Assigning a Contract

Assigning a Contract

The right to performance under a contract is a property right like any other, and ordinarily can be bought and sold. Courts distinguish between the assignment of a right to receive performance from the other party and the delegation of your duty to perform. Because performance can vary from person to person, courts are less likely to allow an assignment of a duty to perform unless it is allowed in the contract. For example, if you hire a famous artist to paint a mural on your building, the artist could not assign the contract to an unknown painter. However, you could sell the building and assign the right to have the mural painted by the artist. (Unless, for some reason, the artist only agreed to do it because you were the building’s owner.)

The law of assignment of contracts varies by state. In some states, some contracts may be assigned unless they specifically state that they cannot be assigned. In other states, some contracts cannot be assigned unless they specifically state that they can. Be sure that the contracts you sign state whether or not you want them to be assignable. Even if a contract says that it may not be assigned, if all parties agree to an assignment, then the original contract is considered amended and the assignment is valid. An ASSIGNMENT OF CONTRACT can be used to accomplish this.If you wish to assign a contract and the other party will not agree to it, and the contract does not spell out whether you have the right to assign it, you should check with an attorney to be sure you have the legal right to do so.

Many people use the term contract assignment to mean both the assignment of rights and the delegation of duties. However, if you intend to delegate a duty, it is better to be specific. If you wish to rid yourself of the possibility of ever having to perform the duty, you must be released from that duty by the person entitled to receive the performance.

Having assigned a contract, it is important to notify the person expecting to receive the performance that the assignment has been made. Suppose the assigned contract is an agreement to move one hundred cases of wine from warehouse A to warehouse B. Quick Moving Company assigns the moving contract to Fast Movers, Inc. (the assignee), which promptly does the job, but Quick Moving neglects to notify the owner of the wine that the contract has been assigned. The owner arrives at warehouse B, discovers the job complete, and sends a check for the moving job to Quick Moving Company. Fast Movers then asks to be paid.

Fast Movers cannot recover its fee from the owner, because the owner has performed its part of the contract—paying for the completed job—as required by the terms of the agreement. Fast Movers will have to hope it can recover the fee from Quick Moving. If Fast Movers had promptly notified the owner of the assignment, then the owner would have paid Fast Movers directly.

Sample Letter: Notice of Assignment of a Contract

Jon Dough
8321 S. Main Street, Fort Worth, TX 76011

June 8, 2006

Fred Jackson, President
Fred’s Lawn Service
842 US Hwy. 81
Fort Worth, TX 76012

Dear Mr. Jackson:

This letter is to inform you that we have sold our home at 1254 Purgatory Lane to William
McClenaghan. The lawn service contract that we signed with your company has been assigned to
him and he has agreed to be responsible for it. All further bills should be directed to him at the
same address. If you have any questions, feel free to call.

Jon Dough