Particular Kinds of Rights and Contracts

Generally, all ordinary business contracts are assignable.  However, executory contracts for personal services or those involving a relationship of confidence are not assignable by either party.[i]  Nevertheless, such contracts are assignable if the contract so provides, the other party consents to or ratifies the assignment, or the assignment would not change the nature of the performance or the obligation.

The general rule is that prospective rights may not be assigned.  Therefore, an assignment of rights expected to arise under a contract not yet formed or executed is ineffective to transfer these prospective rights.  However, if the contract is in existence at the time of the assignment, rights expected to arise in the future under the contract and which are not otherwise nonassignable may be effectively assigned. The assignment of an anticipated future right under an executory contract is operative even against assignees.

Generally, an employee’s covenant not to compete is assignable if one business is transferred to another or in a merger that does not constitute an assignment of a covenant not to compete.  A covenant not to compete is assignable if it is enforceable by a successor to the employer and where the assignment does not create an added burden of employment or another disadvantage to the employee.

Likewise, an option generally may be assigned by the option holder, in the absence of a specific restriction to the contrary.  However, an option should contain the appropriate words to effect assignment, such as an option running to person x and his or her “heirs or assigns.”  An option should be framed so as to limit its exercise to the holder of the option, just like when it is given to a person named, “but no other person.”

[i] Atlantic & N. C. R. Co. v. Atlantic & N. C. Co., 147 N.C. 368 (N.C. 1908)


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