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Warner Angle Hallam Jackson & Formanek PLC


Business Law

Non-Assignability Provisions in Contracts Can Protect You from Unexpected Service or Product Providers

Virtually every individual and business enters into contracts for goods or services. Some of you are subsequently surprised to learn that your contract has been assigned to another provider and that a different party is providing the goods or services under your contract. Oftentimes a business is sold or it merges with another business and a different business takes over the contract with you. Unfortunately, sometimes the goods or services are not as good as the original provider, the relationship may not be as strong, and numerous other tangible and intangible differences may exist.

For example, a property owner might enter into a waste removal contract with a waste removal firm with which it had good experiences in the past. A year later, the property owner observes different waste removal trucks providing the service. Only then does he learn that the original company was sold or otherwise acquired and that the contract was assigned to the new provider with the new company taking over the contract. To add more insult to injury, the new company that is servicing the property might have been one of the companies whose bid you rejected based on poor past performance, a bad reputation, or a number of other reasons. While various legal arguments can potentially be raised when an assignment occurs, you may be able to avoid such incidents from occurring by taking some simple, prudent acts at the time of entering into the contract.

Generally, a contract can be assigned by one party to another party unless the contract expressly prohibits such an assignment. Thus, inserting a simple provision into a contract, prohibiting the contract from being "assigned" without your written consent, may prevent such a problem from occurring. As a precaution, when entering into any contract of a substantial nature or duration, you would be well advised to have legal counsel examine the contract. As the old adage wisely advises, "An ounce of prevention is worth a pound of cure."

This article was originally published in 2008.


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