Is there a standard form for assigning a contract?
QUESTION: A buyer client would like to assign a contract that we have in place. The seller has agreed. In paragraph 15 of the Offer to Purchase and Contract, it states that the contract may not be assigned without the written consent of all parties except in the case of a tax-deferred exchange. Is there a standard form we can use to confirm that the parties have consented to an assignment? If not, why?
ANSWER: There is not a standard form to use when the parties to an existing purchase contract agree to an assignment of that contract. The reason is that an assignment is actually quite complicated from a legal perspective, often because there are three parties involved.
One of the issues that needs to be resolved when a contract is assigned is whether the party whose rights are being assigned (called the assignor) will continue to be liable under the contract if the person to whom the assignor’s rights are being assigned (called the assignee) does not perform. Unless the assignment agreement provides otherwise, the assignor will remain liable for the performance. Assignors should consider including an indemnity provision in the assignment stating that the assignee will indemnify the assignor for any damages the assignor incurs as a result of the assignee’s non-performance.
Assignees should consider requesting, or insisting upon, representations by the assignor that the contract being assigned is in full force and effect, and that the assignor has the legal right to assign the assignor’s contractual rights. Assignees may also want to include a provision stating that the assignee has the right to assign the contract to yet another assignee and indicating whether, in such a case, the assignor’s consent would be required.
The bottom line is that assignments are complex legal transactions. Brokers who receive an inquiry about assigning a real estate contract should never endeavor to draft an assignment. Instead, they should advise their client to consult an attorney about the legal issues involved and to draft the assignment agreement.
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