What is assignment?

Assignment is a transfer of rights from one person to another.

It is trite law that it is, in any event, impossible to assign ‘the contract’ as a whole, i.e. including both burden and benefit. The burden of a contract can never be assigned without the consent of the other party to the contract in which event such consent will give rise to a novation. [Linden Gardens v Lenesta Sludge 1993]

Rights can be freely assigned, unless there are restrictions eg in the assignment clause in your contract (such as the need to get consent, or a restriction on the number of assignments).

Assignees are only allowed to bring the same claims that the original party would be allowed to bring – assignment is stated to be ‘subject to equities’ ie the assignee cannot gain better rights than the party would have had.

What can be assigned?

Under a construction contract, the rights that can be assigned are:

  1. For the employer: the right to receive the works and to sue for defects in those works
  2. For the contractor: the right to be paid.

AKA not very much!

Restrictions on assignment

Under a contract, assignment refers to the transfer of the contractual rights of one party to a person who is not a party to the contract.

The typical restrictions on assignment in a construction contract include:

  • consent: assignment has take place after any required consents are obtained (you can’t just presume consent)
  • timing: assignment may only be permitted up to practical completion of the works
  • number of assignments: the rights under a contract or a collateral warranty may only be assigned a amximum of twice (ie from Party 1 to Assignee 1 and then to Assignee 2)
  • notice: normally notice of the assignment must be given to the other party to the contract (in writing, signed by assignor, absolute only with notice are all required by S136 of the Law of Property Act 1925).

Although assignment clauses prompt much debate with contracts are negotiated, they are in reality a bit of red-herring.

What should you do?

If you do assign, be very careful and read our warning.

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