An assignment is the process of transferring responsibility and accountability.[i] Delegation is the process by which responsibility and authority for performing a task or activity is transferred to another person. The consent of the third party contracting is not necessary in an assignment.[ii] In contrast, in delegation, the person to whom the task is transferred must accept that authority and responsibility.[iii] Assignment is related to the rights under a contract. However, “an obligor’s empowering of another to perform the obligor’s duty is known as a delegation of the performance of that duty.”[iv] Therefore, in Midland Mut. Life Ins. Co. v. Mercy Clinics, 579 N.W.2d 823, 833 (Iowa 1998), the court held that duties or liabilities under the contract were not assigned but delegated.
The terms assignment and delegation can be used interchangeably when not dealing with the consequences.[v] The consequences of assignment and delegation are different. The consequences of assignment include:
- Assignee has the right to sue the obligor;
- Obligor has same defenses against assignee as those against assignor;
- Payment by obligor to assignor is effective until obligor knows of the assignment; and
- Modification agreement between obligor and assignor is also effective if obligor did not know of assignment.
The consequences of delegation include:
- Liability of delegating party; and
- “Delegatee is liable to Obligee only if he receives consideration from delegating party.”[vi]
However, where both rights and duties are transferred, then the transaction can be deemed an “assignment” of the contract.
[iv] Midland Mut. Life Ins. Co. v. Mercy Clinics, 579 N.W.2d 823, 833 (Iowa 1998)