VocabuLaw

Assignment

What is it and what does it mean?

Description of the legal term Assignment:

An assignment is the transfer of a right or benefit from one party (the assignor) to another (the assignee). This legal concept is most commonly used in relation to contractual rights and obligations. An assignment involves three parties: the assignor, the assignee and the obligor (the party obliged to perform under the original contract). It’s important to note that while rights under a contract can be assigned, obligations generally cannot be assigned without the consent of the obligor.

The process of assignment does not require the consent of the obligor unless the contract expressly provides otherwise. However, the debtor must be notified of the assignment for it to be effective against him. The assignee steps into the shoes of the assignor and acquires the right to receive the benefits of the contract, but any limitations or defects that affected the assignor’s rights also apply to the assignee.

Legal context in which the term Assignment may be used:

Example 1: Assignment of a lease
Suppose a tenant (assignor) has a lease with a landlord (obligor) for commercial property. The tenant decides to move and wants to assign the lease to another entity (assignee). The tenant can assign the lease to the new entity, thereby transferring the right to use the property. The new business, as assignee, now has the rights under the lease and must comply with its terms. The landlord must be notified of the change. However, the original tenant may still be liable if the assignee fails to pay the rent, unless the landlord agrees to release the original tenant from its obligations.

Example 2: Assignment of receivables
Consider a company (assignor) that has supplied goods to a customer (debtor) on credit, resulting in the customer owing money to the company. The entity decides to improve its cash flow by assigning this receivable to a finance company (assignee) for a discounted amount. The finance company then has the right to collect the full amount from the customer. The customer must be informed of the assignment and is obliged to pay the finance company instead of the original entity.

This website is for informational purposes only and may contain inaccuracies. It should not be used as a substitute for professional legal advice.