This document is an assignment of contract rights clause. It is designed to be inserted into a loan agreement. The defined terms in this clause have the same meaning as those in the precedent called “Basic loan agreement”.
Assignment if contract rights
An assignment is an agreement that transfers one party’s rights in a contract, but not its obligations or liabilities, to a third party.
When advising a party who wishes to assign their rights under a contract to a third party, it is important to:
- have a clear understanding of the laws relating to assignment; and
- review the initial contract to consider whether the Assignor is entitled to assign such rights and if so, whether these assignment rights are unfettered or restricted. For example, in many contracts a party is required to obtain the written consent of the other party in order to assign rights created under the contract.
This precedent sets out simple assignment of contract rights clauses. Note that the assignment of contract rights can be quite complex. In part, this is due to the fact that one assigns rights not obligations. If rights and obligations were to be assigned, then the parties would generally novate the contract. Parties need to consider:
- how the assignee can ensure that the assignor honours its contractual obligations to the other contracting party; or
- whether the assignee will take over these obligations and then indemnify the assignor against any claim by the other contracting party alleging failure to perform such obligations.
Consideration is not necessary in the case of assignment of contract rights. If there is no consideration the instrument recording the assignment will need to be a deed in order to ensure the assignor’s undertakings are enforceable.
- Basic loan agreement
- Guarantee of payment of loan
- General security deed
- Amendment and restatement agreement
- Deed of priority
- Forbearance of debt agreement
- Real property mortgage
- Deed of assignment of debt
- Loan agreement checklist
This document has been authored for Lexis Nexis by Elise Margow, Principal, Legally Speaking.
This document is prepared with the assistance of Specialist Editors Geoff Geha, Partner, Clayton Utz and Karen Lee, Principal and Consultant, Legal Know-How.