ucc assignment of contract

N.Y. Uniform Commercial Code Law Section 2-210 Delegation of Performance

Assignment of Rights

Source: Section 2-210 — Delegation of Performance; Assignment of Rights , https://www.nysenate.gov/legislation/laws/UCC/2-210 (updated Sep. 22, 2014; accessed Aug. 31, 2024).

Accessed: Aug. 31, 2024

Last modified: Sep. 22, 2014

§ 2-210’s source at nysenate.gov

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14.1 Assignment of Contract Rights

Learning objectives.

Understand what an assignment is and how it is made.
Recognize the effect of the assignment.
Know when assignments are not allowed.
Understand the concept of assignor’s warranties.

The Concept of a Contract Assignment

Contracts create rights and duties. By an assignment The passing or delivering by one person to another of the right to a contract benefit. , an obligee One to whom an obligation is owed. (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor One who owes an obligation. (the one who has a duty to perform) to a third person ( assignee One to whom the right to receive benefit of a contract is passed or delivered. ); the obligee then becomes an assignor One who agrees to allow another to receive the benefit of a contract. (one who makes an assignment).

The Restatement (Second) of Contracts defines an assignment of a right as “a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires the right to such performance.” Restatement (Second) of Contracts, Section 317(1). The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring. A factor A person who pays money to receive another’s executory contractual benefits. is one who purchases the right to receive income from another.

Figure 14.1 Assignment of Rights

Method of Assignment

Manifesting assent.

To effect an assignment, the assignor must make known his intention to transfer the rights to the third person. The assignor’s intention must be that the assignment is effective without need of any further action or any further manifestation of intention to make the assignment. In other words, the assignor must intend and understand himself to be making the assignment then and there; he is not promising to make the assignment sometime in the future.

Under the UCC, any assignments of rights in excess of $5,000 must be in writing, but otherwise, assignments can be oral and consideration is not required: the assignor could assign the right to the assignee for nothing (not likely in commercial transactions, of course). Mrs. Franklin has the right to receive $750 a month from the sale of a house she formerly owned; she assigns the right to receive the money to her son Jason, as a gift. The assignment is good, though such a gratuitous assignment is usually revocable, which is not the case where consideration has been paid for an assignment.

Acceptance and Revocation

For the assignment to become effective, the assignee must manifest his acceptance under most circumstances. This is done automatically when, as is usually the case, the assignee has given consideration for the assignment (i.e., there is a contract between the assignor and the assignee in which the assignment is the assignor’s consideration), and then the assignment is not revocable without the assignee’s consent. Problems of acceptance normally arise only when the assignor intends the assignment as a gift. Then, for the assignment to be irrevocable, either the assignee must manifest his acceptance or the assignor must notify the assignee in writing of the assignment.

Notice to the obligor is not required, but an obligor who renders performance to the assignor without notice of the assignment (that performance of the contract is to be rendered now to the assignee) is discharged. Obviously, the assignor cannot then keep the consideration he has received; he owes it to the assignee. But if notice is given to the obligor and she performs to the assignor anyway, the assignee can recover from either the obligor or the assignee, so the obligor could have to perform twice, as in Exercise 2 at the chapter’s end, Aldana v. Colonial Palms Plaza . Of course, an obligor who receives notice of the assignment from the assignee will want to be sure the assignment has really occurred. After all, anybody could waltz up to the obligor and say, “I’m the assignee of your contract with the bank. From now on, pay me the $500 a month, not the bank.” The obligor is entitled to verification of the assignment.

Effect of Assignment

General rule.

An assignment of rights effectively makes the assignee stand in the shoes of An assignee takes no greater rights than his assignor had. the assignor. He gains all the rights against the obligor that the assignor had, but no more. An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee. Likewise, under UCC Section 9-318(1), the assignee of an account is subject to all terms of the contract between the debtor and the creditor-assignor. Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 per month and the car is warranted for 50,000 miles. If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, $250 and deduct that $250 from the amount owed Dealer on the next installment (called a setoff). Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments. First, it is inapplicable to the sale of a negotiable instrument to a holder in due course (covered in detail Chapter 23 "Negotiation of Commercial Paper" ). Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor. Uniform Commercial Code, Section 9-206. While a waiver of defenses Surrender by a party of legal rights otherwise available to him or her. makes the assignment more marketable from the assignee’s point of view, it is a situation fraught with peril to an obligor, who may sign a contract without understanding the full import of the waiver. Under the waiver rule, for example, a farmer who buys a tractor on credit and discovers later that it does not work would still be required to pay a credit company that purchased the contract; his defense that the merchandise was shoddy would be unavailing (he would, as used to be said, be “having to pay on a dead horse”).

For that reason, there are various rules that limit both the holder in due course and the waiver rule. Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted. Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective. Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such consumer transactions A contract for household or domestic purposes, not commercial purposes. . Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them. Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.

When Assignments Are Not Allowed

The general rule—as previously noted—is that most contract rights are assignable. But there are exceptions. Five of them are noted here.

Material Change in Duties of the Obligor

When an assignment has the effect of materially changing the duties that the obligor must perform, it is ineffective. Changing the party to whom the obligor must make a payment is not a material change of duty that will defeat an assignment, since that, of course, is the purpose behind most assignments. Nor will a minor change in the duties the obligor must perform defeat the assignment.

Several residents in the town of Centerville sign up on an annual basis with the Centerville Times to receive their morning paper. A customer who is moving out of town may assign his right to receive the paper to someone else within the delivery route. As long as the assignee pays for the paper, the assignment is effective; the only relationship the obligor has to the assignee is a routine delivery in exchange for payment. Obligors can consent in the original contract, however, to a subsequent assignment of duties. Here is a clause from the World Team Tennis League contract: “It is mutually agreed that the Club shall have the right to sell, assign, trade and transfer this contract to another Club in the League, and the Player agrees to accept and be bound by such sale, exchange, assignment or transfer and to faithfully perform and carry out his or her obligations under this contract as if it had been entered into by the Player and such other Club.” Consent is not necessary when the contract does not involve a personal relationship.

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right The right or duty of a particular person to perform or receive contract duties or benefits; cannot be assigned. that cannot be assigned. For example, a student seeking to earn pocket money during the school year signs up to do research work for a professor she admires and with whom she is friendly. The professor assigns the contract to one of his colleagues with whom the student does not get along. The assignment is ineffective because it matters to the student (the obligor) who the person of the assignee is. An insurance company provides auto insurance covering Mohammed Kareem, a sixty-five-year-old man who drives very carefully. Kareem cannot assign the contract to his seventeen-year-old grandson because it matters to the insurance company who the person of its insured is. Tenants usually cannot assign (sublet) their tenancies without the landlord’s permission because it matters to the landlord who the person of their tenant is. Section 14.4.1 "Nonassignable Rights" , Nassau Hotel Co. v. Barnett & Barse Corp. , is an example of the nonassignability of a personal right.

Assignment Forbidden by Statute or Public Policy

Various federal and state laws prohibit or regulate some contract assignment. The assignment of future wages is regulated by state and federal law to protect people from improvidently denying themselves future income because of immediate present financial difficulties. And even in the absence of statute, public policy might prohibit some assignments.

Contracts That Prohibit Assignment

Assignability of contract rights is useful, and prohibitions against it are not generally favored. Many contracts contain general language that prohibits assignment of rights or of “the contract.” Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning “the contract” bars “only the delegation to the assignee of the assignor’s performance.” Restatement (Second) of Contracts, Section 322. In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties.

Even if a contractual provision explicitly prohibits it, a right to damages for breach of the whole contract is assignable under UCC Section 2-210(2) in contracts for goods. Likewise, UCC Section 9-318(4) invalidates any contract provision that prohibits assigning sums already due or to become due. Indeed, in some states, at common law, a clause specifically prohibiting assignment will fail. For example, the buyer and the seller agree to the sale of land and to a provision barring assignment of the rights under the contract. The buyer pays the full price, but the seller refuses to convey. The buyer then assigns to her friend the right to obtain title to the land from the seller. The latter’s objection that the contract precludes such an assignment will fall on deaf ears in some states; the assignment is effective, and the friend may sue for the title.

