Assignment clause

Assignment clause determines which rights and responsibilities can be transferred from one party of the contract to another one, they mainly protects against increased risk.

The assignment clause specifies who a new assigned entity can be; also it may provide that a contract may only be attributed to creditor who has almost the same features to the original creditor.

The assignment clause in property insurance policies

In every insurance policy is rooted risk, the risk that the insurer has thoroughly checked everything before insuring the insured. The most important entity that the insurer checks is of course the insured itself. Characteristic of the insured is important in the context of coverage of property by another person but also the attention is paid to life insurance, civil liability and medical insurance. For example, the level of risk shown by the insured is a kind of operation, which leads to the nature of the individual and other relevant factors.

The insurer takes into account whether the risk he gave did not increase through factors such as change of identity or characteristics of the insured. Insurers bear a risk, which they try to prevent by limiting the insured, the ability to transfer coverage rights (under an insurance policy) to another entity or another person. This type of restriction is implemented by including in the policy a sentence that concerns non-transferability or can counteract the change.

The insured's risk and its characteristics determine if the insurer will ensure coverage and in what amount.

Anti-assignment clause

Issues covered by considerations of anti-assignment clause against transfer:

• the applicable law to check whether there are any limits on the anti-department clauses
• conditions should be provided if one party is entitled to assign under certain conditions, it is very important to determine conditions as precisely as possible

Characteristic

It is important to include an appropriate assignment clause that determines who can become new assigned party. The assignment clause may contain information that the contract can be appropriate only for people who are able to participate in HIPC (Heavily Indebted Poor Countries) initiatives or for entities that are members of the Paris club (it is a group of people from creditor countries; their role is to find solutions to monetary problems in countries that are debtors).

As indicated earlier, the assignment clause may provide that the contract may be attributed to a person (creditor) who has almost the same features as the original creditor.

Examples of Assignment clause

• A company may include an assignment clause which states that neither party shall assign any of its rights or obligations under the contract without the prior written consent of the other.
• An assignment clause may also specify that if either party does assign its rights or obligations, it is responsible for any losses suffered by the other party as a result of the assignment.
• A contract may also contain a clause that requires any assignment to be in writing and signed by both parties.
• An assignment clause may also provide that any attempt to assign the contract without the prior written consent of the other party shall be void.
• An assignment clause may also provide that any assignment does not relieve either party from its obligations under the contract.
• An assignment clause may also require the assignee to comply with all the terms and conditions of the contract, as if they were the original party.

Advantages of Assignment clause

An Assignment clause is a useful tool for protecting the rights and responsibilities of the parties involved in a contract. It ensures that any transfer of rights and responsibilities from one party to another does not increase the risk for either party. The following are the main advantages of having an Assignment clause in a contract:

• It allows for the rights and responsibilities set out in the contract to be transferred to another party with the consent of all the parties involved. This can be useful if one of the parties wants out of the contract and wants to transfer their rights and responsibilities to someone else.
• It also helps to protect the parties involved from increased risk. When a contract is assigned, the original parties are no longer liable for any of the obligations or risks, and the new party assumes responsibility for them.
• An Assignment clause can also help to ensure that all of the parties comply with their obligations, as any breach of the contract by one party can be transferred to the other party without the need to renegotiate the contract.
• Finally, it can help to ensure that the parties to the contract are aware of any changes that are being made and that all parties are in agreement with the changes.

Limitations of Assignment clause

An Assignment clause is an important part of the contract that determines which rights and responsibilities can be transferred from one party of the contract to another. However, there are certain limitations to this clause that can limit its effectiveness. These include:

• It is important to specify the exact conditions under which a party can be assigned to another party, otherwise it can be difficult to enforce.
• The clause may not be binding on third parties, as they may not be aware of it.
• It is important to ensure that the assignment does not increase the risk of the other party, as this may not be covered by the clause.
• The clause should not be used to assign contractual obligations that are not intended to be assigned.
• The clause may not be legally enforceable in certain jurisdictions, depending on the laws of the country.
• The clause may not be applicable in certain circumstances, such as when the parties are in different countries.
• The clause may not be able to address certain issues, such as termination of the contract or changes in the terms and conditions.

Other approaches related to Assignment clause

An Assignment clause is only one of the approaches that can be taken in order to protect against increased risk in a contract. Other approaches include:

• Subrogation Clause - This clause specifies that in the event of a dispute, any party involved in the contract must take over the rights and obligations of another party. This clause typically includes a limitation on the amount of liability that can be transferred.
• Indemnification Clause - This clause requires one party to reimburse another for any losses or damages caused by any breach of contract. This clause typically includes a limitation on the amount of damages that can be recovered.
• Limitation of Liability Clause - This clause limits the amount of damages that any party can be held liable for in the event of a breach of contract.
• Choice of Law Clause - This clause specifies which law will be used to interpret and enforce the contract. This clause helps to ensure that any disputes are resolved according to the laws of the jurisdiction specified in the clause.

In conclusion, there are a variety of approaches that can be taken to protect against increased risk in a contract. An Assignment clause is only one of these approaches, and it should be used in conjunction with other clauses in order to ensure that all parties are adequately protected.

Footnotes

Assignment clause — recommended articles

Discharge of contract — Dual insurance — First party insurance — Retroactive date — Assignment of claims — Loss Payee — Contractual relationship — Binding contract — Indemnity principle

References

• Adams C. M. and others (2014) Drafting Contracts in Legal English: Cross-border Agreements Governed by U.S. Law, Wolters Kluwer Law & Business, p. 295-296
• Colinvaux C. M. and others (2010)The Assignment Clause in First-Party Property Insurance Policies., vol 39, p. 1-2
• Sigman H. C. and others (2009) Cross-border Security Over Receivables, Sellier. European law publisher, p. 165
• Sookun D. (2010) Stop Vulture Fund Lawsuits: A Handbook, Commonwealth Secretariat, p. 75.

Author: Monika Sojka