a similar fashion to an asset acquisition, this type of merger will trigger the anti-assignment clause
• A forward triangular merger occurs when the target merges with and into the buyer’s merger subsidiary, with the merger subsidiary surviving the merger. This type of merger will trigger the anti-assignment clause. See  Tenneco Automotive Inc. v. El Paso Corporation , 2002 WL 45930 (Del. Ch. 2002) and  Star Cellular Telephone Company, Inc. v. Baton Rouge CGSA, Inc., 19 Del.  J.  Corp. L. 875  (Del. Ch. 1993).
• A reverse triangular merger occurs when the buyer’s subsidiary merges with and into the target, with the target surviving as a wholly owned subsidiary of the buyer. In effect, the target continues to exist after the closing. The Delaware Chancery Court in  Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH,  2013 WL 655021 (Del. Ch. Feb. 22, 2013) held that the acquisition of a target in a reverse triangular merger did not violate an existing agreement of the target that prohibited assignments by operation of law. The court noted that generally, mergers do not result in an assignment by operation of law of assets that began as property of the surviving entity and continued to be such after the merger. Thus there is a significant difference between a reverse triangular merger and both a direct merger and forward triangular merger, as in those cases the target was not the surviving company of the merger. Note, however, that the matter is not uniformly resolved. In  SQL Solutions, Inc. v. Oracle Corp.  (N.D. Cal. 1991), a United States District Court in the Northern District of California applied California law and federal IP principles to hold that a reverse triangular merger constitutes an assignment by operation of law.

Additional Considerations

Damages and Termination : Some courts have held that a contractual provision prohibiting assignment operates only to limit the parties’ right to assign the contract (for which the remedy would be damages for breach of a covenant not to assign) but the provision does not limit the power to actually assign the contract (which would invalidate the assignment), unless the contract explicitly states that a non-conforming assignment shall be “void” or “invalid.” See, e.g.,  Bel-Ray Co v. Chemrite (Pty.) Ltd ., 181 F. 3d 435 (3d Cir. 1999).  It is also imperative to review the termination section of an agreement, as certain agreements contain a provision by which the non-assigning party has the right to terminate the agreement in the event of an assignment.

As described above, any review of U.S. commercial agreements is highly dependent on the structure of the deal and at times, the specific jurisdiction governing the agreement. With offices across the United States, and specifically in Delaware, New York, and California, all states with highly sophisticated and oft-invoked commercial laws, Greenberg Traurig is uniquely situated in a position to offer high value legal services to Israeli clients.

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Don’t Confuse Change of Control and Assignment Terms

• David Tollen
• September 11, 2020

An assignment clause governs whether and when a party can transfer the contract to someone else. Often, it covers what happens in a change of control: whether a party can assign the contract to its buyer if it gets merged into a company or completely bought out. But that doesn’t make it a change of control clause. Change of control terms don’t address assignment. They say whether a party can terminate if the other party goes through a merger or other change of control. And they sometimes address other change of control consequences.

Don’t confuse the two. In a contract about software or other IT, you should think through the issues raised by each. (Also, don’t confuse assignment of contracts with assignment of IP .)

Here’s an assignment clause:

Assignment. Neither party may assign this Agreement or any of its rights or obligations hereunder without the other’s express written consent, except that either party may assign this Agreement to the surviving party in a merger of that party into another entity or in an acquisition of all or substantially all its assets. No assignment becomes effective unless and until the assignee agrees in writing to be bound by all the assigning party’s obligations in this Agreement. Except to the extent forbidden in this Section __, this Agreement will be binding upon and inure to the benefit of the parties’ respective successors and assigns.

As you can see, that clause says no assignment is allowed, with one exception:

• Assignment to Surviving Entity in M&A: Under the clause above, a party can assign the contract to its buyer — the “surviving entity” — if it gets merged into another company or otherwise bought — in other words, if it ceases to exist through an M&A deal (or becomes an irrelevant shell company).

Consider the following additional issues for assignment clauses:

• Assignment to Affiliates: Can a party assign the contract to its sister companies, parents, and/or subs — a.k.a. its “Affiliates”?
• Assignment to Divested Entities: If a party spins off its key department or other business unit involved in the contract, can it assign the contract to that spun-off company — a.k.a. the “divested entity”? That’s particularly important in technology outsourcing deals and similar contracts. They often leave a customer department highly dependent on the provider’s services. If the customer can’t assign the contract to the divested entity, the spin-off won’t work; the new/divested company won’t be viable.
• Assignment to Competitors: If a party does get any assignment rights, can it assign to the other party’s competitors ? (If so, you’ve got to define “Competitor,” since the word alone can refer to almost any company.)
• All Assignments or None: The contract should usually say something about assignments. Otherwise, the law might allow all assignments. (Check your jurisdiction.) If so, your contracting partner could assign your agreement to someone totally unacceptable. (Most likely, though, your contracting partner would remain liable.) If none of the assignments suggested above fits, forbid all assignments.

Change of Control

Here’s a change of control clause:

Change of Control. If a party undergoes a Change of Control, the other party may terminate this Agreement on 30 days’ written notice. (“Change of Control” means a transaction or series of transactions by which more than 50% of the outstanding shares of the target company or beneficial ownership thereof are acquired within a 1-year period, other than by a person or entity that owned or had beneficial ownership of more than 50% of such outstanding shares before the close of such transactions(s).)

• Termination on Change of Control: A party can terminate if controlling ownership of the other party changes hands.

Change of control and assignment terms actually address opposite ownership changes. If an assignment clause addresses change of control, it says what happens if a party goes through an M&A deal and no longer exists (or becomes a shell company). A change of control clause, on the other hand, matters when the party subject to M&A does still exist . That party just has new owners (shareholders, etc.).

