Learn more about assignment of contract and how it works.
What Is Assignment of Contract?
Assignment of contract means the contract and the property, rights, or obligations within it can be assigned to another party. An assignment of contract clause can typically be found in a business contract. This type of clause is common in contracts with suppliers or vendors and in intellectual property (patent, trademark, and copyright) agreements.
How Does Assignment of Contract Work?
An assignment may be made to anyone, but it is typically made to a subsidiary or a successor. A subsidiary is a business owned by another business, while a successor is the business that follows a sale, acquisition, or merger. Let’s suppose Ken owns a lawn mowing service and he has a contract with a real estate firm to mow at each of their offices every week in the summer. The contract includes an assignment clause, so when Ken goes out of business, he assigns the contract to his sister-in-law Karrie, who also owns a lawn mowing service. Assignment usually is included in a specific clause in a contract. It typically includes transfer of both accountability and responsibility to another party, but liability usually remains with the assignor (the person doing the assigning) unless there is language to the contrary.
What Does Assignment of Contract Cover?
Generally, just about anything of value in a contract can be assigned, unless there is a specific law or public policy disallowing the assignment. Assignments won’t stand up in court if the assignment significantly changes the terms of the contract. For example, if Karrie’s business is tree trimming, not lawn mowing, the contract can’t be assigned to her.
Assigning Intellectual Property
Intellectual property (such as copyrights, patents, and trademarks) has value, and these assets are often assigned. The U.S. Patent and Trademark Office (USPTO) says patents are personal property and that patent rights can be assigned. Trademarks, too, can be assigned. The assignment must be registered with the USPTO’s Electronic Trademark Assignment System (ETAS). The U.S. Copyright Office doesn’t keep a database of copyright assignments, but they will record the document if you follow their procedure.
Alternatives to Assignment of Contract
There are other types of transfers that may be functional alternatives to assignment. Licensing is an agreement whereby one party leases the rights to use a piece of property (for example, intellectual property) from another. For instance, a business that owns a patent may license another company to make products using that patent. Delegation permits someone else to act on your behalf. For example, Ken’s lawn service might delegate Karrie to do mowing for him without assigning the entire contract to her. Ken would still receive the payment and control the work.
Do I Need an Assignment of Contract?
Assignment of contract can be a useful clause to include in a business agreement. The most common cases of assignment of contract in a business situation are:
Assignment of a trademark, copyright, or patent Assignments to a successor company in the case of the sale of the business Assignment in a contract with a supplier or customer Assignment in an employment contract or work for hire agreement
Before you sign a contract, look to see if there is an assignment clause, and get the advice of an attorney if you want to assign something in a contract.