Future Contracts

The law distinguishes between assigning future rights under an existing contract and assigning rights that will arise from a future contract. Rights contingent on a future event can be assigned in exactly the same manner as existing rights, as long as the contingent rights are already incorporated in a contract. Ben has a long-standing deal with his neighbor, Mrs. Robinson, to keep the latter’s walk clear of snow at twenty dollars a snowfall. Ben is saving his money for a new printer, but when he is eighty dollars shy of the purchase price, he becomes impatient and cajoles a friend into loaning him the balance. In return, Ben assigns his friend the earnings from the next four snowfalls. The assignment is effective. However, a right that will arise from a future contract cannot be the subject of a present assignment.

Partial Assignments

An assignor may assign part of a contractual right, but only if the obligor can perform that part of his contractual obligation separately from the remainder of his obligation. Assignment of part of a payment due is always enforceable. However, if the obligor objects, neither the assignor nor the assignee may sue him unless both are party to the suit. Mrs. Robinson owes Ben one hundred dollars. Ben assigns fifty dollars of that sum to his friend. Mrs. Robinson is perplexed by this assignment and refuses to pay until the situation is explained to her satisfaction. The friend brings suit against Mrs. Robinson. The court cannot hear the case unless Ben is also a party to the suit. This ensures all parties to the dispute are present at once and avoids multiple lawsuits.

Successive Assignments

It may happen that an assignor assigns the same interest twice (see Figure 14.2 "Successive Assignments" ). With certain exceptions, the first assignee takes precedence over any subsequent assignee. One obvious exception is when the first assignment is ineffective or revocable. A subsequent assignment has the effect of revoking a prior assignment that is ineffective or revocable. Another exception: if in good faith the subsequent assignee gives consideration for the assignment and has no knowledge of the prior assignment, he takes precedence whenever he obtains payment from, performance from, or a judgment against the obligor, or whenever he receives some tangible evidence from the assignor that the right has been assigned (e.g., a bank deposit book or an insurance policy).

Some states follow the different English rule: the first assignee to give notice to the obligor has priority, regardless of the order in which the assignments were made. Furthermore, if the assignment falls within the filing requirements of UCC Article 9 (see Chapter 28 "Secured Transactions and Suretyship" ), the first assignee to file will prevail.

Figure 14.2 Successive Assignments

Assignor’s Warranties

An assignor has legal responsibilities in making assignments. He cannot blithely assign the same interests pell-mell and escape liability. Unless the contract explicitly states to the contrary, a person who assigns a right for value makes certain assignor’s warranties Promises, express or implied, made by an assignor to the assignee about the merits of the assignment. to the assignee: that he will not upset the assignment, that he has the right to make it, and that there are no defenses that will defeat it. However, the assignor does not guarantee payment; assignment does not by itself amount to a warranty that the obligor is solvent or will perform as agreed in the original contract. Mrs. Robinson owes Ben fifty dollars. Ben assigns this sum to his friend. Before the friend collects, Ben releases Mrs. Robinson from her obligation. The friend may sue Ben for the fifty dollars. Or again, if Ben represents to his friend that Mrs. Robinson owes him (Ben) fifty dollars and assigns his friend that amount, but in fact Mrs. Robinson does not owe Ben that much, then Ben has breached his assignor’s warranty. The assignor’s warranties may be express or implied.

Key Takeaway

Generally, it is OK for an obligee to assign the right to receive contractual performance from the obligor to a third party. The effect of the assignment is to make the assignee stand in the shoes of the assignor, taking all the latter’s rights and all the defenses against nonperformance that the obligor might raise against the assignor. But the obligor may agree in advance to waive defenses against the assignee, unless such waiver is prohibited by law.

There are some exceptions to the rule that contract rights are assignable. Some, such as personal rights, are not circumstances where the obligor’s duties would materially change, cases where assignability is forbidden by statute or public policy, or, with some limits, cases where the contract itself prohibits assignment. Partial assignments and successive assignments can happen, and rules govern the resolution of problems arising from them.

When the assignor makes the assignment, that person makes certain warranties, express or implied, to the assignee, basically to the effect that the assignment is good and the assignor knows of no reason why the assignee will not get performance from the obligor.

If Able makes a valid assignment to Baker of his contract to receive monthly rental payments from Tenant, how is Baker’s right different from what Able’s was?
Able made a valid assignment to Baker of his contract to receive monthly purchase payments from Carr, who bought an automobile from Able. The car had a 180-day warranty, but the car malfunctioned within that time. Able had quit the auto business entirely. May Carr withhold payments from Baker to offset the cost of needed repairs?
Assume in the case in Exercise 2 that Baker knew Able was selling defective cars just before his (Able’s) withdrawal from the auto business. How, if at all, does that change Baker’s rights?
Why are leases generally not assignable? Why are insurance contracts not assignable?

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Chapter 12 – Third-Party Rights

12.2 Assignment of Contract Rights

Contracts create rights and obligations between contracting parties. An assignment is the transfer of rights under a contract from one party (the assignor ) to another party (the assignee ). When a party assigns their rights under a contract, they are essentially transferring their ability to receive benefits or enforce terms of the contract to someone else. Stated another way, an assignment occurs when an obligee (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor (the one who has a duty to perform) to a third person ( assignee ); the obligee then becomes an assignor (one who makes an assignment). So, the party that makes the assignment is both an obligee and an assignor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor.

Generally, the assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are a common occurrence in business, legal, and financial transactions.

Figure 12 .1 Assignment of Rights

Method of Assignment

Manifesting assent.

To effect an assignment , the assignor must make known his intention to transfer the rights to the third person. This intention must take place in the present – it cannot be a future intention. The assignor’s intention must be that the assignment is effective without need of any further action or any further manifestation of intention to make the assignment. Under the UCC, any assignments of rights in excess of $5,000 must be in writing, but otherwise, assignments can be oral and consideration is not required: the assignor could assign the right to the assignee for no exchange of money or any other consideration. For example, Mrs. Franklin has the right to receive $750 a month from the sale of a house she formerly owned; she assigns the right to receive the money to her son Jason, as a gift. The assignment is good, and need not be written.

Acceptance and Revocation

Notice to the obligor is not required, but an obligor who renders performance to the assignor without notice of the assignment (that performance of the contract is to be rendered now to the assignee) is discharged from their obligation within the contract. Obviously, the assignor cannot then keep the consideration he has received; he owes it to the assignee. But if notice is given to the obligor and she performs to the assignor anyway, the assignee can recover from either the obligor or the assignee, so the obligor could have to perform twice. Of course, an obligor who receives notice of the assignment from the assignee will want to be sure the assignment has really occurred. After all, anybody could waltz up to the obligor and say, “I’m the assignee of your contract with the bank. From now on, pay me the $500 a month, not the bank.” The obligor is entitled to verification of the assignment.

Effect of Assignment

An assignment of rights effectively makes the assignee “ stand in the shoes” of the assignor (the “shoe rule”). He gains all the rights against the obligor that the assignor had, but no more. An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee. Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 per month and the car is warranted for 50,000 miles. If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, $250 and deduct that $250 from the amount owed Dealer on the next installment. Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments. First, it is inapplicable to the sale of a negotiable instrument to a holder in due course. Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor. While a waiver of defenses makes the assignment more marketable from the assignee’s point of view, it is a situation fraught with peril to an obligor, who may sign a contract without understanding the full import of the waiver. Under the waiver rule, for example, a farmer who buys a tractor on credit and discovers later that it does not work would still be required to pay a credit company that purchased the contract; his defense that the merchandise was shoddy would be unavailing (he would, as used to be said, be “having to pay on a dead horse”).

For that reason, there are various rules that limit both the holder in due course and the waiver rule. Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted. Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective. Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such consumer transactions . Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them. Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.

Prohibited Assignments

The general rule—as previously noted—is that most contract rights are assignable, and the law favors freely assignable rights. There are five exceptions to this rule however.

