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Why Is An Assignment Clause Important?

The document discusses assignment clauses which allow one party to transfer contractual rights and obligations to another party. Assignment clauses are common in supplier contracts and intellectual property agreements. The document outlines why assignment clauses are important for laying out expectations and protecting both parties in the event of a transfer of obligations or rights between entities.

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Sonica Dhankhar
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201 views2 pages

Why Is An Assignment Clause Important?

The document discusses assignment clauses which allow one party to transfer contractual rights and obligations to another party. Assignment clauses are common in supplier contracts and intellectual property agreements. The document outlines why assignment clauses are important for laying out expectations and protecting both parties in the event of a transfer of obligations or rights between entities.

Uploaded by

Sonica Dhankhar
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ASSIGNMENT CLAUSE:

You may have come across an “assignment of contract” clause in a business contract. This type
of clause is common in contracts with suppliers or vendors and in intellectual
property (patent, trademark, and copyright) agreements.

An assignment may be made to anyone, but it is typically to a subsidiary or a successor. A


successor might be a business (Company B) that buys a business (Company A). A subsidiary is a
business owned by another business.

The process of assignment allows one person or business to transfer or assign rights or benefits
or obligations to another person or business.

Before you sign or daft a business contract, you must make sure that if there is an assignment
clause, it is clear and straight-forward. As a responsible business owner or manager, you should
look into adding an assignment clause to your contract.

Not only are assignment clauses extremely useful for businesses. They also serve as a form of
security for customers who might be inconvenienced by a change of hands in the business or
ownership of intellectual property.

Without the existence of an assignment clause, your vendor will be free to execute these
obligations and liability transfers without any limits.  

Why is an assignment clause important?

 Contracts exist to have a well-laid-out document that details how business between two
entities should go about in a business relationship. Having an assignment clause in a
contract is vital for a couple of reasons:
 It lays down clearly the intent of both parties in the business relationship.
 It is vital to a good relationship between two business entities, as it is a show of hands
regarding how they want their businesses to interact when certain circumstances arise.
 It lays down the groundwork to a more transparent and more stable relationship between
the businesses.
 It protects both parties from the uncontrolled transfer of obligations and rights on covered
contracts.
 As mentioned before, the lack of assignment clauses can cause uncontrolled transfers of
contractual obligations and rights from one party to another without consent.
 With the existence of an assignment clause, there will be more orders on such contractual
obligations, and the necessity for such transfer is reviewable, if necessary.
 It makes both parties aware of the contract expectations.
 In contracts, you can detail your expectations for your business and how it will perform
with the help of the other party.
 With the help of an assignment clause, you can start to think about the future and decide
what you want with a company, as well as what you expect should the trigger for an
assignment clause happen.
Final words

As a business owner, you should know assignment clauses to represent the assets and obligations
of your company well. These make or break your relationship with other businesses and give
way for better collaborations between separate business entities.

Of course, some risks come with assignments, so it’s always preferable to tread lightly when it
comes to this part of the contract to make sure it is clear and straight-forward.

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