Q&As

Can a party to a contract transfer its rights and/or obligations under it to a third party when the contract is silent on that point? Does a Contracts (Rights of Third Parties) Act 1999 clause affect that position?

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Published on LexisPSL on 17/04/2018

The following Commercial Q&A provides comprehensive and up to date legal information covering:

  • Can a party to a contract transfer its rights and/or obligations under it to a third party when the contract is silent on that point? Does a Contracts (Rights of Third Parties) Act 1999 clause affect that position?
  • Assignment for the transfer of rights under a contract
  • Novation for the transfer of obligations (and rights) under a contract
  • Contracts (Rights of Third Parties) Act 1999

Assignment for the transfer of rights under a contract

An assignment is ‘an immediate transfer of an existing proprietary right, vested or contingent from one party to another’.

Assignments can be effected either:

  1. by consent—either by way of gift or for consideration, or

  2. by operation of law—when they can occur during life or on death

A contract may contain an express provision permitting the assignment of rights. Where a contract expressly permits the assignment of rights under it, it may also provide conditions for effecting that assignment (see: Assignment clause). Assignment provisions are interpreted strictly. If an agreement permits assignment subject to the prior written consent of the other party, lack of that consent will render an attempted assignment invalid.

An assignment will fail if it is expressly prohibited in the contract.

The default position is therefore, in the absence of an express provision either prohibiting or conditionalising it, that the benefit under a contract can be assigned.

There are certain exceptions and additiona

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