Consider the following additional issues for change of control clauses:

• Smaller Change of Ownership: The clause above defines “Change of Control” as any 50%-plus ownership shift. Does that set the bar too high? Should a 25% change authorize termination by the other party, or even less? In public companies and some private ones, new bosses can take control by acquiring far less than half the stock.
• No Right to Terminate: Should a change of control give any right to terminate, and if so, why? (Keep in mind, all that’s changed is the party’s owners — possibly irrelevant shareholders.)
• Divested Entity Rights: What if, again, a party spins off the department or business until involved in the deal? If that party can’t assign the contract to the divested entity, per the above, can it at least “sublicense” its rights to products or service, if it’s the customer? Or can it subcontract its performance obligations to the divested entity, if it’s the provider? Or maybe the contract should require that the other party sign an identical contract with the divested entity, at least for a short term.

Some of this text comes from the 3rd edition of The Tech Contracts Handbook , available to order (and review) from Amazon  here , or purchase directly from its publisher, the American Bar Association, here.

Want to do tech contracts better, faster, and with more confidence? Check out our training offerings here: https://www.techcontracts.com/training/ . Tech Contracts Academy has  options to fit every need and schedule: Comprehensive Tech Contracts M aster Classes™ (four on-line classes, two hours each), topical webinars (typically about an hour), customized in-house training (for just your team).   David Tollen is the founder of Tech Contracts Academy and our primary trainer. An attorney and also the founder of Sycamore Legal, P.C. , a boutique IT, IP, and privacy law firm in the San Francisco Bay Area, he also serves as an expert witness in litigation about software licenses, cloud computing agreements, and other IT contracts.

© 2020, 2022 by Tech Contracts Academy, LLC. All rights reserved.

Thank you to  Pixabay.com  for great, free stock images!

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Assignment of Commercial Contracts

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• Increase efficiency
• Enhance productivity
• Improve response time
• General Contract and Boilerplate
• Substantive Law
• What is Assignment?
• Effect of Assignment
• What Is Delegation?
• Types of Assignment
• Requirements for a Legal (Statutory) Assignment
• Requirements for an Equitable Assignment
• Voluntary and Involuntary Transfers
• Change of Control
• Non-Assignable Contracts
• Contractual Anti-Assignment Clauses
• Directly Addressing Assignment and Delegation
• Specifying Restricted Transfers
• Designating the Non-Transferring Party's Consent Rights
• Specifying Exceptions to Non-Transferability
• Requiring Notification of a Permitted Transfer
• Including a Declaration that Impermissible Transfers are Void
• Adding a Novation to the Anti-Assignment and Anti-Delegation Provision
• Contracts for the Sale of Goods
• Distribution and Franchise Agreements
• Personal Services Contracts
• Intellectual Property Licences
• Commercial Real Estate Leases
• Commercial Real Estate Sale Agreements
• Merger and Acquisition Agreements
• Construction Contracts
• Loan Agreements
• Insurance Contracts
• Sale of a Business
• Corporate Reorganizations
• Secured Transactions
• If the Contract is Silent on Transferability
• If the Contract Has an Anti-Assignment and Anti-Delegation Clause

How is the governing law of a contract determined if the contract is silent?

The governing, or Applicable law is the law that governs a dispute between the parties. Generally, parties have the freedom to choose the applicable law. However, where they have failed to do so then the applicable law will be determined by the application of the relevant directive, convention or Common law Rules .

For domestic disputes between parties based within the jurisdiction of England and Wales,

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Key definition:

Governing law definition, what does governing law mean.

Governing law is the law stipulated in a contract to determine a dispute. Where there is no valid governing law clause, the law to be applied, the applicable law , will be determined in accordance with the relevant regulation, convention, legislation or common law rules .

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Assignment of Contracts in Minnesota - 10 Things to Know

Posted by Christopher A. Jensen | Jul 15, 2020 | 0 Comments

If you are a party to a contract, you may have the right to transfer your contract rights to another person. This is called an “assignment” of the contract. Basically, assignment means that another person is stepping into a party's shoes and must perform the original terms of the contract.  

Assignments of contracts are very common. However, many people are not aware of the concept or do not fully understand the legal implications of an assignment.

Assignments come up in many contexts, including :

• Real Estate (mortgages, contracts for deed, etc.);
• Commercial Contracts (sales contracts, security agreements, supply agreements, etc.);
• Transfers of Business Ownership Interests; and
• Debtor-Creditor transactions.

This article discusses 10 basic things that people should know about assignments in Minnesota.

1.  Assignment is a Transfer of a Party's Rights and/or Obligations in a Contract.

“Assignment” is when a party transfers rights or obligations in a contract to another party (also called a “substitution” or “novation” ). This means that a new person is coming into the contract. This can significantly change the dynamic of the contract, so the parties should make sure that assignment is appropriate for their situation.

Assignment can involve transfer of some or all of that party's rights or obligations in the contract. If only some are being transferred, the original party may still retain some rights. If all rights and obligations are being transferred, the new party is being fully substituted into the contract.

It is important to remember that an assignment may involve rights, obligations, or both . A right is a benefit that a party receives from the contract. An obligation is a duty that the party owes to the other party. While it is common to fully substitute another party into all the rights and obligations of the contract, there is variation in what is assigned.

Here are some relevant terms that come up with assignments:

• Assignor : the person assigning (transferring) rights in a contract.
• Assignee : the person receiving the assignment of rights to a contract.
• Obligor : the person that owes duties to another party (in my examples, the obligor is often the “assignor” who owes obligations to the other original party).
• Obligee : the person that receives performance from another party (in my examples, this is often the party to the original contract that is not assigning any interest).

2.  Assignment Does Not Change the Terms of the Original Contract.

Assignment does not change the terms of the original contract, unless the other party agrees to a modification of the original terms. Usually, assignment just changes one of the parties to the contract. Therefore, basic assignments are clean transactions.

Sometimes, the parties modify the original contract at the time of an assignment. This might occur where all parties want the assignment to happen but need to adjust the contract to accommodate the new party (the “assignee”).

For example, if a borrower cannot keep up with loan payments to a creditor, the creditor may want to bring in a better borrower to take over the loan payments. While the creditor could try to foreclose or sue the original borrower, allowing an assignment might create less disruption and allow for consistent cash flow. The creditor and assignee could negotiate some adjustments to the contract to make the assignment happen.

