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Letters Assigning Contracts are used to transfer the benefits of a contract from one party (ie the ‘assignor’) to a new party (ie the ‘assignee’). This is called assigning a contract. A Letter Assigning a Contract can be used to form a new legally binding contract that transfers the benefits of the original contract whilst leaving the rest of the original contract, including the obligations under it, as is.
Use this Letter Assigning a Contract:
to transfer your (ie the assignor’s) rights, benefits, title, and interests in a contract to another party (ie the assignee)
when there are no changes to the terms of the contract
for businesses based in England, Wales, or Scotland only
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Dear Sirs/Madams,
Re: Assignment of the rights under contract:
Introduction
Date of Assignment
Parties
Assignment
Indemnity
On-Going Assistance
Law and Jurisdiction
This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.
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Transfer your obligations under a contract to someone else
Terminate a business contract
Delegate part of your work or obligations to a subcontractor
Notify your employee of changes to their employment terms
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This Letter Assigning a Contract template covers:
a transfer of all of the rights and benefits under the contract from the assignor to the assignee
specification of what the benefits are that are being assigned
an indemnity (or guarantee) from the assignee, promising to cover the costs of any losses the assignor suffers due to problems the assignee causes
an agreement by both parties to help each other to implement the transfer
If one person or business no longer needs to receive the benefits of a contract and they’ve agreed to transfer these benefits to another party who does require them, the parties should formally set out their arrangement using a Letter Assigning a Contract. This can occur, for example, as part of an Asset purchase agreement. Letters Assigning Contracts set out a legally binding basis for the assignment to protect both parties and help ensure a straightforward transfer of rights and benefits from one party to the other. For more information, read Assigning a contract.
The assignor is the party assigning their benefits under a contract to another business or person. The assignee is the new party to the contract, who replaces the assignor. Note that the other party to the original contract remains the same.
An assignment of contract only transfers the assignor’s benefits under a contract, not the obligations of the assignor.
In practice, Letters Assigning Contracts usually contain subcontracting clauses in which the assignor subcontracts their obligations under the contract to the assignee. This means that a separate contractual obligation is formed, requiring the assignee to do whatever the assignor is required to do to perform their obligations under the main contract. However, the assignor will still hold their obligations to the other original party under the original contract. So, if the assignee doesn’t perform the obligations, it is still the assignor that’s liable to the other original party of the main contract (ie if that party makes a legal claim based on a failure to perform, it will be against the assignor). The assignor could then in turn make a claim against the assignee in reliance on the subcontracting clause in the Letter Assigning a Contract - but there’s always a chance that this could be time-consuming, expensive, and possibly unsuccessful. Or, the assignor may use an indemnity contained in their contract for assignment to claim the costs of any claims against them that are the assignee’s fault. This Letter Assigning a Contract template includes such a subcontracting clause and related indemnity.
As opposed to a Novation agreement - which transfers both the benefits and the obligations of a contract to a new party - an assignment does not transfer the burden of (ie obligations under) a contract. This means that the assignor remains liable for any liabilities incurred due to a breach of their obligations under the contract.
You can include an indemnity in your Letter Assigning a Contract, by which the assignee promises to pay the costs of any losses suffered by the assignor related to the contract that are the assignee’s fault.
The assignment date is the date on which the assignment of the contract will take place (ie on which the benefits under the contract will be transferred). Ideally, this should be a date in the future, to give time for the Letter to be signed by both parties first.
When you want to assign your benefits under a contract, you should first check to see if the contract you wish to assign:
prevents any assignments
allows an assignment but only by agreement between the parties (eg with written permission from the remaining party or parties), or
allows either party to assign to any new party whenever they wish
If the contract imposes restrictions on assignment, make sure you follow them by, for example, obtaining written permission before making a Letter Assigning a Contract.
You should first make your Letter Assigning a Contract and ensure both the assignor and assignee sign it (following the correct formalities required to execute it as a deed). This may involve one party signing two or more copies before sending them to the other party, who then signs all copies.
Then, the Letter should be sent to all existing parties to the contract (ie the remaining party to the original contract). Stakeholders, such as banks or customers, should also be notified of the change.
Making your Letter Assigning a Contract online is simple. Just answer a few questions and Rocket Lawyer will build your document for you. When you have all the information about the contract and your assignment prepared in advance, creating your document is a quick and easy process.
You’ll need the following information:
The assignor and the assignee
What are the assignor’s (ie the party giving up their benefits under the contract’s) name, address, and legal structure? If it’s a company, what is its company number?
If the assignor is a company or a partnership, how will it sign the Letter? You must choose one of the viable methods of signing (ie executing) a deed (eg by 2 company directors or all partnership members signing). You will need the names of all individuals who will sign.
What are the name, address, and legal structure of the assignee (ie the party taking on the contract’s benefits)? If it’s a company, what is its company number?
If the assignee is a company or a partnership, how will it sign the Letter (ie the deed)?
The contract
What is the contract name or reference (ie how will you identify the contract to which the Letter applies)?
On which date was the contract signed?
Who is the other party to the contract (ie the party with whom the assignor formed the original contract)?
