Assignment Of Rights Agreement

Jump to section, what is an assignment of rights agreement.

​​An assignment of rights agreement is a written document in which one party, the assignor, assigns to another party all or part of their rights under an existing contract. The most common example of this would be when someone wants to sell their shares of stock in a company.

When you buy shares from someone else (the seller), they agree to transfer them over and give up any control they had on that share. This way, another party can take ownership without going through the trouble of trying to buy the whole company themselves.

Common Sections in Assignment Of Rights Agreements

Below is a list of common sections included in Assignment Of Rights Agreements. These sections are linked to the below sample agreement for you to explore.

Assignment Of Rights Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-99.(H)(7) 5 dex99h7.htm FORM OF ASSIGNMENT AGREEMENT , Viewed December 20, 2021, View Source on SEC .

Who Helps With Assignment Of Rights Agreements?

Lawyers with backgrounds working on assignment of rights agreements work with clients to help. Do you need help with an assignment of rights agreement?

Post a project  in ContractsCounsel's marketplace to get free bids from lawyers to draft, review, or negotiate assignment of rights agreements. All lawyers are vetted by our team and peer reviewed by our customers for you to explore before hiring.

Meet some of our Assignment Of Rights Agreement Lawyers

Igor B. on ContractsCounsel

As a corporate lawyer, I have dealt with international transactions, complex litigation and arbitration, regulatory compliance, and multijurisdictional tax planning. In March 2021, I started my firm and shifted my professional focus to working with start-ups, small businesses, entrepreneurs, and families. I help my clients structure and run their businesses and take care of their assets, including intellectual property issues and estate planning for their families. I try to bring big law quality and small firm personal attention to every client.

Zachary J. on ContractsCounsel

I am a solo-practitioner with a practice mostly consisting of serving as a fractional general counsel to growth stage companies. With a practical business background, I aim to bring real-world, economically driven solutions to my client's legal problems and pride myself on efficient yet effective work.

Cindy A. on ContractsCounsel

Attorney that has worked in both litigation and transactional fields. Motivated and personable professional. Speaks fluent Spanish and very basic Portuguese.

Michael V. on ContractsCounsel

Seven years experience reviewing and drafting corporate and transactional documents, including NDAs, LLC operating agreements, MSAs, employment agreements, etc.

Brittany S. on ContractsCounsel

Brittany S.

I am licensed in New York and New Jersey. I graduated with my J.D. from Touro University Law Center, Summa Cum Laude, in 2021. In 2018, I graduated from SUNY Farmingdale with a B.S. in Sport Management and a minor in Business Management. I have experience in real estate law and insurance defense, including employment law. Please note, I do not carry malpractice insurance.

Josh L. on ContractsCounsel

Josh is a founding partner and the director of Art and Business Law for Twig, Trade, & Tribunal PLLC a local Fort Lauderdale law firm. His practice focuses on Art and Business law including art transactions, legal strategy, art leasing, due diligence, contract drafting, contract negotiations as well as other facets of Art Law including consulting for all market participants. He also advises clients regarding issues for Non-Fungible Tokens (NFTs) again focusing on contract drafting, strategic guidance, and other factors as it relates to art produced as NFTs having given numerous presentations on the subject.

Michael R. on ContractsCounsel

If you're looking for an attorney who can help your business succeed, look no further! With my experience in the legal field, I can provide you with the legal advice you need with entity formation, contract drafting, business operations, and more, And because I'm committed to providing high quality service, you can be sure that your needs will always be met. Contact me today to learn more about how I can help your business thrive!

Find the best lawyer for your project

How it works.

Post Your Project

Get Free Bids to Compare

Hire Your Lawyer

Business lawyers by top cities

  • Austin Business Lawyers
  • Boston Business Lawyers
  • Chicago Business Lawyers
  • Dallas Business Lawyers
  • Denver Business Lawyers
  • Houston Business Lawyers
  • Los Angeles Business Lawyers
  • New York Business Lawyers
  • Phoenix Business Lawyers
  • San Diego Business Lawyers
  • Tampa Business Lawyers