Material Change in Duties of the Obligor

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right that cannot be assigned. For example, a student seeking to earn pocket money during the school year signs up to do research work for a professor she admires and with whom she is friendly. The professor assigns the contract to one of his colleagues with whom the student does not get along. The assignment is ineffective because it matters to the student (the obligor) who the person of the assignee is. It is for this same reason that tenants usually cannot assign (sublet) their tenancies without the landlord’s permission because it matters to the landlord who the person is that is living in the landlord’s property.

Nassau Hotel Co. v. Barnett & Barse Corporation , 147 N.Y.S. 283 (1914)

MCLAUGHLIN, J.

Plaintiff owns a hotel at Long Beach, L. I., and on the 21st of November, 1912, it entered into a written agreement with the individual defendants Barnett and Barse to conduct the same for a period of years.…Shortly after this agreement was signed, Barnett and Barse organized the Barnett & Barse Corporation with a capital stock of $10,000, and then assigned the agreement to it. Immediately following the assignment, the corporation went into possession and assumed to carry out its terms. The plaintiff thereupon brought this action to cancel the agreement and to recover possession of the hotel and furniture therein, on the ground that the agreement was not assignable. [Summary judgment in favor of the plaintiff, defendant corporation appeals.]

The only question presented is whether the agreement was assignable. It provided, according to the allegations of the complaint, that the plaintiff leased the property to Barnett and Barse with all its equipment and furniture for a period of three years, with a privilege of five successive renewals of three years each. It expressly provided:

‘That said lessees…become responsible for the operation of the said hotel and for the upkeep and maintenance thereof and of all its furniture and equipment in accordance with the terms of this agreement and the said lessees shall have the exclusive possession, control and management thereof. * * * The said lessees hereby covenant and agree that they will operate the said hotel at all times in a first-class business-like manner, keep the same open for at least six (6) months of each year, * * *’ and ‘in lieu of rental the lessor and lessees hereby covenant and agree that the gross receipts of such operation shall be, as received, divided between the parties hereto as follows: (a) Nineteen per cent. (19%) to the lessor. * * * In the event of the failure of the lessees well and truly to perform the covenants and agreements herein contained,’ they should be liable in the sum of $50,000 as liquidated damages. That ‘in consideration and upon condition that the said lessees shall well and faithfully perform all the covenants and agreements by them to be performed without evasion or delay the said lessor for itself and its successors, covenants and agrees that the said lessees, their legal representatives and assigns may at all times during said term and the renewals thereof peaceably have and enjoy the said demised premises.’ And that ‘this agreement shall inure to the benefit of and bind the respective parties hereto, their personal representatives, successors and assigns.’

The complaint further alleges that the agreement was entered into by plaintiff in reliance upon the financial responsibility of Barnett and Barse, their personal character, and especially the experience of Barnett in conducting hotels; that, though he at first held a controlling interest in the Barnett & Barse Corporation, he has since sold all his stock to the defendant Barse, and has no interest in the corporation and no longer devotes any time or attention to the management or operation of the hotel.

…[C]learly…the agreement in question was personal to Barnett and Barse and could not be assigned by them without the plaintiff’s consent. By its terms the plaintiff not only entrusted them with the care and management of the hotel and its furnishings—valued, according to the allegations of the complaint, at more than $1,000,000—but agreed to accept as rental or compensation a percentage of the gross receipts. Obviously, the receipts depended to a large extent upon the management, and the care of the property upon the personal character and responsibility of the persons in possession. When the whole agreement is read, it is apparent that the plaintiff relied, in making it, upon the personal covenants of Barnett and Barse. They were financially responsible. As already said, Barnett had had a long and successful experience in managing hotels, which was undoubtedly an inducing cause for plaintiff’s making the agreement in question and for personally obligating them to carry out its terms.

It is suggested that because there is a clause in the agreement to the effect that it should ‘inure to the benefit of and bind the respective parties hereto, their personal representatives and assigns,’ that Barnett and Barse had a right to assign it to the corporation. But the intention of the parties is to be gathered, not from one clause, but from the entire instrument [Citation] and when it is thus read it clearly appears that Barnett and Barse were to personally carry out the terms of the agreement and did not have a right to assign it. This follows from the language used, which shows that a personal trust or confidence was reposed by the plaintiff in Barnett and Barse when the agreement was made.

In [Citation] it was said: “Rights arising out of contract cannot be transferred if they…involve a relation of personal confidence such that the party whose agreement conferred those rights must have intended them to be exercised only by him in whom he actually confided.”

This rule was applied in [Citation] the court holding that the plaintiff—the assignee—was not only technically, but substantially, a different entity from its predecessor, and that the defendant was not obliged to entrust its money collected on the sale of the presses to the responsibility of an entirely different corporation from that with which it had contracted, and that the contract could not be assigned to the plaintiff without the assent of the other party to it.

The reason which underlies the basis of the rule is that a party has the right to the benefit contemplated from the character, credit, and substance of him with whom he contracts, and in such case he is not bound to recognize…an assignment of the contract.

The order appealed from, therefore, is affirmed.

Case questions

The corporation created to operate the hotel was apparently owned and operated by the same two men the plaintiff leased the hotel to in the first place. What objection would the plaintiff have to the corporate entity—actually, of course, a legal fiction—owning and operating the hotel?
The defendants pointed to the clause about the contract inuring to the benefit of the parties “and assigns.” So the defendants assigned the contract. How could that not be allowed by the contract’s own terms?
What is the controlling rule of law upon which the outcome here depends?

Assignment Forbidden by Statute or Public Policy

Various federal and state laws prohibit or regulate some contract assignments. For example, the assignment of future wages is regulated by state and federal law, such an attempt to try to effect such an assignment would not be valid. And even in the absence of statute, public policy might prohibit some assignments.

Contracts That Prohibit Assignment

A written contract may contain general language that prohibits assignment of rights or assignment of “the contract.” Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning “the contract” bars “only the delegation to the assignee of the assignor’s performance.” In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties. Even if a contractual provision explicitly prohibits it, a right to damages for breach of the whole contract is assignable under UCC Section 2-210(2) in contracts for goods. Likewise, UCC Section 9-318(4) invalidates any contract provision that prohibits assigning sums already due or to become due. Indeed, in some states, at common law, a clause specifically prohibiting assignment will fail. For example, the buyer and the seller agree to the sale of land and to a provision barring assignment of the rights under the contract. The buyer pays the full price, but the seller refuses to convey. The buyer then assigns to her friend the right to obtain title to the land from the seller. The latter’s objection that the contract precludes such an assignment will fall on deaf ears in some states; the assignment is effective, and the friend may sue for the title. Bottom line, even though a contract may expressly state it cannot be assigned, that may not always be the case.

As we saw with integration clauses, if you are a Verizon Wireless ™ customer, you have agreed to their terms regarding assignment:

You cannot assign this Agreement or any of your rights or duties under it without our permission. However, we may assign this Agreement or any debt you owe us without notifying you.

Such assignment clauses can be found in many common contracts.

Rose v. Vulcan Materials Co. 194 S.E.2d 521 (N.C. 1973)

HUSKINS, J.

…Plaintiff [Rose], after leasing his quarry to J. E. Dooley and Son, Inc., promised not to engage in the rock-crushing business within an eight-mile radius of [the city of] Elkin for a period of ten years. In return for this promise, J. E. Dooley and Son, Inc., promised, among other things, to furnish plaintiff stone f.o.b. the quarry site at Cycle, North Carolina, at stipulated prices for ten years.…

By a contract effective 23 April 1960, Vulcan Materials Company, a corporation…, purchased the stone quarry operations and the assets and obligations of J. E. Dooley and Son, Inc.…[Vulcan sent Rose a letter, part of which read:]

Mr. Dooley brought to us this morning the contracts between you and his companies, copies of which are attached. This is to advise that Vulcan Materials Company assumes all phases of these contracts and intends to carry out the conditions of these contracts as they are stated.

In early 1961 Vulcan notified plaintiff that it would no longer sell stone to him at the prices set out in [the agreement between Rose and Dooley] and would thereafter charge plaintiff the same prices charged all of its other customers for stone. Commencing 11 May 1961, Vulcan raised stone prices to the plaintiff to a level in excess of the prices specified in [the Rose-Dooley agreement].