The original parties could try to build adjustments into the contract in case there is a future assignment. Perhaps there is an assignment “fee”, “penalty”, or other duty of the assignor. If the original parties see problems with future assignments, they could try to address them in the original contract.

The bottom line is that the assigned contract usually remains the same and the assignee must perform it just as the original party was required to do.

3.  Assignments are Generally Allowed.

In Minnesota, parties are usually allowed to assign their interests in a contract.

The general rule is that contract rights are assignable unless prohibited by statute, by contract, or if “the contract involves a matter of personal trust or confidence. ” Travertine Corp. v. Lexington-Silverwood ,  683 N.W.2d 267, 270 (Minn. 2004).

In that sense, there is a presumption that contracts can be assigned. Therefore, if the contract is silent on whether assignment is allowed, the parties can likely assign their rights.

4.  If Parties Want to Prohibit Assignments, They Must Use Clear Language in the Contract.

There are many reasons why an assignment would pose a problem, as the dynamic of the contractual relationship can significantly change. If the parties want to prevent assignments, they must use clear "anti-assignment" language.

A valid anti-assignment clause in the contract “defeat[s] an otherwise valid assignment.” Stand Up Multipositional Advantage MRI, P.A. v. Am. Family Ins. Co. ,  889 N.W.2d 543, 548 (Minn. 2017). The purpose of an anti-assignment clause “is to protect the contracting party from dealing with parties he has not chosen to do business with.” Travertine Corp. ,  683 N.W.2d at 271. Courts do not “require that the parties use specific terms to preclude assignment,” but they must “include  something  expressing their intent that the contract not be assignable.”  Id.  at 272 (citing  Wilkie v. Becker,  268 Minn. 262, 267, 128 N.W.2d 704, 707 (1964)). Where the contract “prohibits assignment in very specific and unmistakable terms, any purported assignment is void.”  Id.  at 273.

Although there is no “magic” language, the contract must have some language “manifesting the intention of the parties that it shall not be assigned.”  Id. at 272.

Under the Second Restatement of Contract, Section 317 , assignments are generally allowed unless it 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;
• materially reduce the value of the performance to the obligor;
• be forbidden by statute or public policy; or
• prohibited by the contract.

The Restatements are uniform draft laws and have not necessarily been adopted in full by Minnesota courts or by all states. However, the Restatement draft shows what types of things may be at stake with an assignment.

5.  Assignments Depend Significantly on Contract Language.

Where contracts allow assignments, they can have conditions on when assignments are allowed and the consequences of assignment.

Contracts may provide that a party can assign interests to a third party “upon written consent of the opposing party” and that “consent will not be unreasonably withheld.” In other words, a party often must get the other party's permission before assigning the contract. However, the other party may not have the right to deny the assignment without a good reason.

What are good reasons to deny an assignment? There are no hard-and-fast rules, but perhaps:

• The new party lacks the financial resources to pay sums due under the contract, so there would be obvious concern in allowing him to take an assignment.
• The contract involves a customized service provider, so assigning the contract to a low-quality provider would significantly alter the contractual rights.
• The new party is hostile, abrasive, or difficult to work with.

For example, tenants sometimes want to assigns rights in a lease to another person (rather than remaining on the lease and sub-leasing to someone else). The landlord would want to deny a new person that has bad credit or has been convicted of felonies. On the other hand, the landlord should allow an assignment to a good renter with proper credentials.

The takeaway is that the parties can, and should, address assignment issues in the original contract.

6.  It is Best to Have the Assignment in Writing and Give Notice to the Other Party.

Generally, the parties are best served by reducing their assignment to writing giving notice to the other party.

If the contract requires the assignment to be in writing, it must be written. If the law requires the original contract to be in writing (such as required by the Statute of Frauds ), then the assignment must generally be in writing.

A party does not necessarily have to give notice of the assignment to the other party unless the requires it. But there can be reasons to give notice , as it can help avoid any disputes or problems before the assignment takes effect. Practically speaking, it gives the original party the ability to express concerns about the assignment or to make an objection. Smoothing these issues out can be in the interest of all parties.

Additionally, if the assignment involves a right or title to land, then the assignment should be recorded with the County Recorder or the County Register of Titles. Likewise, it may be necessary to make a UCC filing for assignment of a security interest in personal property (such as collateral under a loan). In sum, recording the assignment under these circumstances will give notice to the world as to who holds the interest at stake, and prevent a lien dispute with another creditor.

7.  Assignments are Contracts and are Subject to General Principles of Contract Law.

An assignment that is written and signed by the parties is a contract. As such, general principles of law will apply, including any breach-of-contract defenses.

If the assignment requires one party to meet certain conditions, the other party could sue if the party fails to perform those conditions of the assignment. Likewise, a party defending against an alleged breach of the assignment could argue that the assignment is unenforceable due to formation problems (or duress, fraud, etc.).

For example, if the assignment requires the assignee to pay money to the assignor, then they should be careful to comply with any such requirements. If they fail to do so, then they could expose themselves to breach-of-contract claims under the assignment and claims from the other party under the original contract.

8.  The Uniform Commercial Code (UCC) has its Own Assignment Rules for “Sale of Goods” Contracts.

When the contract involves the “sale of goods”, the UCC has specific rules about assignment. Usually, “sale of goods” means contracts in the business context.  

For instance, Minn. Stat. § 336.2-210(2) discusses when sale-of-goods contract rights can be assigned:

(2) Except as otherwise provided in section 336.9-406, unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on the other party by the contract, or impair materially the other party's chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of the assignor's entire obligation can be assigned despite agreement otherwise.

Also, Minn. Stat. § 336.2-210(4)-(6) discuss how assignments are interpreted in the sale-of-goods contract:

(4) Unless the circumstances indicate the contrary a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the assignor's performance. (5) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by the assignee to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract. (6) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to the rights of the other party against the assignor demand assurances from the assignee (section 336.2-609).

