Assignment of Contract
Definition
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
Example
An investor enters into a purchase agreement to buy a property for $200,000. Before closing, the investor assigns the contract to another buyer for $215,000, pocketing the $15,000 difference as an assignment fee. The new buyer closes directly with the original seller at $200,000.
Exam Tip
The critical exam distinction is between assignment and novation. In an assignment, the original party (assignor) remains secondarily liable. In a novation, the original party is completely released. Remember: all contract rights are assignable unless the contract specifically prohibits it or the obligations are personal in nature.
Related Contracts Terms
Purchase Agreement / Sales Contract
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Offer and Acceptance
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
Counteroffer
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Consideration
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Earnest Money Deposit
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Contingencies
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Frequently Asked Questions
Test Your Contracts Knowledge
Practice with exam-style questions to make sure you can apply Assignment of Contract and other contracts concepts.