At the time Vulcan increased the prices of stone to amounts in excess of those specified in [the Rose-Dooley contract], plaintiff was engaged in his ready-mix cement business, using large quantities of stone, and had no other practical source of supply. Advising Vulcan that he intended to sue for breach of contract, he continued to purchase stone from Vulcan under protest.…

The total of these amounts over and above the prices specified in [the Rose-Dooley contract] is $25,231.57, [about $260,000 in 2024 dollars] and plaintiff seeks to recover said amount in this action.

The [Rose-Dooley] agreement was an executory bilateral contract under which plaintiff’s promise not to compete for ten years gained him a ten-year option to buy stone at specified prices. In most states, the assignee of an executory bilateral contract is not liable to anyone for the nonperformance of the assignor’s duties thereunder unless he expressly promises his assignor or the other contracting party to perform, or ‘assume,’ such duties.…These states refuse to imply a promise to perform the duties, but if the assignee expressly promises his assignor to perform, he is liable to the other contracting party on a third-party beneficiary theory. And, if the assignee makes such a promise directly to the other contracting party upon a consideration, of course he is liable to him thereon. [Citation]

A minority of states holds that the assignee of an executory bilateral contract under a general assignment becomes not only assignee of the rights of the assignor but also delegatee of his duties; and that, absent a showing of contrary intent, the assignee impliedly promises the assignor that he will perform the duties so delegated. This rule is expressed in Restatement, Contracts, s 164 (1932) as follows:

(1) Where a party under a bilateral contract which is at the time wholly or partially executory on both sides purports to assign the whole contract, his action is interpreted, in the absence of circumstances showing a contrary intention, as an assignment of the assignor’s rights under the contract and a delegation of the performance of the assignor’s duties.

(2) Acceptance by the assignee of such an assignment is interpreted, in the absence of circumstances showing a contrary intention, as both an assent to become an assignee of the assignor’s rights and as a promise to the assignor to assume the performance of the assignor’s duties.’ (emphasis added)

We…adopt the Restatement rule and expressly hold that the assignee under a general assignment of an executory bilateral contract, in the absence of circumstances showing a contrary intention, becomes the delegatee of his assignor’s duties and impliedly promises his assignor that he will perform such duties.

The rule we adopt and reaffirm here is regarded as the more reasonable view by legal scholars and textwriters. Professor Grismore says:

It is submitted that the acceptance of an assignment in this form does presumptively import a tacit promise on the part of the assignee to assume the burdens of the contract, and that this presumption should prevail in the absence of the clear showing of a contrary intention. The presumption seems reasonable in view of the evident expectation of the parties. The assignment on its face indicates an intent to do more than simply to transfer the benefits assured by the contract. It purports to transfer the contract as a whole, and since the contract is made up of both benefits and burdens both must be intended to be included.…Grismore, Is the Assignee of a Contract Liable for the Nonperformance of Delegated Duties? 18 Mich.L.Rev. 284 (1920).

In addition, with respect to transactions governed by the Uniform Commercial Code, an assignment of a contract in general terms is a delegation of performance of the duties of the assignor, and its acceptance by the assignee constitutes a promise by him to perform those duties. Our holding in this case maintains a desirable uniformity in the field of contract liability.

We further hold that the other party to the original contract may sue the assignee as a third-party beneficiary of his promise of performance which he impliedly makes to his assignor, under the rule above laid down, by accepting the general assignment. Younce v. Lumber Co. , [Citation] (1908), holds that where the assignee makes an express promise of performance to his assignor, the other contracting party may sue him for breach thereof. We see no reason why the same result should not obtain where the assignee breaches his promise of performance implied under the rule of Restatement s 164. ‘That the assignee is liable at the suit of the third party where he expressly assumes and promises to perform delegated duties has already been decided in a few cases (citing Younce). If an express promise will support such an action it is difficult to see why a tacit promise should not have the same effect.’ Grismore, supra. Parenthetically, we note that such is the rule under the Uniform Commercial Code, [2-210].

We now apply the foregoing principles to the case at hand. The contract of 23 April 1960, between defendant and J. E. Dooley and Son, Inc., under which, as stipulated by the parties, ‘the defendant purchased the assets and obligations of J. E. Dooley and Son, Inc.,’ was a general assignment of all the assets and obligations of J. E. Dooley and Son, Inc., including those under [the Rose-Dooley contract]. When defendant accepted such assignment it thereby became delegatee of its assignor’s duties under it and impliedly promised to perform such duties.

When defendant later failed to perform such duties by refusing to continue sales of stone to plaintiff at the prices specified in [the Rose-Dooley contract], it breached its implied promise of performance and plaintiff was entitled to bring suit thereon as a third-party beneficiary.

The decision…is reversed with directions that the case be certified to the Superior Court of Forsyth County for reinstatement of the judgment of the trial court in accordance with this opinion.

Why did Rose need the crushed rock from the quarry he originally leased to Dooley?
What argument did Vulcan make as to why it should not be liable to sell crushed rock to Rose at the price set out in the Rose-Dooley contract?
What rule did the court here announce in deciding that Vulcan was required to sell rock at the price set out in the Rose-Dooley contract? That is, what is the controlling rule of law in this case?

Future Contracts

Partial Assignments

Successive Assignments

It may happen that an assignor assigns the same interest twice. With certain exceptions, the first assignee takes precedence over any subsequent assignee. One obvious exception is when the first assignment is ineffective or revocable. A subsequent assignment has the effect of revoking a prior assignment that is ineffective or revocable. Another exception: if in good faith the subsequent assignee gives consideration for the assignment and has no knowledge of the prior assignment, he takes precedence whenever he obtains payment from, performance from, or a judgment against the obligor, or whenever he receives some tangible evidence from the assignor that the right has been assigned (e.g., a bank deposit book or an insurance policy).

Figure 1 2 .2 Successive Assignments

Assignor’s Warranties

An assignor has legal responsibilities in making assignments. Unless the contract explicitly states to the contrary, a person who assigns a right for value makes certain assignor’s warranties to the assignee: that he will not upset the assignment, that he has the right to make it, and that there are no defenses that will defeat it. However, the assignor does not guarantee payment; assignment does not by itself amount to a warranty that the obligor is solvent or will perform as agreed in the original contract. Mrs. Robinson owes Ben fifty dollars. Ben assigns this sum to his friend. Before the friend collects, Ben releases Mrs. Robinson from her obligation. The friend may sue Ben for the fifty dollars. Or again, if Ben represents to his friend that Mrs. Robinson owes him (Ben) fifty dollars and assigns his friend that amount, but in fact Mrs. Robinson does not owe Ben that much, then Ben has breached his assignor’s warranty. The assignor’s warranties may be express or implied.

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Assignment Clause

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Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

Example 1 . A business closing or a change of control occurs
Example 2 . New services providers taking over existing customer contracts
Example 3 . Unique real estate obligations transferring to a new property owner as a condition of sale
Example 4 . Many mergers and acquisitions transactions, such as insurance companies taking over customer policies during a merger

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival . Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database, EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1492426/000119312510226984/dex1029.htm >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database, EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1490985/000119312510160407/dex108.htm >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database, EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1329394/000119312507148404/dex412.htm >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database, EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1428669/000119312510013625/dex21.htm >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database, EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < https://www.sec.gov/Archives/edgar/data/1002047/000119312511171858/dex24.htm >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

Real estate contracts
Sales contract
Asset purchase agreement
Purchase and sale agreement
Bill of sale
Assignment and transaction financing agreement

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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§ 28:2–210. Delegation of performance; assignment of rights.

(1) A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.

(2) Except as otherwise provided in section 28:9-406, 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 him by his contract, or impair materially his 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 his entire obligation can be assigned despite agreement otherwise.