9.  Parties Can Often Assign Lawsuit Rights to Other Persons.

It may seem obvious from the nature of an assignment, but the person taking the assignment (the “assignee”) also takes on any disputes and lawsuits related to the original contract. Further, some assignments involve purely a transfer of rights in a lawsuit or a dispute that may turn into a lawsuit.

A “chose in action” is a right to sue for recovery of money or property. Minnesota has generally allowed parties to assign their “chose in action” to another person so that other person can pursue a claim. See Maslowski v. Prospect Funding Partners LLC , No. A18-1906 (Minn. June 3, 2020) (citing Leuthold v. Redwood County,  288 N.W. 165, 167 (Minn. 1939) (“The law of this state is that an assignment of a chose in action is valid and complete in itself upon the mutual assent of the assignor and assignee without notice to the debtor.”).

A similar concept is that of “champerty”, which is "an agreement to divide litigation proceeds between the owner of the litigated claim and a party unrelated to the lawsuit who supports or helps enforce the claim." Id. While champerty has generally been prohibited in Minnesota, the Minnesota Supreme Court recently abolished that prohibition in the Maslowski case. Champerty issues have come up with “litigation financing”. This often involves a lender that pays the personal injury claimant money pending the outcome of their case; when the case settles, the creditor receives a percentage of the settlement.

Regardless of whether the contract involves an existing lawsuit or simply a potential dispute, parties involved in an assignment must be aware of its risks and responsibilities.

10.  If There is a Lawsuit Under the Original Contract, the Assignee is Generally the Party to Sue.

It is important to sue the right party in a lawsuit. Suing the wrong party can waste time, money, and anger the party who has been wrongfully sued.

If a valid assignment is made, the assignee is generally the proper party to sue or defend a claim (rather than the assignor). However, it depends on the language of the parties' original contract or the language of the assignment.

The original contract might require the assignor to personally guarantee the performance of the assignee; if there is a problem, the assignor might have to step back in to defend a lawsuit. Similarly, the assignment might govern which person (the assignor or assignee) is required to sue or defend a lawsuit. Usually, the assignee will have to address litigation concerns. However, if the assignor failed to disclose risks to the assignee, then the assignee may have grounds to set aside the assignment and require the assignor to step back in to defend a breach-of-contract claim.

Additionally, the right to sue or defend a lawsuit usually includes issues related to any judgments . If the party that litigated the case obtained a judgment, that party can usually collect on a judgment. Keep in mind that the right to collect judgments can themselves be assigned , and often are by collection companies.

Assignments can be a solution where one or both parties want to substitute a new person into the contract. Generally, assignments are valid unless the contract has clear language preventing it.

Parties must be aware of the risks of assignment, as it affects the dynamic of how the contract is performed. The parties must therefore do their due diligence when deciding whether to assign rights and the party to receive an assignment of those rights.

If you need legal advice or representation on a contract dispute, Contact Us  for a free consultation .  With offices in Shakopee (Scott County) and Litchfield (Meeker County), we serve clients throughout the Twin Cities and Greater Minnesota.

About the Author

Christopher A. Jensen

About Chris Jensen  Chris Jensen is an experienced litigation attorney that has successfully handled civil lawsuits in state, federal, administrative, and appellate courts.  He has been honored as a Rising Star attorney, which is a distinction awarded to less than 2.5% of attorneys.  He is not a...

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Assignment provisions in contracts

Author’s note, Nov. 22, 2014: For a much-improved update of this page, see the Common Draft general provisions article .

(For more real-world stories like the ones below, see my PDF e-book, Signing a Business Contract? A Quick Checklist for Greater Peace of Mind , a compendium of tips and true stories to help you steer clear of various possible minefields. Learn more …. )

Table of Contents

Legal background: Contracts generally are freely assignable

When a party to a contract “ assigns ” the contract to someone else, it means that party, known as the assignor , has transferred its rights under the contract to someone else, known as the assignee , and also has delegated its obligations to the assignee.

Under U.S. law, most contract rights are freely assignable , and most contract duties are freely delegable, absent some special character of the duty, unless the agreement says otherwise. In some situations, however, the parties will not want their opposite numbers to be able to assign the agreement freely; contracts often include language to this effect.

Intellectual-property licenses are an exception to the general rule of assignability. Under U.S. law, an IP licensee may not assign its license rights, nor delegate its license obligations, without the licensor’s consent, even when the license agreement is silent. See, for example, In re XMH Corp. , 647 F.3d 690 (7th Cir. 2011) (Posner, J; trademark licenses); Cincom Sys., Inc. v. Novelis Corp. , 581 F.3d 431 (6th Cir. 2009) (copyright licenses); Rhone-Poulenc Agro, S.A. v. DeKalb Genetics Corp. , 284 F.3d 1323 (Fed. Cir. 2002) (patent licenses). For additional information, see this article by John Paul, Brian Kacedon, and Douglas W. Meier of the Finnegan Henderson firm.

Assignment consent requirements

Model language

[Party name] may not assign this Agreement to any other person without the express prior written consent of the other party or its successor in interest, as applicable, except as expressly provided otherwise in this Agreement. A putative assignment made without such required consent will have no effect.

Optional: Nor may [Party name] assign any right or interest arising out of this Agreement, in whole or in part, without such consent.

Alternative: For the avoidance of doubt, consent is not required for an assignment (absolute, collateral, or other) or pledge of, nor for any grant of a security interest in, a right to payment under this Agreement.

Optional: An assignment of this Agreement by operation of law, as a result of a merger, consolidation, amalgamation, or other transaction or series of transactions, requires consent to the same extent as would an assignment to the same assignee outside of such a transaction or series of transactions.

• An assignment-consent requirement like this can give the non-assigning party a chokehold on a future merger or corporate reorganization by the assigning party — see the case illustrations below.