Assignment Of Rights Agreement lawyers by city

  • Austin Assignment Of Rights Agreement Lawyers
  • Boston Assignment Of Rights Agreement Lawyers
  • Chicago Assignment Of Rights Agreement Lawyers
  • Dallas Assignment Of Rights Agreement Lawyers
  • Denver Assignment Of Rights Agreement Lawyers
  • Houston Assignment Of Rights Agreement Lawyers
  • Los Angeles Assignment Of Rights Agreement Lawyers
  • New York Assignment Of Rights Agreement Lawyers
  • Phoenix Assignment Of Rights Agreement Lawyers
  • San Diego Assignment Of Rights Agreement Lawyers
  • Tampa Assignment Of Rights Agreement Lawyers

related contracts

  • 93a Demand Letter
  • Accounting Services Agreement
  • Accounts Receivable Purchase Agreement
  • Ad Agency Contract
  • Adhesion Contract
  • Advertising Services Agreement
  • Agency Agreement
  • Agency Contract

other helpful articles

  • How much does it cost to draft a contract?
  • Do Contract Lawyers Use Templates?
  • How do Contract Lawyers charge?
  • Business Contract Lawyers: How Can They Help?
  • What to look for when hiring a lawyer

assignment of rights and agreement to arbitrate

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

Contracts Counsel was incredibly helpful and easy to use. I submitted a project for a lawyer's help within a day I had received over 6 proposals from qualified lawyers. I submitted a bid that works best for my business and we went forward with the project.

I never knew how difficult it was to obtain representation or a lawyer, and ContractsCounsel was EXACTLY the type of service I was hoping for when I was in a pinch. Working with their service was efficient, effective and made me feel in control. Thank you so much and should I ever need attorney services down the road, I'll certainly be a repeat customer.

I got 5 bids within 24h of posting my project. I choose the person who provided the most detailed and relevant intro letter, highlighting their experience relevant to my project. I am very satisfied with the outcome and quality of the two agreements that were produced, they actually far exceed my expectations.

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Find lawyers and attorneys by city

  • Search Menu
  • Advance articles
  • Author Guidelines
  • Open Access
  • Why Publish?
  • About Arbitration International
  • Self-Archiving Policy
  • Editorial Board
  • Advertising and Corporate Services
  • Journals Career Network
  • Dispatch Dates
  • Journals on Oxford Academic
  • Books on Oxford Academic

Article Contents

Consent to arbitration: do we share a common vision.

  • Article contents
  • Figures & tables
  • Supplementary Data

Bernard Hanotiau, Consent to Arbitration: Do we Share a Common Vision?, Arbitration International , Volume 27, Issue 4, 1 December 2011, Pages 539–554, https://doi.org/10.1093/arbitration/27.4.539

  • Permissions Icon Permissions

It is not always proper to equate the right and duty to arbitrate with the notion of consent to arbitration. Although a party's participation in arbitral proceedings will often be based on (at least presumed) consent, it is not always the case.

That notwithstanding, an analysis of the approach taken in the leading civil law and common law jurisdictions indicates a broad consensus that consent may be proved by parties' conduct. In multiparty arbitrations, classical theories of contract law and company law, including consent by conduct, are sufficient to determine the scope rationae personae of the arbitration clause where proceedings involve individuals or companies that have not formally signed the arbitration agreement (sometimes wrongly termed the ‘extension’ issue). In particular, there is no need to rely on the so-called ‘group of companies doctrine’. This theory is merely a shortcut to avoid legal reasoning. Contrary to what has often been written, it also fails to represent the approach followed in the Dow Chemical case and subsequent French case law. Subject to few exceptions, the approach of the French courts has always been, and remains, based on consent. The author concludes that it is incorrect to claim that there has been a marginalization of consent. It is more accurate to refer to a modem approach to consent that is more focussed on facts and more aligned with commercial practice, economic reality and trade usages.

Email alerts

Citing articles via.

  • Recommend to your Library

Affiliations

  • Online ISSN 1875-8398
  • Print ISSN 0957-0411
  • Copyright © 2024 The London Court of International Arbitration
  • About Oxford Academic
  • Publish journals with us
  • University press partners
  • What we publish
  • New features  
  • Open access
  • Institutional account management
  • Rights and permissions
  • Get help with access
  • Accessibility
  • Advertising
  • Media enquiries
  • Oxford University Press
  • Oxford Languages
  • University of Oxford

Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide

  • Copyright © 2024 Oxford University Press
  • Cookie settings
  • Cookie policy
  • Privacy policy
  • Legal notice

This Feature Is Available To Subscribers Only

Sign In or Create an Account

This PDF is available to Subscribers Only

For full access to this pdf, sign in to an existing account, or purchase an annual subscription.

