(b) Assignment

Many contracts will provide for a prohibition to assign the rights and obligations under the agreement. Normally, each party should be able to negotiate that the other party’s approval of an assignment will not be unreasonably withheld or delayed:

Assignment. No Party shall assign its rights or obligations under this Agreement in whole or in part, without the prior written approval of the other Party, which approval shall not be unreasonably withheld, conditioned or delayed.

In many cases, parties would like to make an extra carve-out for intra-group restructurings of activities or performance under the contract by an affiliate, whether for tax-related or other geographical reasons. This would be a typical example involving the applicability of shall not be unreasonably withheld. However, contracting parties may seek more certainty. Uncertainty becomes particularly problematic when a party prepares a divestment of the business. Obviously, when the new investor is a competitor of the customer, the latter’s refusal to unconditionally approve assignment is reasonable. In other cases, the parties may want to be free to assign the agreement (i.e. the rights and related obligations) as part of a sale of the entire business to which such agreement relates. The uncertainty may be covered by a specific exception:

…, except that Seller may assign its rights and obligations under this Agreement in connection with a sale of all or a substantial part of its business to which such rights and obligations pertain.

Please note that an assignment clause does not relieve the parties to an assignment from fulfilling the requirements of the applicable law regarding the assigned rights and obligations. To give an assignment of rights its full effect (i.e. enforceability against the debtor and an obligation on the debtor to perform vis-à-vis the assignee only), most jurisdictions require a (written) assignment notice to the debtor.