A contract in a basic sense can be seen as a benefit (often the payment of money) to one party and a burden (obligations) on the other. Of course, contracts are usually more complex than this with a series of interlinked benefits and burdens. But the concept of benefits and burdens is important to understanding when and if a contract can be ‘assigned’.

The courts in the UK will generally enforce a contract term made under English law which prevents ‘assignment’ of the contract - that is, its benefits and burdens.

If the contract does not prevent assignment, then, again in English law, the benefits can usually be assigned and the other party does not need to consent. However, the burdens in such a contract cannot be assigned without the consent of the other party. In some circumstances, taking an assignment of the benefit may lead to all or some of the burdens being taken on too, known as a conditional benefit.

Some contracts are regarded as ‘personal’ in the sense that the identity of individuals or companies performing under the contract are important for other parties to the contract. For example, author and publisher. Such contracts tend not to be assignable.

Certain formalities must be followed in English law to ensure that the assignment is effective. Also commercial consideration must be given to the ‘benefit’ being assigned and its value as the ‘assignee’ stands in the shoes of the ‘assignor’. If the benefit is a payment then an assignment of a ‘junk’ obligation to pay will not be worth much. Perhaps additional security might be prudent and so on.

Often contracts are made subject to the laws of other countries rather than English law in which case whether or not the contract may be assigned will depend on that law.   

Posted: November 19th, 2007 under Contract.
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