Contract Basics

Assignment and Delegation of Contracts

How Are Contracts Assigned?

Assignment occurs when a party to a contract transfers their rights and duties under that contract to another person. The assignee steps into the shoes of the original party and can exercise all the rights owed to the original party under the contract.

Assignment is a legal concept where a party to a contract transfers rights, duties, and obligations under the contract to another person, who then becomes a party to the agreement in their place. Unless the contract forbids it, the party can assign the entire agreement or just the benefits due, such as monetary consideration or other payments.

The assignor is the person assigning contractual rights—the terms of the contract. The person stepping into their place is the assignee. The assignee can exercise all the rights owed to the original party under the contract.

Many contracts discuss the issue of assignment. Some contracts may indicate the contract is freely assignable by either party. Some may permit only one party or the other to assign its rights. Other contracts may prohibit assignment by either party. Some contracts may permit assignment only if the other party consents. This provides the other party a chance to investigate or exercise due diligence on the party to whom the assignment is being made.

One example of assignment is a sublease. If a tenant (person living on a property) no longer wishes to lease the property, they may decide to sublease, which means to assign the lease to another person who wants to live in or otherwise use the property. For many tenants, this is a legally safer and more attractive option than breaching the lease. Many apartment rental agreements forbid subletting. In many cases such as this, a landlord would have the right to consent to or reject the assignment.

Sometimes a party's refusal to consent must be deemed reasonable to be enforceable, but typically these terms are spelled out in the contract itself. For example, a contract might say, "This contract may be assigned only with the consent of party X, but such consent may not be unreasonably withheld."

How Are Contracts Delegated?

Delegation transfers a contractual obligation to another person, but, unlike assignment, the original parties to the agreement remain the same. The only thing that changes is that one party has someone else perform an obligation on its behalf.

Unlike assignment, delegation simply transfers a contractual obligation to another person. With delegation, the original parties to the contract stay the same. The only thing that changes is that one party delegates an obligation to someone else.

Delegation is not typically addressed in a contract and is very common. Often, one party does not even know that certain contract items are delegated. It is rare that the delegation of any contract task would ever require the consent of the other party.

However, there are instances where delegation might not be permitted.

  • The delegation cannot materially change the contract. For example, Ramon is well-known for his catering business. If Erin contracts with Ramon to perform a highly specialized task that he is well-known for doing, such as catering a wedding, it would not be appropriate for Ramon to delegate that task to a less skilled party. Delegation would alter the contract in a material way and would deny Erin the benefit of the bargain.
  • Parties generally cannot delegate the repayment of a debt.
  • Delegation is not permitted if the contract specifically prohibits it.

It is important to realize that with delegation, unlike assignment, the party delegating the task remains liable, meaning legally responsible. A person cannot escape liability under a contract just because they delegated a task to someone else.

Both assignment and delegation are typically achieved by creating a separate agreement setting forth what is occurring (assignment or delegation) and any specific conditions related to that action. The separate agreement is between the assignor and assignee or the delegator and delegatee.

Assignment versus Delegation

To protect themselves from lawsuits, business leaders need to understand the differences between assignment (when the original party transfers rights and duties to another) and delegation (when a particular contractual duty is transferred to another party).