(2A) The creation, attachment, perfection, or enforcement of a security interest in the seller’s interest under a contract is not a transfer that materially changes the duty of or increases materially the burden or risk imposed on the buyer or impairs materially the buyer’s chance of obtaining return performance within the purview of subsection (2) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the seller. Even in that event, the creation, attachment, perfection, and enforcement of the security interest remain effective, but (a) the seller is liable to the buyer for damages caused by the delegation to the extent that the damages could not reasonably be prevented by the buyer; and (b) a court having jurisdiction may grant other appropriate relief, including cancellation of the contract for sale or an injunction against enforcement of the security interest or consummation of the enforcement.

(3) 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.

(4) 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 him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract.

(5) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (section 28:2-609).

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Ucc assignment and federal uspto assignment: one word, two meanings.

UCC Assignment and USPTO Assignment - Intellectual Property Due Diligence

Fairly frequently, I am asked the following question:

“Do assignment filings made with the USPTO have the same effect as assignment filings made under Article 9 of the Uniform Commercial Code?”

While in certain situations the answer is yes, the more helpful and short answer is no . UCC assignments are typically filed centrally or locally in each state, IP filings are made at the federal level. Moreover, the word ‘assignment’ may have a different meaning.

I’ll explore some of the similarities and differences between Article 9 assignments and assignments made with the U.S. Patent and Trademark Office (USPTO) to explain why.

What is an Assignment?

Let's start with setting the scope of what we mean by the term ‘assignment’. When used with respect to property, particularly in the legal world, assignment is defined as “the act of transferring an interest in property or some right (such as contract benefits) to another”.

UCC Assignment

Article 9 of the Uniform Commercial Code (UCC) allows a secured party (SP) to file assignments via UCC3 amendments. In the UCC Article 9 world, an assignment (UCC3) is linked to the initial financing statement (UCC1) in the public record so that the relationship between the two filings is clear. Both filings, the UCC1 and UCC3, are indexed together so that a search of the public record by a debtor name will reveal both the financing statement and the amendment in one search.

There are several types of UCC assignment filings a secured party may make with the appropriate central filing office and/or local filing office:

The secured party (assignor) may assign all of its rights to another party (assignee). (This is considered a full assignment.)
The secured party may assign the rights to some portion or percentage of all the collateral covered by the initial UCC financing statement to another party. (A partial assignment.)
The secured party may assign the rights of the 100% interest in a portion of the collateral to another party. (Also a partial assignment.)

USPTO Assignment

Like the rights to security interests that may be fully or partially assigned under the UCC, intellectual property (IP) , such as patents and trademarks, may also have ownership rights transferred in full or in part on the public record at the USPTO. In both cases, when an IP or UCC assignment filing is made, the filings end up in the public record so that searchers can find them.

At the USPTO, however, assignments and other changes are not directly linked on one index when searching by name, which is ordinarily how due diligence searching is conducted. A name search of the USPTO index will not yield one set of complete results containing both trademark applications and registrations and all trademark assignment filings. Separate searches are needed in different sections of the USPTO website. Once those searches are completed, a searcher may need to manually review the results in order to determine if there is a parent-child relationship between the records.

This is also important to note because an IP assignment can be filed before a patent is granted or a trademark application and registration appears on the USPTO records, because it might still be going through the review process at the USPTO.

On top of that, some filings categorized as ‘assignments’ at the USPTO, because they are indexed in the assignments database, are not assignments by definition. In other words, a filing on the USPTO assignment database may NOT be transferring rights in full or in part . This means that search results will include actual assignments and other records that are not assignments in the true sense of the rights of transfer.

USPTO Assignment Recordation Examples

So, what other filings are included as ‘assignments’ at the USPTO that are not really assignments? As an example, let’s say that the owner of IP changes their name while retaining ownership in their IP. Searching either of the assignment indexes at the USPTO may include name change results. Technically, this is not an assignment by definition – there was no transfer of rights – but the name change is filed on the assignment index. A security interest in IP is another example of a type of lien filing found on the USPTO assignments database but is not, by definition, an assignment.

Adding to the confusion, IP filers can choose to file using the option of ‘Other’ and can enter a conveyance type not already provided as a standard selection, which means that almost anything can be included on the ‘assignment’ records at the USPTO.

A Rule of Thumb for UCC and IP Assignments

The main point to take away from this discussion is that while assignments of UCCs are always assignments, assignments of IP are not as clear. Assignments of UCCs are always linked to the initial financing statements and are usually reflected in a single search, but assignments of IP filings are found on a different USPTO database from the trademark application and registration database, and patent grant and published pending patent databases, which all require separate searches (and thus, yield separate search results) on the USPTO website. It is necessary for the searcher to match up IP assignments to the parent record, if there is a parent record available.

The terminology may appear the same, but the meaning – and the search processes – for USPTO assignments and UCC assignments are completely different.

For insight on how intellectual property due diligence dovetails with more traditional types of searches, access our free webinar below:

This content is provided for informational purposes only and should not be considered, or relied upon, as legal advice.

Topics: Article 9 Filing, Searching and Due Diligence , UCC , Intellectual Property Due Diligence

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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.

• 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...

Dell “D. C.” Toedt III

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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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Uniform Commercial Code

ULC Statement on Ownership of Investment Property under Uniform Commercial Code Article 8

ULC Statement on Central Bank Digital Currencies and the Uniform Commercial Code

Cooperation with ALI

The ucc today, article 1, general provisions.

Uniform Commercial Code Article 1 contains definitions and general provisions applicable as default rules to transactions covered under other articles of the UCC. Article 1 was last revised in 2001, with a few minor amendments since then to harmonize with recent revisions of other UCC articles. View Article 1, General Provisions

Article 2, Sales

Uniform Commercial Code Article 2 governs the sale of goods. It was part of the original Uniform Commercial Code approved in 1951. Article 2 represented a revision and modernization of the Uniform Sales Act, which was originally approved by the National Conference of Commissioners on Uniform State Laws in 1906. The Uniform Law Commission and American Law Institute approved a revised Article 2 in 2003 that was not adopted in any state, and was subsequently withdrawn by both organizations in 2011. Thus the 1951 version of Article 2 is the most recent official version. View Article 2, Sales

Article 2A, Leases

Uniform Commercial Code Article 2A governs leases of personal property. It was first added to the Uniform Commercial Code in 1987 and amended in 1990. A revision was approved by the Uniform Law Commission and the American Law Institute in 2003, but was not adopted in any jurisdiction and subsequently withdrawn by both organizations in 2011. Thus, the 1987 version of Article 2A, as amended in 1990, remains the official text. View Article 2A, Leases

Article 3, Negotiable Instruments

Uniform Commercial Code Article 3 governs negotiable instruments: drafts (including checks) and notes representing a promise to pay a sum of money, and that have independent value because they are negotiable. An instrument is negotiable if it can be transferred to another person and remain enforceable against the person who originally made the promise to pay. The substance of Article 3 has its roots in the Negotiable Instrument Law first approved by the National Conference of Commissioners on Uniform State Laws in 1896. That early uniform law was revised and incorporated into the original version of the UCC in 1951, and a further revision was approved in 1990. Finally, a set of amendments to UCC Articles 3 and 4 was approved in 2002. View Article 3, Negotiable Instruments

Article 4, Bank Deposits and Collections

Uniform Commercial Code Article 4 governs bank deposits and collections, providing rules for check processing and automated inter-bank collections. Article 4 was completely revised in 1990 and amended in 2002. View Article 4, Bank Deposits and Collections

2002 Amendments to Article 3, Negotiable Instruments and Article 4, Bank Deposits

These 2002 amendments to Uniform Commercial Code Articles 3 and 4 update provisions dealing with payment by checks and other paper instruments to provide essential rules for new technologies and practices in payment systems. View Article 3, Negotiable Instruments and Article 4, Bank Deposits, Amendments to

Article 4A, Funds Transfers

Uniform Commercial Code Article 4A provides a comprehensive body of law on the rights and obligations connected with fund transfers. It was added to the UCC in 1989. View Article 4A, Funds Transfers

2012 Amendments to Article 4A, Funds Transfers

These 2012 Amendments to Section 108 of Uniform Commercial Code Article 4A provide that Article 4A applies to a remittance transfer that is not an electronic funds transfer under the Federal Electronic Funds Transfer Act (EFTA). The amendment was necessary to conform the UCC with the federal law and associated regulations. View Article 4A, Amendments to