Home

Search form

The law applicable to the assignment of claims subject to an arbitration agreement - chapter 3 - conflict of laws in international commercial arbitration.

Subscribe to download

assignment of rights and agreement to arbitrate

Originially from  Conflict of Laws in International Commercial Arbitration

I.INTRODUCTION: ISSUE DEFINED 

Suppose an arbitration agreement or clause between the initial parties to the main contract (the creditor/assignor and the debtor/debitor cessus): Does the arbitration agreement apply merely to disputes between these two initial parties, or may the arbitration clause also apply to disputes between the assignee (who is not a party to the initial contract) and the debtor? 

When Christian Hausmaninger and I undertook to analyse the issue of assignment and arbitration more than 25 years ago,2 we realized that we could not base our thoughts on much specific literature: While the question of whether an assignee is bound to, or may invoke, an arbitration agreement concluded between the assignor and the debtor, had arisen as a practical problem quite often in many jurisdictions, no specific and even less comprehensive analyses had been published at the time. That has changed radically in the meantime: The articles and case notes are now legion, and various detailed articles and books have appeared in many languages analysing and comparing a multitude of legal systems.3 It would thus constitute a redundant task to add yet another analysis to these careful, and largely comprehensive, publications, and it would be impossible to summarize all relevant court and arbitral decisions and/or theories in a short article such as the one I was asked to produce. I will therefore endeavour to structure my observations in the form of a dozen or so preliminary theses, in which, and from which I will try to draw a few conclusions on how legislators, courts, and arbitral tribunals may approach the problem of the applicable law in the future when confronted with it.  

Assignment of Rights Agreement: Everything You Need to Know

An assignment of rights agreement refers to a situation in which one party, known as the assignor, shifts contract rights to another party, known as assignee. 3 min read updated on February 01, 2023

An assignment of rights agreement refers to a situation in which one party, known as the assignor, shifts contract rights to another party. The party taking on the rights is known as the assignee.

An Assignment of Rights Agreement

The following is an example of an assignment of rights agreement. Dave decides to buy a bicycle from John for $100 and after agreeing on the price, Dave and John draw up a written agreement. Let's suppose that there will be a one week wait before the bicycle is ready for delivery to Dave and before anything is passed between them.

Meanwhile, John accepts that he will transfer his right to be paid $100 from Dave to Rob, in exchange for Rob paying John $90 immediately. Let's assume that John's motivation is an immediate need for cash. In this context, John is regarded as the assignor and Rob is the assignee.

John is the assignor as he is giving the assignment to Rob and Rob is the assignee because he is acquiring the assignment from John. To put it simply, the assignee is the party who gets something. In this case, Rob will receive $100.

Rules of Assignments

Assignments frequently occur in contracts. It's important to note the following points:

  • The assignor (e.g. John) is accountable according to the contract unless the parties make an agreement that states otherwise.
  • This means that if Dave does not receive the bicycle, he can sue John for it.
  • Assignments are allowed in almost every type of agreement unless the contract includes an explicit ban on assignments or unless a specific exception is applicable.
  • The assignor does not need to speak to the other contract party in order to create the assignment. For example, John would not need to ask Dave if John can transfer his right to be paid to Rob.

Exceptions Where a Contract Cannot be Assigned

  • Some exceptions dictate that a contract cannot be assigned .
  • Unenforceable assignments include the following: a personal services agreement, changing the contract duties, changing the material provisions of the agreement (e.g. time, amount, location, etc.).
  • An example of a personal services agreement, which cannot be assigned, would be if you decided to employ a particular professional writer to write a book for you.
  • That writer would not be allowed to take your payment and then give the work to another writer because you employed that particular writer to write the book, rather than someone else.
  • Some kinds of assignments have to be in writing in order to be enforceable such as assignments of actual property (e.g. selling your house), loans, or debts.
  • It's best to look at the statute of frauds for more information on the kinds of agreements that must be in writing.

Delegations and Novations

A delegation is very similar to an assignment in terms of what it involves. A delegation takes place when a party moves his or her obligations (or liabilities) under an agreement to a different party. Assignments, on the other hand, involve the transfer of rights.

If the parties in our previous example had created a novation , Rob would be entirely accountable to Dave and John would be clear of responsibility. A novation replaces the earliest party with a new party.

