The unresolved dilemma— Can I assign/delegate the contract?

I present a solution better than the typical ‘successors, heirs, assigns clause’.

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Every contract creates specific rights and obligations for the contracting parties. In some cases, a contracting party is competent to transfer those rights and obligations to someone else.

1. When a contracting party transfers contractual rights to another, she is said to assign the contract.
2. When a contracting party transfers contractual obligations to another, she is said to delegate the contract.

The effect of each is:

1. If I assign a contract to you, you become entitled to the benefits I was previously entitled to under that contract. I’m the assignor, and you’re the assign.
2. If I delegate a contract to you, you become bound by the obligations I was previously bound by under that contract. I’m the delegator, and you’re the delegate.

Can I assign/delegate it?

Not all contracts can are capable of being assigned or delegated.

1. Contracts which can be assigned are known as assignable contracts.
2. Contracts which can be delegated are known as delegable contracts.

From a legal standpoint, determining the assignability or delegability of a contract is a two-step process:

1. Does the law allow it?— Some contractual rights cannot be assigned, and some contractual obligations cannot be delegated — the law prohibits it. Hence, the first step is to determine whether the assignment of the right, or the delegation of the obligation, in question is prohibited by the law.
2. Do the contracting parties intend to allow it?— If the law theoretically allows assignment or delegation of the right or obligation in question, the next step is to look at the intention of the contracting parties. Do the parties intend the contract to be, assignable or delegable? Whatever the parties intend, the law will give effect to.

If the answer to both of these questions is ‘yes’, then the contractual right in question is assignable, or the contractual obligation in question, is delegable.

Now, of course, the contract drafter cannot change the law. What she can, and should, do is express the intention of the contracting parties in no uncertain terms. The brief of the contract drafter is hence clear:

The drafter must express the intention of the contracting parties conspicuously— whether the parties intend the contract to be, assignable or delegable.

The typical solution of drafters— the one with a serious problem

How do drafters typically express the intention of the contracting parties? They use a ‘successors, heirs, and assigns, clause’.

A badly-drafted successors, heirs, and assigns, clause is often tucked right into identification of the contracting parties. It typically looks something like this—

Ms. Latifa Kumar, aged 20, daughter of Mr. Some Other Kumar, resident of 2/26, Damn Interesting Lane, Some Random Locality, Bengaluru 123456 — hereafter referred to as “Purchasor”, which term shall also include her successors, heirs, administrators, executors, legal representatives, and assigns;

A better-drafted successors, heirs, and assigns clause might appear in the list of definitions. It typically looks something like this—

(f) “Purchasor” in addition to the 2nd party to this Contract includes, when the factual circumstances so admit, her successors, heirs, administrators, executors, legal representatives, and assigns;

Contract drafters tend to assume this establishes the assignability, or delegability, of the contract. I seriously dispute this belief.

I can’t even begin to tell you the number of problems with the successors, heirs, and assigns, clause:

1. Verbosity: The expression used is “successors, heirs, administrators, executors, legal representatives, and assigns”. Interesting news flash— successors, heirs, administrators, and executors, are all types of legal representatives. Hence, for a start, I can replace the devilishly long “successors, heirs, administrators, executors, legal representatives, and assigns” with just “legal representatives and assigns”. Good Lord, what a treat for the eyes, isn’t it?
2. Excuse me, I’m still not sure if the contract is assignable or delegable: Bad semantics aside, this is a far more serious problem. Legal representatives are a type of assigns and delegates; and assigns are, well, assigns. Hence, this clause merely tells me that legal representatives and assigns of the contracting party will step into her shoes if an assignment or delegation has already taken place (you cannot have assigns and delegates, unless assignment or delegation has taken place— obviously). The clause does not tell me if, and when, I can assign or delegate the contract at all— it seems, I have to figure that out myself.

Hence, a successors, heirs, and assigns, clause fails to express the most important thing it is presumably intended to convey— can I assign or delegate the contract; if so, in what circumstances?

Spell it out explicitly— can I assign, or delegate, the contract?

(i) The solution.

True, nothing can be expressed in a contract with perfect certainty. However, to my mind, every contract drafter has an ethical duty to express with reasonable certainty everything she intends to convey.

If you ask me, I’d say— when contract drafters use the successors, heirs, and assigns, clause; they do not express with reasonable certainty the assignability and delegability of the contract.

I seriously think we can do better.

What’s the solution then? It’s childishly simple:

1. Is the contract assignable? State explicitly whether it is assignable, or not— literally put it in words.
2. Is the contract delegable? Again, state explicitly whether it is delegable, or not— put it in words, that’s literally what I mean.

(ii) Examples.

What may a clause explicitly stating the assignability or delegability of a contract look like?

Consider this clause, for a contract which is neither assignable nor delegable:

21. No Assignment or Delegation.

A Party cannot, assign any right or delegate any obligation, arising out of this contract.

It clearly and explicitly tells every sensible reader that the contract is neither assignable nor delegable.

For a contract which is both assignable and delegable, I’d write a clause like this:

21. Assignment and Delegation.

21.1. A Party may, assign any right or delegate any obligation, arising out of this contract.

21.2. The Party assigning or delegating, shall serve notice of the same to the other Party within 30 days after the assignment or delegation in question.

21.3. The notice must, at a minimum, contain (i) a statement of the rights assigned and/or the obligations delegated and (ii) the name and address of the assign[s] or the delegate[s] in question.

It clearly and explicitly spells out, not only the assignability and delegability of the contract, but also the process by which the assignment or delegation must take place.

What may a clause for a contract which is assignable but not delegable look like? Consider this—

21. Assignment and Delegation.

21.1. A Party, may assign any right but cannot delegate any obligation, arising out of this contract.

21.2. The Party assigning, shall serve notice of the same to the other Party within a 30 days after the assignment.

21.3. The notice must, at a minimum, contain (i) a statement of the rights assigned and (ii) the name and address of the assign[s].

Similarly, we can come up with many other variations, depending on the requirement of the contracting parties.

Epilogue

The successors, heirs, and assigns, clause is yet another instance of a dysfunctional drafting practice. It does not serve the very purpose it is intended to serve — express whether the contracting parties intend the contract to be assignable or delegable.

It’s time we abandon this dysfunctional expression, and use something far simpler and effective— an explicit statement clarifying whether the contract is assignable or delegable.