Non-assignability: Overview, definition, and example
What is non-assignability?
Non-assignability refers to a contract provision that prevents one or both parties from transferring their rights or obligations under the agreement to a third party without prior consent. This clause ensures that the original parties maintain control over the agreement and protects against unexpected changes that could arise if obligations or benefits are assigned to someone else.
For example, a service provider might include a non-assignability clause in a contract to prevent the client from transferring their service agreement to another company without approval.
Why is non-assignability important?
Non-assignability is important because it preserves the original intent of the agreement and ensures that both parties can rely on the other’s specific qualifications, performance, or obligations. Without this clause, one party might assign the contract to a third party who may lack the necessary resources or expertise to fulfill the agreement, creating risks and uncertainties.
For SMBs, a non-assignability clause protects against unwanted changes in business relationships, ensuring that the agreement remains with the trusted parties originally involved.
Understanding non-assignability through an example
Imagine a small business hires a graphic designer to create a brand logo. The contract includes a non-assignability clause, meaning the designer cannot transfer their obligations to another designer without the client’s consent. This ensures the client receives the agreed-upon quality and style of work.
In another scenario, a software vendor signs a licensing agreement with a retail company. The contract states that the license is non-assignable, preventing the retailer from transferring the license to another company without the vendor’s approval. This protects the vendor from unauthorized use of their software.
An example of a non-assignability clause
Here’s how a non-assignability clause might appear in a contract:
“Neither this Agreement nor any of the rights or obligations hereunder may be assigned or transferred by either Party without the prior written consent of the other Party. Any attempted assignment without such consent shall be void and of no effect.”
Conclusion
A non-assignability clause ensures that contractual rights and obligations cannot be transferred to third parties without consent, maintaining the integrity of the original agreement. It protects businesses from unexpected changes and ensures that both parties fulfill their agreed responsibilities.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.