Contract Assignment

An Assignment Agreement can also be called a Contract Assignment. Another example of this would be if you're a contractor who needs assistance finishing a job. You could give those tasks and rights to a subcontractor, but only if the original agreement does not prohibit the assignment of these rights and responsibilities.

Creating an Assignment Agreement

In an Assignment Agreement, it is important to include details such as:

  • The name of the person assigning the responsibilities (known as the assignor)
  • The name of the of the party who is taking the rights and responsibilities (the assignee)
  • The other party to the first agreement (known as the obligor)
  • The name of the agreement and its expiration date
  • Whether the first contract necessitates the obligor's approval before assigning rights
  • The date of the obligor's consent
  • When the contract will be put into effect
  • Which state's laws will regulate the contract

If you need help with an assignment of rights agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

  • Assignment of Rights Example
  • Assignment of Contract Rights
  • Assignment of Rights and Obligations Under a Contract
  • Partial Assignment of Contract
  • Assignment Contract Law
  • What Is the Definition of Assigns
  • Assignment Law
  • Assignment Of Contracts
  • Legal Assignment
  • Delegation vs Assignment

logo

  • assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights 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, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

Founded in 1939, our law firm combines the ability to represent clients in domestic or international matters with the personal interaction with clients that is traditional to a long established law firm.

Read more about our firm

© 2024, Stimmel, Stimmel & Roeser, All rights reserved  | Terms of Use | Site by Bay Design

  • Share on Facebook
  • Share on Twitter
  • Share on LinkedIn
  • Share by email
  • Copy Page Url

  Non-assignment clauses and the transfer of rights to arbitrate

Non-assignment clauses and the transfer of rights to arbitrate

There is no presumption in English law that transfers of rights by operation of law are exempt from contractual clauses prohibiting the assignment of rights. The important recent case of Dassault Aviation SA v Mitsui Sumitomo Insurance Co Ltd [2022] EWHC 3287 (Comm) established that the relevant distinction is whether the transfer of rights is truly voluntary or involuntary.

A transfer that is given effect by operation of law may be the culmination of a series of purely voluntary acts within the control of the assignor. In such cases, the transfer may have the “ taint of voluntariness ” and may be caught by a non-assignment clause and invalidated. For those reasons, the Commercial Court held that Mitsui Insurance Co (Mitsui) had not acquired the right to bring an arbitration claim under a contract between its insured Mitsui Butsan Aerospace (MBA) and Dassault Aviation (Dassault).

Dassault contracted to manufacture two aircraft for MBA (the Sale Contract) for onward supply by MBA to the Japanese Coast Guard. The Sale Contract was governed by English law and contained an ICC arbitration clause in which London was the seat of arbitration. It also contained confidentiality provisions and a clause prohibiting the assignment or transfer of any right or interest under the contract “ in whole or in part by any Party to any third party, for any reason whatsoever ” without prior written consent (the ‘Non-Assignment Clause’). Two years into the contract, MBA became concerned about delays in manufacture and obtained insurance from Mitsui against its potential liability to the Japanese Coast Guard. The insurance policy was governed by the Japanese Insurance Law (JLA). Article 25 of the JLA provides that, once it has indemnified a loss, an insurer is subrogated “ by operation of law ” to the insured’s recovery claim against any third party. The JLA permits parties to contract out of Article 25, but MBA’s policy with Mitsui in fact contained a clause which had the same effect as Article 25, by providing for the transfer of claims to Mitsui following payment of any loss.

Dassault delivered the aircraft late and Mitsui indemnified MBA under the insurance policy. Mitsui then commenced ICC arbitration proceedings against Dassault on the basis that MBA’s rights under the Sale Contract had been transferred to the insurer. The ICC panel made a partial award that, because the transfer to Mitsui occurred by operation of law, it was not invalidated by the Non-Assignment Clause so that accordingly the panel had jurisdiction to hear the claim. Dassault applied to the English Commercial Court to set aside the award.

The court’s decision

The court’s task was to construe the Non-Assignment Clause and apply it to the disputed transfer of rights to Mitsui. The court accepted that Article 25 of the JLA worked by transferring rights to an insurer by operation of law. By contrast, subrogation under English insurance law requires the claim to be brought in the insured’s name and is not thought to involve any transfer of rights (although there is a lack of certainty about the correct analysis, as the court acknowledged here).