Article 5, Letters of Credit

Uniform Commercial Code Article 5 governs letters of credit, which are typically issued by a bank or other financial institution to its business customers in order to facilitate trade. Article 5 was updated in 1995 to address advances in technology and modern business practices. View Article 5, Letters of Credit

Article 6, Bulk Sales

Uniform Commercial Code Article 6 covers bulk sales - a topic many states have determined is obsolete. The original version of Article 6 was withdrawn by the Uniform Law Commission and the American Law Institute in 1989 and replaced with two options for every state to consider: replace Article 6 with a revised version 6, or repeal Article 6 entirely. The ULC recommends repeal, and nearly every state has followed that recommendation. View Article 6, Bulk Sales

Article 7, Documents of Title

Uniform Commercial Code Article 7 covers documents of title for personal property, including warehouse receipts, bills of lading, and other documents typically used for commercial trade. Revised Article 7, approved in 2003, updates the original version to provide a framework for the further development of electronic documents of title, and to update the article in light of state, federal and international legal developments. View Article 7, Documents of Title

Article 8, Investment Securities

Uniform Commercial Code Article 8 provides a modern legal structure for the system of holding securities through intermediaries. The 1994 revision sets forth rules concerning the system through which securities are held, specifying the mechanisms by which ownership and other interests in securities are recorded and changed, and setting out some of the rights and duties of the parties who participate in the securities holding system. View Article 8, Investment Securities

Article 9, Secured Transactions

Uniform Commercial Code Article 9 provides a statutory framework that governs secured transactions--transactions that involve the granting of credit secured by personal property. Each state maintains an office for filing finance statements to publicly disclose security interests in encumbered property. A substantial revision to Article 9 was completed in 1998 and adopted in all states. The article was further amended in 1999, 2000, 2001, and 2010. View Article 9, Secured Transactions

2010 Amendments to Article 9, Secured Transactions

Uniform Commercial Code (UCC) Article 9 governs secured transactions in personal property. The 2010 Amendments to Article 9 modify the existing statute to respond to filing issues and address other matters that have arisen in practice following a decade of experience with the 1998 version. Most significantly, the 2010 Amendments provide greater guidance as to the form of the name of an individual debtor to be provided on a financing statement. View Article 9, Secured Transactions, Amendments to

2018 Amendments to 9-406 and 9-408 of UCC Article 9, Secured Transactions

Amendments to UCC Article 9 Sections 9-406 and 9-408 modify the anti-assignment override provisions, thereby excluding security interests in ownership interests of general partnerships, limited partnerships, and limited liability companies from the override provisions. View UCC Article 9, Secured Transactions, Amendments to 9-406 and 9-408

Article 12 and the 2022 Amendments

The 2022 amendments to the Uniform Commercial Code address emerging technologies, providing updated rules for commercial transactions involving virtual currencies, distributed ledger technologies (including blockchain), artificial intelligence, and other technological developments. The amendments span almost every article of the UCC and add a new Article 12 addressing certain types of digital assets defined as “Controllable Electronic Records” (CERs). The amendments provide new default rules to govern transactions involving these new technologies and clarify the UCC’s applicability to mixed transactions involving both goods and services. The amendments also contain some miscellaneous revisions unrelated to technological developments but providing needed clarification. View UCC, 2022 Amendments to

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Uniform Law Commission The Uniform Law Commission (ULC, also known as the National Conference of Commissioners on Uniform State Laws), established in 1892, provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state statutory law.

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What Is Article 9?

Understanding article 9, revisions to article 9, the bottom line.

Guide to Microeconomics

Article 9: Definition, How It Works, Example, and Revisions

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Article 9 is an article under the Uniform Commercial Code (UCC) that governs secured transactions, or those transactions that pair a debt with the creditor’s interest in secured property.

Article 9 regulates the creation of security interests , and the enforcement of those interests, in movable or intangible property and fixtures. It encompasses a wide variety of possessory liens and determines the legal right of ownership if a debtor does not meet their obligations.

Key Takeaways

Article 9 is a section under the Uniform Commercial Code (UCC) that governs secured transactions including the creation and enforcement of debts.
Article 9 spells out the procedure for settling debts, including various types of collateralized loans and bonds.
In particular, Article 9 sets out the interests established by the creation of a credit-debt relationship.

The UCC is a standardized set of business laws that regulate financial contracts. It has been fully adopted by all states in the U.S., with the exception of Louisiana, though some states' legal codifications of the UCC do not exactly match the text of the official UCC. Louisiana has not fully ratified the code, although it has adopted a version of Article 9.

The code itself has nine separate articles. Each article deals with separate aspects of banking and loans. The UCC better enabled lenders to loan money secured by the borrower's personal property . The UCC was drawn up and ratified by most states in the 1950s. A recent addition to the code covers corporate electronic payments. The UCC undergoes frequent revisions that address specific articles.

Under Article 9, if a debtor defaults on their debt, the creditor may repossess the secured property. For example, suppose that Alex brings a computer to be serviced by Sam. Upon completing the repairs, Alex does not have the funds to pay for the work so Sam keeps the laptop as collateral. Under state laws in general, if Alex and Sam are residents of the same state, and the business they are engaged in takes place in that state, then there would be no further complications.

However, if Alex and Same reside in different states and the transaction occurs across state lines, then without the UCC, a legal controversy might ensue if the laws of the two states differ. Legal differences between states might even be significant enough to prevent or deter Alex and Sam from doing business with each other in the first place. The UCC helps resolve this potential problem by harmonizing commercial law across different states. In this case, if both states have adopted the UCC, then Article 9 states that Sam may keep the computer until payment is received.

Attachment and Perfection

Attachment and perfection are the two most important legal concepts used to describe the events that create a security interest under Article 9. Attachment can be said to happen when a security interest is effectively created between a debtor and a creditor. This is usually provided for in the agreement between the two parties.

Perfection happens when a creditor is able to establish themselves in a position of priority or dominance over other creditors who may have a claim on the same collateral . The creditor who has priority may seize the collateral in order to satisfy the debt if the debtor defaults. Creditors who do not have priority do not have first dibs on the collateral.

A financing statement must be filed as a matter of public record in order for perfection to occur. The first creditor to file a financing statement is granted first priority; the second is granted second priority; and so on.

Public Records

Public records are an important tool under Article 9 because they provide a record for creditors to understand any security interests that precede theirs in priority. Therefore, a second-priority creditor has no grounds to complain about prior security interests that are a matter of public record.

The UCC undergoes periodic review and revision to clarify the laws and update the provisions based on new technologies and economic realities.

In 2002, Article 9 was revised to substantially modernize and expand the scope of what can be used as collateral to include credit card receivables, electronic chattel paper, accounts receivable , and business inventory. Although Article 9 goes into great detail to incorporate the many loans secured by various types of collateral, there are still disputes over who has ownership priority of an asset subject to a security interest transaction.

In 2010, clarifications to Article 9 were adopted to previous changes (originally made in 1998) that streamlined the rules for attachment and perfection. These changes specify that the filings required under Article 9 should be done in the location of the debtor and naming the debtor under the name filed when it was organized with the state (if a business) or the individual's name (if the debtor is an individual).

What Is the General Purpose of the UCC?

The Uniform Commercial Code is important because it harmonizes laws governing commercial transactions—such as sales—across states. This ensures a degree of regulatory consistency that makes business efficient to conduct throughout the country.

What Situation is the UCC Most Applicable to?

The UCC is most applicable to commercial transactions. This can include sales of goods or financial contracts inked across state lines.

How Does UCC Article 9 Work?

Article 9 of the UCC governs security interests, which refers to legal claims that creditors have on collateral in the context of a loan.

Article 9 is an article of the Uniform Commercial Code (UCC), which harmonizes laws related to commercial transactions across the country. Article 9 of the UCC governs secured transactions, including procedures for settling debts. Under Article 9, if a debtor defaults on debt, the creditor may repossess the secured property.