• A party being asked to agree to an assignment-consent requirement should consider trying to negotiate one of the carve-out provisions below, for example, when the assignment is connection with a sale of substantially all the assets of the assignor’s business {Link} .

Case illustrations

The dubai port deal (ny times story and story ).

In 2006, a Dubai company that operated several U.S. ports agreed to sell those operations. (The agreement came about because of publicity and political pressure about the alleged national-security implications of having Middle-Eastern companies in charge of U.S. port operations.)

A complication arose in the case of the Port of Newark: The Dubai company’s lease agreement gave the Port Authority of New York and New Jersey the right to consent to any assignment of the agreement — and that agency initially demanded $84 million for its consent.

After harsh criticism from political leaders, the Port Authority backed down a bit: it gave consent in return for “only” a $10 million consent fee, plus $40 million investment commitment by the buyer.

Cincom Sys., Inc. v. Novelis Corp., No. 07-4142 (6th Cir. Sept. 25, 2009) (affirming summary judgment)

A customer of a software vendor did an internal reorganization. As a result, the vendor’s software ended up being used by a sister company of the original customer. The vendor demanded that the sister company buy a new license. The sister company refused.

The vendor sued, successfully, for copyright infringement, and received the price of a new license, more than $450,000 as its damages. The case is discussed in more detail in this blog posting.

The vendor’s behavior strikes me as extremely shortsighted, for a couple of reasons: First, I wouldn’t bet much on the likelihood the customer would ever buy anything again from that vendor. Second, I would bet that the word got around about what the vendor did, and that this didn’t do the vendor’s reputation any good.

Meso Scale Diagnostics, LLC v. Roche Diagnostics GmbH, No. 5589-VCP (Del. Ch. Apr. 8, 2011) (denying motion to dismiss).

The Delaware Chancery Court refused to rule out the possibility that a reverse triangular merger could act as an assignment of a contract, which under the contract terms would have required consent. See also the discussion of this opinion by Katherine Jones of the Sheppard Mullin law firm.

Assignment with transfer of business assets

Consent is not required for an assignment of this Agreement in connection with a sale or other disposition of substantially all the assets of the assigning party’s business.

Optional: Alternatively, the sale or other disposition may be of substantially all the assets of the assigning party’s business to which this Agreement specifically relates.

Optional: The assignee must not be a competitor of the non-assigning party.

• A prospective assigning party might argue that it needed to keep control of its own strategic destiny, for example by preserving its freedom to sell off a product line or division (or even the whole company) in an asset sale.

• A non-assigning party might argue that it could not permit the assignment of the agreement to one of its competitors, and that the only way to ensure this was to retain a veto over any assignment.

• Another approach might be to give the non-assigning party, instead of a veto over asset-disposition assignments, the right to terminate the contract for convenience . (Of course, the implications of termination would have to be carefully thought through.)

Assignment to affiliate

[Either party] may assign this Agreement without consent to its affiliate.

Optional: The assigning party must unconditionally guarantee the assignee’s performance.

Optional: The affiliate must not be a competitor of the non-assigning party.

Optional: The affiliate must be a majority-ownership affiliate of the assigning party.

• A prospective assigning party might argue for the right to assign to an affiliate to preserve its freedom to move assets around within its “corporate family” without having to seek approval.

• The other party might reasonably object that there is no way to know in advance whether an affiliate-assignee would be in a position to fulfill the assigning party’s obligations under the contract, nor whether it would have reachable assets in case of a breach.

Editorial comment: Before approving a blanket affiliate-assignment authorization, a party should consider whether it knew enough about the other party’s existing- or future affiliates to be comfortable with where the agreement might end up.

Consent may not be unreasonably withheld or delayed

Consent to an assignment of this Agreement requiring it may not be unreasonably withheld or delayed.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are to be treated as direct damages.

Optional: For the avoidance of doubt, any damages suffered by a party seeking a required consent to assignment of this Agreement, resulting from an unreasonable withholding or delay of such consent, are not subject to any exclusion of remedies or other limitation of liability in this Agreement.

• Even if this provision were absent, applicable law might impose a reasonableness requirement; see the discussion of the Shoney case in the commentary to the Consent at discretion provision.

• A reasonableness requirement might not be of much practical value, whether contractual or implied by law. Such a requirement could not guarantee that the non-assigning party would give its consent when the assigning party wants it. And by the time a court could resolve the matter, the assigning party’s deal could have been blown.

• Still, an unreasonable-withholding provision should make the non-assigning party think twice about dragging its feet too much, becuase of the prospect of being held liable for damages for a busted transaction. Cf. Pennzoil vs. Texaco and its $10.5 billion damage award for tortious interference with an M&A deal.

• Including an unreasonable-delay provision might conflict with the Materiality of assignment breach provision, for reasons discussed there in the summary of the Hess Energy case.

Consent at discretion

A party having the right to grant or withhold consent to an assignment of this Agreement may do so in its sole and unfettered discretion.

• If a party might want the absolute right to withhold consent to an assignment in its sole discretion, it would be a good idea to try to include that in the contract language. Otherwise, there’s a risk that court might impose a commercial-reasonableness test under applicable law (see the next bullet). On the other hand, asking for such language but not getting it could be fatal to the party’s case that it was implicitly entitled to withhold consent in its discretion.

• If a commercial- or residential lease agreement requires the landlord’s consent before the tentant can assign the lease, state law might impose a reasonableness requirement. I haven’t researched this, but ran across an unpublished California opinion and an old law review article, each collecting cases. See Nevada Atlantic Corp. v. Wrec Lido Venture, LLC, No. G039825 (Cal. App. Dec. 8, 2008) (unpublished; reversing judgment that sole-discretion withholding of consent was unreasonable); Paul J. Weddle, Pacific First Bank v. New Morgan Park Corporation: Reasonable Withholding of Consent to Commercial Lease Assignments , 31 Willamette L. Rev. 713 (1995) (first page available for free at HeinOnline ).