The court began by rejecting Mitsui’s primary argument that there is a rule of English law that transfers of rights ‘by operation of law’ escape contractual prohibitions on assignment. The court found no such broad principle in the case law: the test does not focus on the immediate cause or legal mechanism of the disputed transfer, but rather whether it was truly voluntary or non-voluntary, in the sense of occurring contrary to the will of the transferring party and truly outside their voluntary control. Here, MBA chose to enter into the insurance policy, chose not to contract out of Article 25 of the JLA and chose to claim an indemnity from Mitsui.

The court then construed the Non-Assignment Clause by reference to the words used, the factual matrix and commercial purpose of the Sales Contract, and commercial common sense. The court found that the clear broad words of the clause supported a preliminary conclusion that it applied to the transfer to Mitsui.  The court accepted Mitsui’s argument that the fact that the Non-Assignment Clause might not prohibit a subrogated claim by an English insurer (because it would not involve a transfer of rights), was part of the relevant factual matrix.  However, the court found that there were reasons why contracting parties might treat subrogation differently and that a general prohibition on transfers of contractual rights to insurers would fit with the commercial purpose of the Non-Assignment Clause.  The court concluded that no element of factual matrix/commercial purpose or public policy displaced the initial interpretation based on the words of the Non-Assignment Clause and held that it applied to invalidate the transfer of the right to arbitrate to Mitsui. Accordingly, the court set aside the ICC award on the grounds that the ICC did not have jurisdiction to hear Mitsui’s claim.

This decision will be of obvious interest to insurers and their advisers. Insurers’ rights to pursue recovery claims under their insureds’ contracts with third parties may no longer escape non-assignment clauses simply on the basis that insurers acquire those rights ‘by operation of law’ once they have indemnified the insured. Each case will turn on the specific words of the policy and the non-assignment clause in the underlying contract. The courts may now regard the more important factor as being the insured’s decision to enter into the policy and claim an indemnity, which may colour the transfer to insurers as ‘voluntary’ and potentially bring it within a non-assignment clause. The focus will then shift to the legal basis of the insurers’ right to bring a claim.

For insurers writing policies under systems of law where their title to bring a claim is acquired by means of a transfer of the insured’s rights (as with Japanese law in this case and in contrast to the English law of subrogation), those transfers may be caught by non-assignment clauses and invalidated. Indeed, the judgment leaves open the possibility that English law subrogation claims may one day be caught by non-assignment clauses if the classification problems with subrogation law are resolved in favour of an analysis of transfer of rights. Insurers are therefore now likely to insist that non-assignment clauses in the English law contracts which they insure have express carve-outs permitting transfers of rights to insurers.

The court acknowledged the dispute raised complex issues and that the decision had been reached “ with an unusual degree of hesitation ”. It will be interesting to see how the case law on this important issue develops.

This analysis was co-authored by Jeremy Collins and first published on Lexis®PSL on 21 February 2023 and can be found here (subscription required). 

Other Publications

One size fits one? The challenge of “tailored” regulation in digital markets in the UK

One size fits one? The challenge of “tailored” regulation in digital markets in the UK

  • Antitrust / Competition
  • United States, France, Germany, United Kingdom, Netherlands, Sweden, Belgium
  • Nov 15 2023

FTC says to ignore its previous guidance about PBMs

FTC says to ignore its previous guidance about PBMs

Jurisdictional clause favouring English courts held invalid by Frankfurt District Court post-Brexit

Jurisdictional clause favouring English courts held invalid by Frankfurt District Court post-Brexit

Beyond the SCP paradigm: Merger control for the twenty-first century

Beyond the SCP paradigm: Merger control for the twenty-first century

The role of data for competition in online advertising

The role of data for competition in online advertising

  • Sep 15 2023

The role of EU data protection law in the realm of competition law – Insights from the Meta judgment of the European Court of Justice

The role of EU data protection law in the realm of competition law – Insights from the Meta judgment of the European Court of Justice

assignment of rights and agreement to arbitrate

What is an arbitration agreement?

Arbitration agreements are a popular way for businesses to limit their legal fees and keep disputes out of court.

Find more Legal Forms and Templates

assignment of rights and agreement to arbitrate

by   Jane Haskins, Esq.

Jane Haskins is a freelance writer who practiced law for 20 years. Jane has litigated a wide variety of business disp...

Read more...

Updated on: January 22, 2024 · 3min read

What is arbitration?

What’s in an arbitration agreement, advantages of signing an arbitration agreement, disadvantages of signing an arbitration agreement.

