"assigning Contract" - What Does It Mean?

[JungleBiker]

Are there any legal eagles here could kindly explain to me in plain English what does the following contract term mean?

"This contract may be assigned by either party to the assignee or transferee of the assigning party’s entire business or such part of the party’s business that has responsibility for performance under this contract. Such assignment shall not require the prior consent of the other party. No other assignments of this contract are permitted without the prior written consent of the non-assigning party, which consent shall not be unreasonably withheld."

I understand some of it, but I am not sure who are the assignee or transferee in this case; could it be an employee of my company? Many thanks.

[backflip]

Essentially, the contract can be given (traded, sold, bartered) to someone else by either you, or the other party. For example, you bought a car, and you promise to pay the bank $x for $y months. The bank might, for example, decide to get out of the auto loan business, and "assign" (sell, probably) the contract to another bank. You then owe the new bank the money. On the other hand, you decide to trade the new car for a piece of land owned by your next door neighbor, and you "assign" (trade) the contract for the land. Your next door neighbor then owes the money to the bank.

[ProThaiExpat]

I find the contract language in the OP somewhat vague, when it begins to speak of "no other assignments".

The basic assignment language permits any transfer or assignment of the rights and obligations under the contract to a 3rd party.

This is a highly dangerous provision as it would permit the original contracting party, who has been vetted or who has undergone "due diligence" scrutiny, presumably OP's company, to escape his legal obligation under the contract by merely assigning it to a shell entity or irresponsible party.

Few good lawyers would permit their clients to permit unrestricted assignment of obligations in a contract for the stated reasons. Usually, consent of the other contracting party is required to forestall assignment to escape an obligation.

Banks and lenders certainly use very strong language regarding non-assignment and usually call for an immediate "acceleration" of installment payments if an assignment occurs.

Landlords likewise forbid unlimited assignment to avoid undesirable tenants.

I would almost venture a guess that the language in the OP is two conflicting assignment paragraphs joined together by a novice.

Since the first assignment language speaks of an unlimited ability to assign "entire business or such part of the party’s business that has responsibility for performance under this contract"

what other rights or duties remain that cannot be assigned under this language?"No other assignments of this contract are permitted without the prior written consent of the non-assigning party, which consent shall not be unreasonably withheld."

Since there are no restrictions on who the assignee can be, it could be anyone under these contract provisions as drafted.

Thus if OP's question is "Can I assign an existing contract between my company and a 3rd party to an employee of my company?" the answer is yes, under the unlimited right of assignment provision provided.

One of the ambiguities is the use of the word "performance". Since providing a product or service is performance or the payment of monies is likewise "performance" under a financial contract, what was intended by breaking this issue out of the general permission to assign given.

Perhaps, the drafter in-artfully intended to refer to an assignment to a sub-contractor to perform the actual work while the original contracting party collected the money for the work. This would of course be permitted under the language, however, more specificity would be desirable if such was contemplated. The intent of the contracting parties, if provable by parole evidence (evidence outside the language of the contract itself) can be used if contractual language is ambiguous.

OP can PM me if further clarification is needed.

[JungleBiker]

Many thanks backflip for clarifying the general meaning of contract assignment and many thanks ProThaiExpat for trying to make sense of the term as used in this particular contract.

I also felt the two parts were contradictory with (it seems to me) no need for prior consent on the one hand and the need for prior consent on the other. I think your guess that a novice has pasted together two paragraphs could be right; in this case I think the novice is a non-native English speaker.

To give you some background, I am making a contract with a customer. My supplier in a neighboring country that has links with a top law school gave me a contract they have used so that I could model my contract on theirs. So I just inserted what I thought was boilerplate legal terms into my draft contract and then I let my customer make comments, but he couldn’t make sense of this term and neither could I!

There is one more term that neither of us really understands:

“Survival. Immediately upon the termination or expiration of this Agreement all the buyers’ rights under this Agreement shall terminate; provided, however, the buyers’ obligations that have accrued prior to the effective date of termination or expiration of this Agreement.”

