What is a contractual assignment?

An assignment is the transfer of a right from one person to another. The benefit of a contract is a right and, in principle, can be freely assigned by the benefiting party. The burden of a contract cannot be assigned, although in practice the parties often act as though it can be, particularly in relation to ongoing arrangements where the assignee takes over the performance of the contract from the assignor. 

After assignment, the assignee is entitled to the benefit of the contract and to bring proceedings against the other contracting party to enforce its rights. Because assignment only transfers existing rights and does not create new ones, the assignee cannot enforce rights that the assignor did not have (this can lead to problems for the assignee). Because the burden of a contract cannot be assigned, the assignor remains liable post assignment to perform any part of the contract that has still to be fulfilled. In practice, the assignee will assume the performance of the contract with effect from assignment and the assignor will generally ask to be indemnified against any breach or failure to perform by the assignee. The assignor will remain liable for any past liabilities incurred before the assignment. 

Assignment is commonly used in business sales or intra-group reorganisations that are structured as a business sale, when the benefit of the businesses contracts need to be transferred to the buyer. A business or individual may also on occasion want to transfer the benefit of a single contract to a third party. The perceived benefit of assignment over other forms of transfer is that, in principle, a party may assign the benefit of an agreement to a third party without the other contracting party's consent, and give notice of assignment only after the event. However, in practice, this benefit is subject to limits.

The major limitation of assignment is that parties want to transfer both the rights and the obligations under the contract, and, as stated, the burden of a contract cannot be assigned. As a result, parties looking for absolute certainty will opt for a formal novation, which transfers a contract outright.