An assignment involves the transferal of some or all of the contractual rights or benefits by one party (the assignor) to a third party (the assignee). For example, a contractor may assign its right to payment of a sum of money but not its obligation to perform specific tasks such as construction or accounting.

The obligations and liabilities flowing from the original agreement will not be transferred. Assignments are distinguished from novations, which are arrangements that replace an existing contract with an entirely new one. However, where the agreement allows, the assignor may delegate the performance of obligations under the contract to the assignee. For a deed of novation, see Deed of Novation.

The stamp duty implications of the assignment should be considered.

How do deeds of assignment work?

Usually, an assignment can be effected without the consent of the remaining party to the contract. The assignor must clearly show intent of making an assignment, although it is recommended that this be made in writing.

Since the assignor still owes obligations and can incur liability for breaches of the contract, to the other contracting party, outstanding tasks will need to be performed.

Issues to be considered before assigning

Is there a clause preventing assignment?

Before assigning rights and benefits to a third party, make sure this is permitted under the original contract.

Is consent required before assignment?

If assignment of the contract is allowed, check to see if formal approval is required from the other party. An assignment can be rendered void if consent is required but not obtained from the other party.

There are limitations on what can be assigned.

• The benefit of a contract involving personal skill: if the identity of the person receiving the benefit matters to the person obliged to perform, the benefit cannot be transferred. This is determined at trial, although the parties can agree that this is the case at the drafting stage, and stipulate that the right is not transferable for this reason. This avoids litigation over the issue at a later stage.
• The benefit of a contract to lend money: the benefit of a contract to lend money cannot be assigned, because a party cannot be ordered to make or take a loan of money.
• Certain other benefits cannot be assigned where the assignment is prohibited by statute, for example social security benefits and the like.

What does the Deed of Assignment cover?

• The use of consideration in exchange for the assignment;
• The rights of the assignee; and
• The option for the assignor to delegate the performance of obligations under the contract to the assignee.

Further information

• What Is An Assignment?
• What’s the Difference Between Assignment and Novation?