Assignment of Contracts


An assignment is a transfer of contract obligations to another party. It is a method of getting out of the contract by getting somebody else to perform the obligations. The other party to the contract usually must permit an assignment if it is reasonable, meaning that the assignment will not jeopardize the security of the other party or increase its risks. Normally, an assignment requires the explicit approval of the other party. Often the original party to the contract remains liable for the performance of the contract, if the person to whom the contract is assigned (the assignee) breaches the contract.

Assignments are important in several types of contracts. Using a long-term car lease as an example, assume you lease a car for 36 months and then six months later are transferred abroad and no longer need the car. What do you do? If you terminate the lease contract early, you may be subject to serious early termination penalties. Assigning the lease to someone else is an option if the lease contract permits it. In an assignment, your assignee assumes the remainder of your contract obligations. If everything works according to plan, you have terminated the contract for practical purposes.