Assignment: Definition, Example and Related Terms
What is an Assignment ?
For example, if you have a lease on an apartment but need to move before the lease ends, you might assign your lease to another person. This means that the other person takes over your lease, including all the rights and responsibilities that come with it.
Another example of assignment in business agreements could be the transfer of contractual rights to receive money from a debtor. If a company is owed money under a contract, it might assign the right to collect this money to a third party, perhaps as part of a sale of its assets or to improve liquidity.
It's important to note that while assignment transfers the benefits of a contract, it does not necessarily relieve the original party of their obligations under the contract unless the other party to the contract agrees to this as well. This means that even after assigning the contract, the assigning party may still be held liable if the assignee fails to perform their duties.
The rules and limitations regarding assignments can vary depending on the type of agreement and jurisdiction. Some contracts explicitly prohibit assignment without the other party's consent, while others might allow it freely. Therefore, it's crucial to carefully review contract terms and seek legal advice if you're considering an assignment.
Example(s)
Scenario Description A company is selling one of its business units, and as part of the sale, it assigns its customer contracts to the buying company. In this scenario, the customer contracts are transferred from the selling company to the buying company. The buying company assumes all rights and obligations under these contracts. An individual assigns their benefits from a life insurance policy to a trust for estate planning purposes. Here, the individual transfers their rights to receive the life insurance benefits to the trust. The trust will then collect the benefits upon the individual's death and distribute them according to the trust's terms.