Computer screen cursor about to click agree button

Arbitration agreements are everywhere these days, and chances are you’ve signed a few without even realizing it. You may have agreed to arbitrate disputes when you clicked “agree” to a software license or when you purchased ordinary goods or services.

But what happens when an arbitration agreement is part of an important contract such as an employment agreement? Should you sign it?

By agreeing to arbitrate, you give up certain rights while also gaining some benefits. Understanding the pros and cons ahead of time will help you make a smart decision when you’re asked to sign.

Arbitration is a way of resolving a dispute without filing a lawsuit and going to court. The arbitration process is similar to the proceedings in a court case: the parties may have lawyers, they exchange information, and there is a hearing where they question witnesses and present their cases. After the hearing, the arbitrator will make a decision.

Arbitration is more informal than litigation and the procedures are simplified.

In arbitration, the parties usually have a more limited right to obtain documents and other information from one another.

Most arbitrations occur in a conference room rather than a courtroom, and the arbitrator may be a lawyer, a retired judge or a person with experience in a particular industry. Most arbitrations are binding, meaning that the parties must accept the arbitrator’s decision and cannot try to resolve the same dispute in court.

Before arbitration can go forward, the parties must have agreed to arbitrate the dispute.

Arbitration agreements are usually signed at the beginning of a business relationship – long before there’s a disagreement.

They are often just a few sentences long, and are commonly found near the end of a larger contract under a heading such as “Arbitration” or “Dispute Resolution.” Employee arbitration agreements may be buried in an employment contract or employee handbook.

An arbitration clause will typically say that all disputes arising under the larger contract will be submitted to binding arbitration. Sometimes a contract will say that only certain disputes will be arbitrated.

The agreement may also say how the arbitration will be conducted. It may specify certain arbitration rules, such as the American Arbitration Association (AAA) rules, and it may say whether there will be one arbitrator or a panel of arbitrators. The agreement may also specify how the arbitrator will be chosen.

The parties to a dispute may also agree to arbitration after a conflict has arisen, or even after a lawsuit has been filed.

  • Arbitration is usually faster and less expensive than litigating a case in court.
  • Arbitrations are confidential, which means that you will not have to publicly testify. The specifics of your dispute will not be in the public court records.
  • In arbitration, you can choose who will decide your dispute. This can be particularly helpful if you want a decision-maker who has specialized technical knowledge or experience in your industry.
  • Some employers will not hire you if you refuse to sign an employment arbitration agreement.
  • Arbitration awards cannot be appealed. You must accept the arbitrator’s decision as final.
  • You cannot have a jury trial. This can lead to a worse result if you have an employment dispute because juries are often sympathetic to employees.
  • The parties’ exchange of information is more limited in arbitration. This can make it harder to develop your case in an employment arbitration or in any other situation where the other party has most of the information and documents.
  • If you are asked to agree to arbitration before you even have a dispute, you may not know whether you want to arbitrate or not. If you sign the agreement and decide later that you would rather pursue a claim in court, you won’t be able to—or you will rack up legal fees trying to invalidate the arbitration agreement.
  • Like all contracts, arbitration agreements can be one-sided in favor of the party who wrote the agreement. You should be on the lookout for this and make sure the agreement gives you an equal voice in choosing the arbitrator, does not limit the remedies available to you, and does not deny you the right to an attorney.

Arbitration agreements are a way to limit litigation costs and keep disputes confidential. But signing an arbitration agreement also means giving up important rights. Before signing, it pays to read arbitration clauses and reject or renegotiate anything that you’re uncomfortable with.

You may also like

assignment of rights and agreement to arbitrate

What does 'inc.' mean in a company name?

'Inc.' in a company name means the business is incorporated, but what does that entail, exactly? Here's everything you need to know about incorporating your business.

January 22, 2024 · 10min read

assignment of rights and agreement to arbitrate

How to get an LLC and start a limited liability company

Considering an LLC for your business? The application process isn't complicated, but to apply for an LLC, you'll have to do some homework first.

February 6, 2024 · 11min read

assignment of rights and agreement to arbitrate

What is a power of attorney (POA)? A comprehensive guide

Setting up a power of attorney to make your decisions when you can't is a smart thing to do because you never know when you'll need help from someone you trust.

February 8, 2024 · 15min read

Open database of authors and journals

Assignment of Rights and Agreement to Arbitrate

Arbitration international , 1992 , 8 , 121-166, similar articles.