What is the contract for (eg what type of goods or services)?
What is the assignment date (ie the date on which you want the benefits under the contract to be transferred from to the assignee)?
The Letter
On which date will the Letter be sent (from the assignor to the assignee)?
What is your correspondence reference for this Letter (ie the number, code, or phrase by which this Letter can be identified in future communications)?
If the assignee is a company or a partnership, is the Letter being addressed to the recipient’s managing director, a specific person that the contract specifies is to receive notices, or another person (ie job title)?
If the assignor or the assignee is based in Scotland, will the contract be governed by the laws of England and Wales or the laws of Scotland?
Letters Assigning Contracts set out how the benefits of a contract are being transferred from one party to another. To do this, this Letter Assigning a Contract template includes the following terms and sections:
Names, addresses, date and reference
The Letter begins with a traditional letter structure, which clearly sets out the sender and the recipient of the Letter (ie the assignor and the assignee), their addresses, and the date of the Letter. The reference number or code that the parties can use to identify this Letter is also set out here.
Re: Assignment of the rights under the contract…
Next, the contract that is being assigned is identified via a reference (eg a number or code).
Introduction
The basic facts are set out here. For instance, the assignor and other original party to the original contract are identified and the contract’s date and purpose are set out.
The purpose of the Letter - setting out the terms of an assignment - is then highlighted. The assignee (ie the recipient of the Letter) is asked to sign the Letter as a deed and to return it to the assignor within 7 business days.
Date of assignment
This section states the date on which the assignment is to take place.
Parties
The assignor and the assignee are identified here as the parties to this contract for assignment (ie the contract contained in the Letter).
Assignment
It’s clarified here exactly what is being assigned, ie the assignor’s rights, title, interest, and benefit in and to the original contract.
This section also contains a contractual promise by the assignee to perform all of the assignor’s obligations under the original contract (eg by providing services or payment). This acts as a subcontracting clause. See the FAQ ‘What happens to the assignor’s obligations under the contract?’ for more information.
Indemnity
Here the assignee provides an indemnity for the assignor, promising to cover the costs of any losses the assignor incurs in relation to the original contract after the assignment has taken place, which occur due to the assignee’s failure to perform the assignor’s obligations under the original contract which the assignee has promised to take on. The assignee also commits to assisting the assignor with any legal claims arising relevant to the contract after the assignment, regardless of whether they arise due to the assignee’s fault.
On-going assistance
In this section, both parties promise to do anything necessary to give this deed (ie the assignment) full effect. For example, executing any other necessary documents.
Law and jurisdiction
This section sets out which country’s legal system must be used to resolve any disputes (ie the contract of assignment’s jurisdiction). This is necessary as the legal systems of England and Wales and of Scotland are different.
This document has been executed as a deed…
This text clarifies that the document is being signed as a deed, which is one of the legal requirements for the execution of a deed. It is followed by spaces for all necessary individuals to sign on behalf of both the assignee and the assignor. For more information on how to execute (ie sign) your Letter, read Execution of deeds and the Make it legal checklist for this document.
If you want your Letter Assigning a Contract to include further or more detailed provisions, you can edit your document. However, if you do this, you may want a lawyer to review the document for you (or to make the changes for you) to make sure that your modified Letter complies with all relevant laws. Use Rocket Lawyer’s Ask a lawyer service for assistance.
Remember that the assignor is still liable to the other original party to the contract
Assigning a contract only transfers the benefits that the assignor holds under the contract. Even if the assignor subcontracts their obligations to the assignee too, the assignor remains liable to the other original party to the contract after the assignment (ie if the assignee doesn’t perform their obligations under the contract, the original party can make a legal claim against the assignor relevant to this default). The risk held by the assignor due to this is mitigated by the indemnity contained in this Letter, but it’s still important to be aware of your business’ exposure to potential legal claims.
Consider alternative options if you no longer want to be party to a contract
If you no longer want to be involved in a contract that you’re a party of (eg if you no longer need to receive certain goods or services), consider other options that may fit your situation better than assigning your benefits under the contract. For example, consider:
novating the contract using a Novation agreement - to end one party’s benefits and burdens under a contract whilst creating a new, otherwise identical contract with a new party. This could be helpful if, for example, you’re selling the part of your business that deals with the relevant goods or service provision
ending the contract using a Letter ending a contract - if there is no need for the contract to exist any more or if the other party to the contract has breached their obligations under it (eg by providing services to a standard that’s below specification)
varying the contract - agreeing on changes to the original contract so that the contractual relationship can be continued on different terms (eg if you want to continue receiving services or goods but feel it’s commercially reasonable to negotiate lower prices to be paid in exchange)
Understand when to seek advice from a lawyer
In some circumstances, it’s good practice to Ask a lawyer for advice to ensure that you’re complying with the law and that you are well protected from risks. You should consider asking for advice if:
there is no written contract in place (eg you want to transfer benefits under a verbal agreement)
you need to make changes to the terms of the contract to be transferred (you will generally need a new contract)
you want to create a contract that all three parties are involved in (ie the assignor, assignee, and the other original party)
