Successors and assigns generally: Overview, definition, and example
What are successors and assigns?
Successors and assigns are terms used in contracts to refer to the parties who may assume or transfer rights and obligations under the agreement.
- Successors refer to individuals or entities that take over the rights and obligations of a party to the contract after that party has passed, sold its business, merged with another entity, or in any other way transferred its ownership or responsibilities. Successors are typically bound by the same terms and conditions as the original party.
- Assigns refer to parties to whom rights or obligations under the contract are transferred. For example, if one party to a contract assigns its rights to another party, the assignee takes over those rights and responsibilities. The assignor, however, may still remain liable under the agreement unless specified otherwise.
Together, successors and assigns ensure that the contract remains binding on any future parties who step into the original party's shoes, whether through inheritance, sale, or other legal transfer.
Why are successors and assigns important?
The successors and assigns clause is important because it establishes the continuity of obligations and rights under a contract, even if one of the original parties is no longer able to fulfill their duties. It provides clarity about who will be responsible for upholding the contract’s terms in the event of a change in ownership, restructuring, or a transfer of rights.
For businesses, this provision helps maintain the enforceability of contracts during transitions, such as mergers or acquisitions. For individuals, it ensures that their rights under the contract will be passed on to a successor or assignee if necessary, preserving their interests.
Understanding successors and assigns through an example
Imagine a company that enters into a contract with a supplier for the delivery of raw materials over a period of several years. If the company is acquired by another business, the new company, as a successor, will take over the obligations of the original company under the contract. The contract may also allow the original company to assign its rights to another company that handles its logistics, meaning that the assignee would now be responsible for receiving and distributing the materials.
In another example, a real estate lease agreement may contain a successors and assigns clause that allows the tenant to assign the lease to another party. If the tenant sells their business and the new owner takes over the lease, the new tenant (the assignee) would be responsible for paying rent and adhering to the terms of the lease, while the original tenant may remain liable unless the lease agreement specifically releases them.
An example of a successors and assigns clause
Here’s how a successors and assigns clause might look in a contract:
“This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns. Neither Party may assign or transfer its rights or obligations under this Agreement without the prior written consent of the other Party, except in the case of a merger, acquisition, or sale of substantially all assets, in which case the rights and obligations of the assigning Party shall automatically transfer to its successor or assignee.”
Conclusion
The successors and assigns provision is a key part of many contracts, ensuring that the terms and obligations are upheld even when one of the parties changes due to sale, transfer, or restructuring. By including this clause, businesses and individuals can ensure that their rights and responsibilities under the contract remain intact and enforceable, regardless of who assumes or inherits the contract’s obligations. This clause helps provide continuity and security in long-term agreements and transactions.
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.