Louisiana State University Law School. " Louisiana's Non-Uniform Variations in U.C.C. Chapter 9 ." Accessed April 8, 2021.

Louisiana Secretary of State. " Title 10: Financial Institutions, Consumer Credit, Investment Securities and UCC, Part XIX. Uniform Commercial Code ," Page 1. Accessed April 8, 2021.

Uniform Law Commission. " Uniform Commercial Code ."

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Assignments and Security Interests Under UCC Article 9: A Worthy Decision

The March 2020 Commentary and its accompanying amendments to the Official Comments are critical steps in getting the commercial finance industry and, more importantly, courts aligned on how 9-406 and 9-607 work in concert.

December 16, 2022 at 10:30 AM

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The basic definitions of Article 9 align with this approach of applying to both an assignment of payment rights and a security interest in such assets. “[S]ecurity interest” in UCC Article 1, §1-201(b)(35) (General Definitions), includes “any interest of a … buyer of accounts, chattel paper, a payment intangible or a promissory note in a transaction that is subject to Article 9.” The definition of “secured party” in Article 9, §9-102(a)(73) (Definitions and Index of Definitions), includes a “person in whose favor a security interest is created or provided for under a security agreement,” as well as a “person to which accounts, chattel paper, payment intangibles or promissory notes have been sold.” Finally, the definition of “debtor” in Article 9, §9-102(a)(28), includes both a “person having an interest, other than a security interest or other lien, in the collateral” and a “seller of accounts, chattel paper, payment intangibles or promissory notes.”

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§ 1-201. General Definitions.

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(a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other articles of the Uniform Commercial Code that apply to particular articles or parts thereof, have the meanings stated.

(b) Subject to definitions contained in other articles of the Uniform Commercial Code that apply to particular articles or parts thereof:

(1) " Action ", in the sense of a judicial proceeding, includes recoupment, counterclaim, set-off, suit in equity, and any other proceeding in which rights are determined.

(2) " Aggrieved party " means a party entitled to pursue a remedy .

(3) " Agreement ", as distinguished from " contract ", means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1-303.

(4) " Bank " means a person engaged in the business of banking and includes a savings bank, savings and loan association, credit union, and trust company.

(5) " Bearer " means a person in possession of a negotiable instrument, document of title , or certificated security that is payable to bearer or indorsed in blank.

(6) " Bill of lading " means a document evidencing the receipt of goods for shipment issued by a person engaged in the business of transporting or forwarding goods.

(7) " Branch " includes a separately incorporated foreign branch of a bank .

(8) " Burden of establishing " a fact means the burden of persuading the trier of fact that the existence of the fact is more probable than its nonexistence.

(9) " Buyer in ordinary course of business " means a person that buys goods in good faith , without knowledge that the sale violates the rights of another person in the goods, and in the ordinary course from a person, other than a pawnbroker, in the business of selling goods of that kind. A person buys goods in the ordinary course if the sale to the person comports with the usual or customary practices in the kind of business in which the seller is engaged or with the seller's own usual or customary practices. A person that sells oil, gas, or other minerals at the wellhead or minehead is a person in the business of selling goods of that kind. A buyer in ordinary course of business may buy for cash, by exchange of other property, or on secured or unsecured credit, and may acquire goods or documents of title under a preexisting contract for sale. Only a buyer that takes possession of the goods or has a right to recover the goods from the seller under Article 2 may be a buyer in ordinary course of business. "Buyer in ordinary course of business" does not include a person that acquires goods in a transfer in bulk or as security for or in total or partial satisfaction of a money debt.

(10) " Conspicuous ", with reference to a term , means so written , displayed, or presented that a reasonable person against which it is to operate ought to have noticed it. Whether a term is "conspicuous" or not is a decision for the court. Conspicuous terms include the following: (A) a heading in capitals equal to or greater in size than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same or lesser size; and (B) language in the body of a record or display in larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from surrounding text of the same size by symbols or other marks that call attention to the language.

(11) " Consumer " means an individual who enters into a transaction primarily for personal, family, or household purposes.

(12) " Contract ", as distinguished from " agreement ", means the total legal obligation that results from the parties' agreement as determined by the Uniform Commercial Code as supplemented by any other applicable laws.

(13) " Creditor " includes a general creditor, a secured creditor, a lien creditor, and any representative of creditors, including an assignee for the benefit of creditors, a trustee in bankruptcy, a receiver in equity, and an executor or administrator of an insolvent debtor's or assignor's estate.

(14) " Defendant " includes a person in the position of defendant in a counterclaim, cross-claim, or third-party claim.

(15) " Delivery ", with respect to an instrument, document of title , or chattel paper, means voluntary transfer of possession.

(16) " Document of title " includes bill of lading , dock warrant, dock receipt, warehouse receipt or order for the delivery of goods, and also any other document which in the regular course of business or financing is treated as adequately evidencing that the person in possession of it is entitled to receive, hold, and dispose of the document and the goods it covers. To be a document of title, a document must purport to be issued by or addressed to a bailee and purport to cover goods in the bailee's possession which are either identified or are fungible portions of an identified mass.

(17) " Fault " means a default, breach, or wrongful act or omission.

(18) " Fungible goods " means: (A) goods of which any unit, by nature or usage of trade, is the equivalent of any other like unit; or (B) goods that by agreement are treated as equivalent.

(19) " Genuine " means free of forgery or counterfeiting.

(20) " Good faith ," except as otherwise provided in Article 5, means honesty in fact and the observance of reasonable commercial standards of fair dealing.

(21) " Holder " means: (A) the person in possession of a negotiable instrument that is payable either to bearer or to an identified person that is the person in possession; or (B) the person in possession of a document of title if the goods are deliverable either to bearer or to the order of the person in possession.

(22) " Insolvency proceeding " includes an assignment for the benefit of creditors or other proceeding intended to liquidate or rehabilitate the estate of the person involved.

(23) " Insolvent " means: (A) having generally ceased to pay debts in the ordinary course of business other than as a result of bona fide dispute; (B) being unable to pay debts as they become due; or (C) being insolvent within the meaning of federal bankruptcy law.

(24) " Money " means a medium of exchange currently authorized or adopted by a domestic or foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more countries.

(25) " Organization " means a person other than an individual.

(26) " Party ", as distinguished from "third party", means a person that has engaged in a transaction or made an agreement subject to the Uniform Commercial Code .

(27) " Person " means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity.

(28) " Present value " means the amount as of a date certain of one or more sums payable in the future, discounted to the date certain by use of either an interest rate specified by the parties if that rate is not manifestly unreasonable at the time the transaction is entered into or, if an interest rate is not so specified, a commercially reasonable rate that takes into account the facts and circumstances at the time the transaction is entered into.

(29) " Purchase " means taking by sale, lease, discount, negotiation, mortgage, pledge, lien, security interest , issue or reissue, gift, or any other voluntary transaction creating an interest in property.

(30) " Purchaser " means a person that takes by purchase .

(31) " Record " means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(32) " Remedy " means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal.

(33) " Representative " means a person empowered to act for another, including an agent, an officer of a corporation or association, and a trustee, executor, or administrator of an estate.

(34) " Right " includes remedy .

(35) " Security interest " means an interest in personal property or fixtures which secures payment or performance of an obligation. "Security interest" includes any interest of a consignor and a buyer of accounts, chattel paper, a payment intangible, or a promissory note in a transaction that is subject to Article 9. "Security interest" does not include the special property interest of a buyer of goods on identification of those goods to a contract for sale under Section 2-505 , the right of a seller or lessor of goods under Article 2 or 2A to retain or acquire possession of the goods is not a "security interest", but a seller or lessor may also acquire a "security interest" by complying with Article 9. The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer under Section 2-401 is limited in effect to a reservation of a "security interest." Whether a transaction in the form of a lease creates a "security interest" is determined pursuant to Section 1-203 .

(36) " Send " in connection with a writing , record , or notice means: (A) to deposit in the mail or deliver for transmission by any other usual means of communication with postage or cost of transmission provided for and properly addressed and, in the case of an instrument, to an address specified thereon or otherwise agreed, or if there be none to any address reasonable under the circumstances; or (B) in any other way to cause to be received any record or notice within the time it would have arrived if properly sent.

