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How Contract Assignment Works

Lately the media have re-labeled a very common practice called "Contract Assignments" and I would like to bring bit of light into this matter.

 

What is an assignment of a contract:
An assignment of contract occurs when one party to an existing contract (the "assignor") hands off the contract's obligations and benefits to another party (the "assignee"). Ideally, the assignor wants the assignee to step into his shoes and assume all of his contractual obligations and rights. In order to do that, the other party to the contract must be properly notified.

How Assignments Work:

How an assignment of contract plays out depends on many factors, especially the language of the contract. Some contracts may contain a clause prohibiting assignment; other contracts may require the other party to consent to the assignment.

Here's an example of a basic assignment of a contract:
Tom has a firm contract on the purchase of a townhouse but due to some new financial obligations he doesn't think he can complete on the purchase. His brother John steps in and for $1.00 assumes all the obligations of the contract and buys the property. 

It is important to note that in this case an assignment didn't relieve Tom from liability. If John couldn't complete on the purchase Tom would be liable.

In a hot market, assignment of contracts is often executed for a much larger sum of money then $1.00 but the principal and legality is the same (if properly executed).


If you have a question on this write me an email or consult with your lawyer/ notary.

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