My customer thought that survival referred to the two contract parties (!) but I did a quick a google and found that survival referred to the terms of the contract. However, besides not understanding the implications in this particular case, it seems to me that the last part of the paragraph is missing a few words from the end, so I reckon the whole paragraph is kind of meaningless. What do you make of it ProThaiExpert?

Thanks again.

JB.

Edited May 28, 2007 by JungleBiker

[backflip]

Since you are posting in a Thai-related forum, I'll assume that you are dealing within Thailand, and the contract will be executed in Thailand. I'm not familiar with Thai contract law. I do have some knowledge of US contract law, and I'll try to provide some help. The fact that you needed to "google" what a contract means is an indication that it might be ambiguous. In the US, a contract is construed against the drawer of the contract, although it is signed by both parties. So, if the parties end up in court, and the court finds that the contract is ambiguous, the court will rule against the party that drew up the contract. My advice, draw up the contract as plainly and clearly as possible. Too, if you use the services of an attorney, check to see if (s)he has "E+O" (errors and omission) insurance.

[ProThaiExpat]

JB: Your right. The quoted paragraph is not complete and your google search did clue you to the fact that this area of the contract is speaking to the survivability of rights after expiration of the contract, not survivability of the parties.

It is a good negotiating technique to draw up a contract and then submit it to the other party for revisions. Lawyers often put "red herrings" into perfectly good contracts just so the other lawyer can make changes that make him look good to his client. The submitting lawyer expects the "red herring" to be rejected and thus the "good part" of the contract drafted is left alone.

Keep in mind that contracts are often not worth the "paper they are printed on", since enforcement is problematic in many jurisdictions. I would be loathe to represent a client in a south east Asian country's court over a contract in English, especially if the other party was a native of the court's jurisdiction.

As to the general purpose of the paragraph in question, it attempts to address issues regarding what should be done if the contract expires pursuant to its term but work remains undone, payments unmade, etc.

Keep in mind that another important ambiguity exists in this paragraph. "Expiration" refers to the date specified in the "term" paragraph of the contract as to when it is to end, while "Termination" refers to the contract being canceled before its "expiration" for any number of reasons, including by mutual agreement. Thus, another serious defect in the wording as it now stands.

PM me if you want more.

[JungleBiker]

Hi ProThaiExat and backflip,

Thanks to you both again for your help. Actually I am off to Vietnam in a couple of hours to meet with the people who sent me the "model" contract, so later today I'll have a chance to quiz them about the contract terms. My guess is that they don't understand them either and yet they told me they had had input from one of the leading law schools in the USA! I'll be back by the weekend and I'll let you know what they say!

Cheers,

JB.

[ProThaiExpat]

Perhaps a student at a leading law school who has yet to take contracts, although it is a first year subject.

Find out what law school they are in contact with and who at the law school is providing them the language. Just curious. Perhaps a janitor that is fishing the language from a refuse bin!!!

[Carmine6]

My read on the intent of the first term is that it is trying to allow a company to assign the contract to a legally separate but related entity. So for example, if the manufacturing operation were a wholly owned operation with the same management, you could assign the contract to that entity. Or perhaps a subcontracted employee.

But it's either been butchered, or perhaps "assignee" and "transferee" were specifically defined in the original document.

I don't think I'd leave that term in as boilerplate even if properly rewritten. If you need it, specify who it can be assigned to without prior approval. Otherwise you could be stuck having to sell to someone you don't want to do business with.

[sbkk]

Hi JB

Before one party can assign the contract, the other party needs to provide its prior written consent - there is one exception: If a party has transferred its business to a third party, it can assign the contract to that third party without the need to obtain consent.

This allows assignment of the contract as part of a business sale, but otherwise consent is required.

Good luck in Vietnam.

[kratindaeng]

"assigning contract" - What Does it mean?

Hmmm maybe it just means, "ass signing contract" like many contracts here in Thailand?

I apoligise! sorry