(37) " Signed " includes using any symbol executed or adopted with present intention to adopt or accept a writing .

(38) " State " means a State of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(39) " Surety " includes a guarantor or other secondary obligor.

(40) " Term " means a portion of an agreement that relates to a particular matter.

(41) " Unauthorized signature " means a signature made without actual, implied, or apparent authority. The term includes a forgery.

(42) " Warehouse receipt " means a receipt issued by a person engaged in the business of storing goods for hire.

(43) " Writing " includes printing, typewriting, or any other intentional reduction to tangible form. " Written " has a corresponding meaning.

IMAGES

UCC CONTRACT LAW ESSAY QUESTION
Assignment Of Contract printable pdf download
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Law of Contract Marked Assignment
Contracts and the UCC
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IUCC History

COMMENTS

§ 2-210. Delegation of Performance; Assignment of Rights
§ 2-210. Delegation of Performance; Assignment of Rights. (1) A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract. No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.
Uniform Commercial Code Law Section 2-210
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 ...
Assignment of Contract Rights
The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring.
U.C.C.
§ 9-404. RIGHTS ACQUIRED BY ASSIGNEE; CLAIMS AND DEFENSES AGAINST ASSIGNEE. § 9-405. MODIFICATION OF ASSIGNED CONTRACT. § 9-406. DISCHARGE OF ACCOUNT DEBTOR; NOTIFICATION OF ASSIGNMENT; IDENTIFICATION AND PROOF OF ASSIGNMENT; RESTRICTIONS ON ASSIGNMENT OF ACCOUNTS, CHATTEL PAPER, PAYMENT INTANGIBLES, AND PROMISSORY NOTES INEFFECTIVE. § 9-407.
12.2 Assignment of Contract Rights
The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are a common occurrence in business, legal, and financial transactions.
§ 9-405. MODIFICATION OF ASSIGNED CONTRACT.
A modification of or substitution for an assigned contract is effective against an assignee if made in good faith . The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that the modification or substitution is a breach of contract by the assignor.
Commercial, Sample Agreement
In the following sample document, the underlying agreement being assigned is a commercial sale of goods contract. Accordingly, the agreement is subject to the Uniform Commercial Code - Sales (UCC) in lieu of ordinary rules on assignment and assumption. The principal governing provision is UCC § 2-210, which broadly reflects the common law.
Assignment Clause: Meaning & Samples (2022)
Purpose of Assignment Clause The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.
§ 28:2-210. Delegation of performance; assignment of rights
Uniform Commercial Code Comment Prior Uniform Statutory Provision: None. Purposes: 1. Generally, this section recognizes both delegation of performance and assignability as normal and permissible incidents of a contract for the sale of goods. 2.
UCC Assignment and Federal USPTO Assignment: One Word, Two Meanings
UCC Assignment Article 9 of the Uniform Commercial Code (UCC) allows a secured party (SP) to file assignments via UCC3 amendments. In the UCC Article 9 world, an assignment (UCC3) is linked to the initial financing statement (UCC1) in the public record so that the relationship between the two filings is clear.
Assignment provisions in contracts
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
1302.13. (UCC 2-210) Delegation of performance; assignment of rights
(UCC 2-210) Delegation of performance; assignment of rights. (A) A party may perform the party's duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having the original promisor perform or control the acts required by the contract.
When Is a Written Contract Required Under the UCC?
In some cases, the UCC requires your contract to be in writing. You need a written contract for the sale or lease of some goods and for security interests.
14.1: Assignment of Contract Rights
The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring. A factor is one who purchases the right to receive income from another. Figure 14.1 Assignment of Rights Method of Assignment
Assignment of Contracts in Minnesota
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.
§ 9-404. Rights Acquired by Assignee; Claims and Defenses Against
(e) [Inapplicability to health-care-insurance receivable.] This section does not apply to an assignment of a health-care-insurance receivable. ‹ § 9-403. AGREEMENT NOT TO ASSERT DEFENSES AGAINST ASSIGNEE. up § 9-405. MODIFICATION OF ASSIGNED CONTRACT.
Uniform Commercial Code
The Uniform Commercial Code (UCC) is a comprehensive set of laws governing all commercial transactions in the United States. It is not a federal law, but a uniformly adopted state law. Uniformity of law is essential in this area for the interstate transaction of business. Because the UCC has been universally adopted, businesses can enter into contracts with confidence that the terms will be ...
Article 9: Definition, How It Works, Example, and Revisions
Article 9 is a section under the Uniform Commercial Code (UCC) that governs secured transactions including the creation and enforcement of debts. Article 9 spells out the procedure for settling ...
§ 9-514. Assignment of Powers of Secured Party of Record
(a) [Assignment reflected on initial financing statement.] Except as otherwise provided in subsection (c), an initial financing statement may reflect an assignment of all of the secured party 's power to authorize an amendment to the financing statement by providing the name and mailing address of the assignee as the name and address of the secured party.
Assignment Under UCC
ASSIGNMENT - UCC Â§9-206 (1) states that an agreement by a buyer or lessee that he will not assert any claim or defense he may have against the seller or lessor against the seller's/lessor's assignee is enforceable IF the assignee takes assignment for value, in good faith, and without notice of a claim or defense by the buyer/lessee. This ...
Assignments and Security Interests Under UCC Article 9: A Worthy
Assignments and Security Interests Under UCC Article 9: A Worthy Decision The March 2020 Commentary and its accompanying amendments to the Official Comments are critical steps in getting the ...
§ 5-114. Assignment of Proceeds.
§ 5-114. Assignment of Proceeds. (a) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit. The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.
§ 1-201. General Definitions.
General Definitions. § 1-201. General Definitions. (a) Unless the context otherwise requires, words or phrases defined in this section, or in the additional definitions contained in other articles of the Uniform Commercial Code that apply to particular articles or parts thereof, have the meanings stated. (b) Subject to definitions contained in ...

N.Y. Uniform Commercial Code Law Section 2-210 Delegation of Performance

Blank Outline Levels

14.1 Assignment of Contract Rights

The Concept of a Contract Assignment

Method of Assignment

Acceptance and Revocation

Effect of Assignment

When Assignments Are Not Allowed

Material Change in Duties of the Obligor

Assignment of Personal Rights

Assignment Forbidden by Statute or Public Policy

Contracts That Prohibit Assignment

Future Contracts

Partial Assignments

Successive Assignments

Assignor’s Warranties

Key Takeaway

12.2 Assignment of Contract Rights

Method of Assignment

Acceptance and Revocation

Effect of Assignment

Prohibited Assignments

Material Change in Duties of the Obligor

Assignment of Personal Rights

Assignment Forbidden by Statute or Public Policy

Contracts That Prohibit Assignment

Future Contracts

Partial Assignments

Successive Assignments

Assignor’s Warranties

Video on Assignment

Check your Understanding

Contract Clauses

Jump to Section

Assignment Clause Explained

Purpose of Assignment Clause

Assignment Clause Examples

Assignment Clause Samples

Sample 2 – Purchase and Sale Agreement

Sample 3 – Share Purchase Agreement

Sample 4 – Asset Purchase Agreement

Sample 5 – Asset Purchase Agreement

Common Contracts with Assignment Clauses

Assignment Clause FAQs

What is an assignment clause in real estate?

What does no assignment clause mean?

What’s the purpose of the transfer and assignment clause in the purchase agreement?

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§ 28:2–210. Delegation of performance; assignment of rights.

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What is an Assignment?

UCC Assignment

USPTO Assignment

USPTO Assignment Recordation Examples

A Rule of Thumb for UCC and IP Assignments

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Assignment provisions in contracts

Legal background: Contracts generally are freely assignable

Assignment consent requirements

Case illustrations

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

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

Assignment with transfer of business assets

Assignment to affiliate

Consent may not be unreasonably withheld or delayed

Consent at discretion

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

Termination by non-assigning party

Assignment – other provisions

Materiality of assignment breach

Assignment of Contracts in Minnesota - 10 Things to Know

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