IMAGES

  1. Arbitration Agreement Sample

    assignment of rights and agreement to arbitrate

  2. Assignment Of Rights Agreement Free Template

    assignment of rights and agreement to arbitrate

  3. Free Copyright Assignment Agreement

    assignment of rights and agreement to arbitrate

  4. FREE 10+ Assignment of Rights Contract Samples in PDF

    assignment of rights and agreement to arbitrate

  5. Agreement to Arbitrate Online

    assignment of rights and agreement to arbitrate

  6. Assignment Rights Form

    assignment of rights and agreement to arbitrate

VIDEO

  1. Agreement, Alignment, Assignment| Elder Yvette C. Pierce| Morning Service

  2. BIO 113 Assignment Submission Syllabus Agreement

  3. #LegalHelpline:Arbitration and conciliation act

  4. KNOW YOUR LAWS-ARBITRATION IN ALTERNATIVE DISPUTE RESOLUTION -18TH NOV 2021

  5. Introduction to Arbitration Act, 1940 I Sec 2-5 of Arbitration Act

  6. Arbitration Act 1996 important landmark case laws

COMMENTS

  1. Assignment of Rights and Agreement to Arbitrate

    Assignment of Rights and Agreement to Arbitrate | Arbitration International | Oxford Academic Journal Article Assignment of Rights and Agreement to Arbitrate Daniel Girsberger , Christian Hausmaninger Arbitration International, Volume 8, Issue 2, 1 June 1992, Pages 121-166, https://doi.org/10.1093/arbitration/8.2.121 Published: 18 December 2014 PDF

  2. PDF Assignment of The Arbitration Agreement: Perspectives of Leading

    mandated to arbitrate unless he or she decides to do so. ... Hausmaninger Christian, "Assignment of Rights and Agreement to Arbitrate", Arbitration International, LCIA, Volume 8, No.2, 1992, 121-165. Collection 3 law, legal principles and arbitration rules. Moreover, the thesis is based on other sources ...

  3. Explaining Assignments of Arbitration Agreements

    This principle indicates, first, that arbitration agreements which are not actual burdens can be assigned, and second, that the assignability of arbitration agreements is grounded in the assignee's acceptance in the form of non-disclaimer of the assignment.

  4. Assignment of Rights and Agreement to Arbitrate

    I. Effects of Assignments of Contractual Rights on Arbitration Agreements - A Jurisdictional Overview 1. Common Law Countries 1. United States 2. United Kingdom 2. Civil Law Countries 1. Germany 2. Austria 3. Switzerland 4. France 3. International Arbitration Conventions and Institutional Rules 1. New York Convention 2. European Convention 3. ICC Arbitration Rules 4. Conclusion of Section I ...

  5. Assignment Of Rights Agreement: Definition & Sample

    An assignment of rights agreement is a written document in which one party, the assignor, assigns to another party all or part of their rights under an existing contract. The most common example of this would be when someone wants to sell their shares of stock in a company.

  6. PDF What Law Applies to an Agreement to Arbitrate?

    However, the FAA, first enacted in 1925 and restated in 1947, has been held by the US Supreme Court to be a small body of substantive law that applies to all written agreements to arbitrate disputes evidencing a transaction "involving interstate commerce."5 This is far and away the most misunderstood part of the FAA.

  7. Consent to Arbitration: Do we Share a Common Vision?

    Abstract. It is not always proper to equate the right and duty to arbitrate with the notion of consent to arbitration. Although a party's participation in arbitral proceedings will often be based on (at least presumed) consent, it is not always the case. That notwithstanding, an analysis of the approach taken in the leading civil law and common ...

  8. The Arbitration Agreement (Chapter Two)

    Cite Summary FUNCTION AND PURPOSE When parties agree to arbitrate their disputes, they give up the right to have those disputes decided by a national court. Instead, they agree that their disputes will be resolved privately, outside any court system.

  9. The Law Applicable to the Assignment of Claims Subject to an

    When Christian Hausmaninger and I undertook to analyse the issue of assignment and arbitration more than 25 years ago,2 we realized that we could not base our thoughts on much specific literature: While the question of whether an assignee is bound to, or may invoke, an arbitration agreement concluded between the assignor and the debtor, had ...

