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.
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.