Contractual Provision Limiting or Prohibiting Assignment

Generally, provisions in bilateral contracts that forbid or restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment.   However, the restriction of the power to assign is ineffective unless the restriction is expressly and precisely stated.  Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition.   Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Unless circumstances indicate the contrary, a contract term prohibiting assignment of “the contract” bars only the delegation to an assignee of the performance by the assignor of a duty or condition.  A contract term prohibiting assignment of rights under the contract, unless a different intention is manifested, gives the obligor a right to damages for breach of the terms forbidding assignment but does not render the assignment ineffective.[i]

If a party attempts to assign contractual rights but does not do so in conformance with the contractual terms, the assignment is valid if the contract rights assigned will not be affected by a change in the personal character of the party holding those rights.  If the contract does not expressly state that an assignment shall be void or invalid if not made in specified way, an assignment contrary to an anti-assignment clause is effective and the objecting party merely has a right to damages for the assignor’s breach.

A prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary.  Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment.  The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment.

[i], Inc. v. Cross Country Bank, 2003 Del. Super. LEXIS 112 (Del. Super. Ct. Apr. 2, 2003)

Inside Contractual Provision Limiting or Prohibiting Assignment