  10. Explaining Assignments of Arbitration Agreements

    Abstract The case law and literature to date have struggled to locate the rationale for the assignability of arbitration agreements. While different justifications have been proffered, each of them rests on questionable premises. This has given rise to a host of uncertainties over the rules which apply in practice. This paper proposes that a satisfactory rationale can be found in the ...

  11. PDF Non-Signatories and International Arbitration in the United States: the

    assignment agreement to ensure this result is consistent with the parties' intention.(7)This is in contrast to the position in France, where, in the context of international commerce, there is a 'presumption' of 'automatic' transmission of the arbitration agreement as part of the assignment of the contract.(8) b. Incorporation by Reference

  12. Assignment of Rights Agreement: Everything You Need to Know

    An assignment of rights agreement refers to a situation in which one party, known as the assignor, shifts contract rights to another party. The party taking on the rights is known as the assignee. An Assignment of Rights Agreement The following is an example of an assignment of rights agreement.

  13. PDF Joining Nonsignatories to an Arbitration in the US

    investor plaintiffs were compelled to arbitrate because they knowingly exploited the benefits of the engagement agreements by asserting claims against auditors expressly based on those agreements (2020 WL 2844578 at *3 (Sup. Ct. N.Y. Co May 29, 2020)). Based on the plaintiffs' allegations that they were third party beneficiaries of the

  14. Assignments: The Basic Law

    An assignment is the transfer of rights held by one party called the "assignor" to another party called the "assignee." The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment.

  15. Supreme Court decides that assignee is bound by arbitration agreement

    The assignment of rights and obligations stemming from an agreement forms part of everyday business. This issue can become complicated if a transferred claim is covered by an arbitration agreement.

  16. Non-assignment clauses and the transfer of rights to arbitrate

    There is no presumption in English law that transfers of rights by operation of law are exempt from contractual clauses prohibiting the assignment of rights. The important recent case of Dassault Aviation SA v Mitsui Sumitomo Insurance Co Ltd [2022] EWHC 3287 (Comm) established that the relevant distinction is whether the transfer of rights is truly voluntary or involuntary.

  17. Irish High Court rules on effect of an assignment on agreement to arbitrate

    (The 'Jay Bola') [1997] 2 Lloyd's Rep. 279 shows that, as a matter of English law, where contractual rights are assigned, the assignee will usually be bound by any applicable arbitration agreement ...

  18. Equitable Estoppel and the Compulsion of Arbitration

    Despite the promise to arbitrate, oftentimes one party will circumvent an arbitration agreement and turn to the traditional dispute resolution mechanism: litigation. In these situations, the defendant typically brings the arbitration clause to the court's attention, asking the court to compel the plaintiff to arbitrate.

  19. Singapore: Court of Appeal holds reassignment of contract to original

    The assignment of a debt results in an assignment of the right to arbitrate a dispute in relation to that debt. Further, once the right to arbitrate has been assigned, the assignor cannot commence arbitration proceedings. This is because the legal assignment extinguishes the legal cause of action of the assignor against the party liable so that ...

  20. Third Circuit Rules on 'Mind-Bending' Arbitration Question

    The US Court of Appeals for the Third Circuit recently issued a precedential decision on what it called "the mind-bending issue of arbitration about arbitration." Relying on an arbitration agreement between the plaintiff and a third-party lender that delegated questions of arbitrability to an arbitrator, the court permitted the lender's alleged assignee (i.e., the defendant) to compel ...

  21. What is an arbitration agreement?

    By agreeing to arbitrate, you give up certain rights while also gaining some benefits. Understanding the pros and cons ahead of time will help you make a smart decision when you're asked to sign. What is arbitration? Arbitration is a way of resolving a dispute without filing a lawsuit and going to court.

  22. Assignment Of Contractual Rights And Its Impact On Arbitration Agreements

    the assignment shall be absolute and in writing by the assignor and that an express notice shall be given to the other party, i.e. the obligor.18 Under English law, it is a prerequisite of the validity of legal assignments that there is a written assignment agreement; whereas such agreement does not have to be in writing for the validity of

  23. Assignment of Rights and Agreement to Arbitrate

    Assignment of Rights and Agreement to Arbitrate | Exaly Links Official Page Citation Report Assignment of Rights and Agreement to Arbitrate Arbitration International, 1992, 8, 121-166 Similar Articles Quick Tips This is an overview of where and by who this paper has been cited. Help Us Non-profit projects normally ask for donations. We don't.