Shoney’s LLC v. MAC East, LLC, No. 1071465 (Ala. Jul. 31, 2009)

In 2009, the Alabama Supreme Court rejected a claim that Shoney’s restaurant chain breached a contract when it demanded a $70,000 to $90,000 payment as the price of its consent to a proposed sublease. The supreme court noted that the contract specifically gave Shoney’s the right, in its sole discretion , to consent to any proposed assignment or sublease.

Significantly, prior case law from Alabama was to the effect that a refusal to consent would indeed be judged by a commercial-reasonableness standard. But, the supreme court said, “[w]here the parties to a contract use language that is inconsistent with a commercial-reasonableness standard, the terms of such contract will not be altered by an implied covenant of good faith. Therefore, an unqualified express standard such as ‘sole discretion’ is also to be construed as written.” Shoney’s LLC v. MAC East, LLC , No. 1071465 (Ala. Jul. 31, 2009) (on certification by Eleventh Circuit), cited by MAC East, LLC v. Shoney’s [LLC] , No. 07-11534 (11th Cir. Aug. 11, 2009), reversing No. 2:05-cv-1038-MEF (WO) (M.D. Ala. Jan. 8, 2007) (granting partial summary judgment that Shoney’s had breached the contract).

Termination by non-assigning party

A non-assigning party may terminate this Agreement, in its business discretion , by giving notice to that effect no later than 60 days after receiving notice, from either the assigning party or the assignee, that an assignment of the Agreement has become effective.

Consider an agreement in which a vendor is to provide ongoing services to a customer. A powerful customer might demand the right to consent to the vendor’s assignment of the agreement, even in strategic transactions. The vendor, on the other hand, might refuse to give any customer that kind of control of its strategic options.

A workable compromise might be to allow the customer to terminate the agreement during a stated window of time after the assignment if it is not happy with the new vendor.

Assignment – other provisions

Optional: Delegation: For the avoidance of doubt, an assignment of this Agreement operates as a transfer of the assigning party’s rights and a delegation of its duties under this Agreement.

Optional: Promise to perform: For the avoidance of doubt, an assignee’s acceptance of an assignment of this Agreement constitutes the assignee’s promise to perform the assigning party’s duties under the Agreement. That promise is enforceable by either the assigning party or by the non-assigning party.

Optional: Written assumption by assignee: IF: The non-assigning party so requests of an assignee of this Agreement; THEN: The assignee will seasonably provide the non-assigning party with a written assumption of the assignor’s obligations, duly executed by or on behalf of the assignee; ELSE: The assignment will be of no effect.

Optional: No release: For the avoidance of doubt, an assignment of this Agreement does not release the assigning party from its responsibility for performance of its duties under the Agreement unless the non-assigning party so agrees in writing.

Optional: Confidentiality: A non-assigning party will preserve in confidence any non-public information about an actual- or proposed assignment of this Agreement that may be disclosed to that party by a party participating in, or seeking consent for, the assignment.

The Delegation provision might not be necessary in a contract for the sale of goods governed by the Uniform Commercial Code, because a similar provision is found in UCC 2-210

The Confidentiality provision would be useful if a party to the agreement anticipated that it might be engaging in any kind of merger or other strategic transaction.

Materiality of assignment breach

IF: A party breaches any requirement of this Agreement that the party obtain another party’s consent to assign this Agreement; THEN: Such breach is to be treated as a material breach of this Agreement.

A chief significance of this kind of provision is that failure to obtain consent to assignment, if it were a material breach, would give the non-assigning party the right to terminate the Agreement.

If an assignment-consent provision requires that consent not be unreasonably withheld , then failure to obtain consent to a reasonable assignment would not be a material breach, according to the court in Hess Energy Inc. v. Lightning Oil Co. , No. 01-1582 (4th Cir. Jan. 18, 2002) (reversing summary judgment). In that case, the agreement was a natural-gas supply contract. The customer was acquired by a larger company, after which the larger company took over some of the contract administration responsibilities such as payment of the vendor’s invoices. The vendor, seeking to sell its gas to someone else at a higher price, sent a notice of termination, on grounds that the customer had “assigned” the agreement to its new parent company, in violation of the contract’s assignment-consent provision. The appeals court held that, even if the customer had indeed assigned the contract (a point on which it expressed considerable doubt) without consent, the resulting breach of the agreement was not material, and therefore the vendor did not have the right to terminate the contract.

See also (list is generated automatically) :

• Notebook update: Reverse triangular merger might be an assignment of a contract, requiring consent Just updated the Notebook with a citation to a case in which the Delaware Chancery Court refused to rule out the possibility that a reverse...
• Assignment-consent requirements can cause serious problems in future M&A transactions A lot of contracts provide that Party A must obtain the prior written consent of Party B if it wishes to assign the agreement to a...
• SCOTX rejects implied obligation not to unreasonably withhold consent to assignment of contract In a recent Texas case, two sophisticated parties in the oil and gas busi­ness — let’s call them Alpha and Bravo — were negotiating a contract....
• Ken Adams and the marketplace of ideas I (used to) comment occasionally at Ken Adams’s blog. Recent examples: Here, here, here, here, and here. Ken and I disagree on a number of issues; some...

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If a commercial contract is silent on the issue of assignment, can a party be in breach if it assigns its benefits under it without the consent of the other party?

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Okert designated for release or assignment, Twins select contract of Scott Blewett

Minnesota Twins pitcher Steven Okert, second right, stands on the mound with teammates as pitching coach Pete Maki, right, approaches during the sixth inning of a baseball game against the Los Angeles Dodgers, Monday, April 8, 2024, in Minneapolis. (AP Photo/Abbie Parr)

The Minnesota Twins announced Saturday that a contract was selected for Scott Blewett from Triple-A St. Paul.

Blewett, a right-handed pitcher, will be making his second stint with the Twins this season after appearing in one game earlier this month on August 12.

There, against the Kansas City Royals, Blewett pitched for one scoreless inning with one strikeout.

He has appeared in 38 games for the Saints this season, going 5-2 with a 3.79 ERA, one save, 17 walks and 54 strikeouts. To make room for Blewett, the Twins have designated left-handed pitcher Steven Okert for release or assignment. Okert made 44 appearances with one start for the Twins this season, going 3-2 with a 5.09 ERA, one save, seven holds, 16 walks and 33 strikeouts.

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MLB Trade Rumors

Angels Designate Mike Baumann For Assignment

By Anthony Franco | August 23, 2024 at 4:29pm CDT

The Angels announced that they have selected the contract of righty reliever Ryan Zeferjahn . In a corresponding roster move, fellow reliever Mike Baumann has been designated for assignment.

Baumann has ridden the DFA carousel throughout the season. The righty is out of options, so teams need to continue taking him off the 40-man roster if they nudge him out of the bullpen. No club has successfully gotten Baumann through waivers. He has gone from the Orioles to the Mariners, Giants and Halos via DFA resolutions throughout the year.

The 28-year-old hasn’t pitched especially well at any of those stops. He owns a cumulative 5.24 ERA through 44 2/3 innings. The Jacksonville product’s 19.5% strikeout percentage, 10.2% walk rate and 1.61 home runs per nine are all subpar. A few teams have nevertheless been intrigued by his still above-average velocity (96.4 MPH on the fastball) and last year’s decent results. He’s a season removed from a 3.76 ERA across 64 2/3 innings with Baltimore.

Baumann will land back on waivers in the next couple days. Any claiming team would need to keep him in the MLB bullpen. He surpassed the two-year service threshold this season and will play on a pre-arbitration salary for another year.

Zeferjahn, a University of Kansas product, steps into the vacated bullpen spot. The 6’5″ righty is a former third-round pick of the Red Sox. Command issues quickly pushed him to the bullpen, where Zeferjahn has shown strikeout stuff. He has fanned more than 28% of opponents in his five-year minor league career. That’s up to nearly 31% this season between the top two minor league levels. Zeferjahn carries a 3.33 earned run average across 46 innings on the season.

The Angels acquired him as part of a four-player return for reliever Luis García at the deadline. Three of them — Zeferjahn, outfielder  Matthew Lugo and first baseman  Niko Kavadas — were in the high minors at the time. Kavadas debuted last week. Los Angeles would have needed to add Zeferjahn to the 40-man this offseason to keep him out of the Rule 5 draft. They’ll give him his first big league opportunity a few weeks earlier than that as he tries to carve out a middle relief role going into next season.

22 Comments

What’s your thoughts on zeferjahn red Sox fans?

Big hit in Rocket City

Funny, they’re bringing up all these pitchers, while we’re all sitting here waiting for Moore to be called up. I’ll stand on my record that I’m ok with Moore staying down as long as he needs to. there’s no rush.

Baumann wasn’t long for the team, so this is fine. Lets see what Super Hans can do.

@kellin they need to see who they have for the bullpen next year surprised Reyes hasn’t been called up. Moore is kinda slumping but he’s still doing better than schanuel when they called him up, hasn’t made a error, and they could use a 2nd baseman. Unless they want to go for the 1st overall pick since the whitesox can’t get it.

@Rexhudler86 who’s Reyes? I’m not aware of a Reyes in the Angels org since Gerardo Reyes who’s now with the A’s.

I meant Torres

As pitchers adjust, Moore is beginning to struggle – he’s striking out in roughly a third of plate appearances at AA, and his swing decisions are becoming more suspect. Too aggressive, and he’s fighting the umps too frequently.

They may call him up anyway, but he’s not a finished product by any means, and needs a little maturity on a few levels.

@turksteeth yeah he still has better stats than schanuel, but I agree about the pitchers figuring him out. Working with both Washington’s til the end of the season shouldn’t hurt, and let him earn the spot in spring training.

@rex Just ignore the trolls (referring to post below). If you don’t feed them, they’ll go away.

I just want to congratulate the Angels and their inept organization for extending the GM on the very day they fell into last place!!! Way to go!!! Oakland is no longer Jokeland!!!

That’s because Oakland doesn’t have a MLB team anymore

Same could be said of the Pacific Coast League Angels.

@theylive thanks for your pointless comment.

@Rex Only pointless to a fan unconscious of where his team is and the direction you’re going in. It was shameful to extend Minasian because rewarding ineptitude creates more of the same.

LIVE – You think Minasian is the problem. He’s not. Pay attention.

Agreed, Baumann wasn’t a long term offer.

Zeferjahn might be. Might not. Might as well get a look at him.

Makes sense they cut Baumann. They allowed him ten appearances and he put 20 men on in nine and a third innings. Quick taste, and the taste was bitter.

Trivia question: How many teams have NOT DFAd Mike Baumann this year?

And how many of them will do so in the next 5 weeks?

Would Baumann break a record if he were to make it to the Majors with a fifth team this season? I can think of a bunch of guys who have played for four teams in a season but never five.

Niko Kavadas is a monster.

Love this game. Baumann. 10-1 last year. Undefeated this year. Can’t hold down a job .. and I get it. Ohhh, the war stories he’ll have for the grandkids.

Kid needs a haircut. Thinks he’s Josh Hader

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Red Sox Promote Former Dodgers Pitcher to Majors at 44

Maren angus-coombs | 17 hours ago.

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Former Los Angeles Dodgers starting pitcher Rich Hill has quickly returned to the Boston Red Sox after signing a minor league contract on August 16.

His contract was selected on Tuesday, and he made his first appearance on the mound in over 10 months for Triple-A Worcester on Friday, pitching two scoreless innings with two strikeouts, one walk, and one hit batter.

Hill's minor league outing was a key step toward rejoining the Red Sox as they push for an American League playoff spot.

Hill expressed confidence in his performance after the game.

Dick Mountain is back: After signing a minor-league contract on Aug. 15, the Red Sox are activating Rich Hill, sources say. Hill, 44, made one appearance with Triple-A Worcester, throwing two hitless innings while recording two strikeouts. — Robert Murray (@ByRobertMurray) August 27, 2024

"I felt great. The ball came out of my hand the way that I wanted it to,"  Hill told Rob Bradford of Audacy Sports  on the "Baseball Isn't Boring" podcast. "You're always working to continuously work. That's part of the process and that's the one thing that (I've talked about) is the main focus for really anything that you wanna achieve; it's just putting in the time and the effort, and that's something that you have to do. I enjoy that part of it. I enjoy the work. I enjoy the day in and day out of the task at hand."

Hill has played for 13 Major League teams, the second most in history behind Edwin Jackson’s 14 teams. With his first appearance in 2024, Hill will become the only player to have played in each of the last 20 seasons (2005-24). He will also join Tim Wakefield as the only pitcher to have played for the Red Sox at age 44 or older; Wakefield’s final MLB appearance was on Sept. 25, 2011, at age 45.

The oldest MLB pitcher to throw a pitch each year: 2020 - Rich Hill 2021 - Rich Hill 2022 - Rich Hill 2023 - Rich Hill 2024 - Rich Hill (soon) pic.twitter.com/fZ8lRUFcJ2 — Codify (@CodifyBaseball) August 27, 2024

“This is a special place,” Hill said about Boston in a phone interview with MLB.com on Aug. 18. “Boston’s one of the best places to play in the league, if not the best, just because of the ballpark. But it’s really what the fans bring to the game because you get that immediate feedback. When you get to play at the highest level, that’s what you want. You want to get that feedback.”

Over his 19-season career, Hill has a record of 90-73 with a 4.01 ERA across 382 appearances, including 248 starts.

His career includes stints with the Chicago Cubs, Baltimore Orioles, Red Sox, Cleveland Guardians, Los Angeles Angels, New York Yankees, Oakland A’s, Los Angeles Dodgers, Minnesota Twins, Tampa Bay Rays, New York Mets, Pittsburgh Pirates, and San Diego Padres. He has also made 13 postseason appearances with a 1-2 record and a 3.06 ERA.

With the Dodgers from 2016-19, Hill made 68 starts and went 30-16 with a 3.36 ERA. He made an additional 12 postseason appearances (11 starts), going 1-2 with a 3.06 ERA.

MAREN ANGUS-COOMBS

Maren Angus-Coombs was born in Los Angeles and raised in Nashville, Tenn. She is a graduate of Middle Tennessee State and has been a sports writer since 2008. Despite growing up in the South, her sports obsession has always been in Los Angeles. She is currently a staff writer at the LA Sports Report Network.

Twins select contract of Scott Blewett

Steven okert designated for release or assignment.

MINNEAPOLIS-ST. PAUL, MN – The Minnesota Twins announced today that they have selected the contract of right-handed pitcher Scott Blewett from Triple-A St. Paul.

Blewett, who will be making his second stint with the Twins this season, appeared in one game for Minnesota on August 12 vs. Kansas City, pitching 1.0 scoreless inning with one strikeout. He has appeared in 38 games for the Saints this season, going 5-2 with a 3.79 ERA (54.2 IP, 23 ER), one save, 17 walks and 54 strikeouts.

To make room for Blewett on the 26-man and 40-man rosters, the Twins have designated left-handed pitcher Steven Okert for release or assignment. Okert, 33, made 44 appearances (1 start) for the Twins this season, going 3-2 with a 5.09 ERA (35.1 IP, 20 ER), one save, seven holds, 16 walks and 33 strikeouts.

The UK's building a 'silent hangar' to put weapons like F-35 stealth fighters, transport helicopters, and more through the 'harshest' electronic warfare attacks

• The UK is building a "silent hangar" to test how military assets fare against electronic warfare.
• The experimental facility will be big enough to host fighter jets, helicopters, and drones.
• The new facility will help the UK get a better sense of the vulnerabilities in its equipment.

Britain's defense ministry is building a massive experimental facility to better understand how it can protect military aircraft against GPS jamming and other threats as the war in Ukraine shows the danger of electronic warfare.

The new defense testing facility — expected to be one of the largest in Europe and resemble a large aircraft hanger in size — will simulate hostile environments and test some of the UK's most advanced military equipment, Britain's defense ministry said in a statement on Wednesday.

The ministry said it will be big enough to fit F-35 stealth fighter jets, Chinook transport helicopters, and Protector combat drones.

"Hostile threats jamming GPS to disorientate military equipment has become increasingly common," Maria Eagle, the UK's minister for defense procurement and industry, said.

"This cutting-edge test facility will help us eliminate vulnerabilities from our platforms, protect our national security and keep our Armed Forces better protected on global deployments," she added in a statement.

Electronic warfare has been a prominent element of Russia's full-scale invasion of Ukraine, with both sides using jamming and other digital interference tactics to mess with the targeting process of precision strike weapons like attack drones and guided munitions.

With the extensive employment of these capabilities on the battlefield, both Russia and Ukraine have been forced to seek out innovative solutions to scale up their electronic warfare capabilities and also develop various countermeasures to stay ahead.

NATO countries — including the US and UK — have been watching the electronic warfare trends and adaptations in Ukraine and are making their own force posture adjustments to be ready for a future fight.

For the UK, this includes the newly announced experimental facility.

Britain's defense ministry said that the "silent hangar" will reduce the emission of radio-frequency waves. GPS simulators inside the chamber will allow the UK to test how well equipment can withstand jamming or other disruptive threats.

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"The facility will provide a key capability to develop UK assets that can perform in the harshest electromagnetic environments on operations," the defense ministry said. Since the hangar is isolated, the tests won't impact emergency services or air traffic control, it added.

UK firm QinetiQ will build the facility under a £20 million ($26 million) contract. It is set to open in 2026.

"On an increasingly digital battlefield, the debilitating effects of electronic warfare are a persistent threat," said Will Blamey, the chief executive of UK defense at QinetiQ, said.

"The testing we will conduct using this new facility will be integral to strengthening the resilience of military equipment, which in turn enhances the safety and security of our Armed Forces and the United Kingdom," he added in a statement.

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