Assignee is a person to whom a right is transferred by the person holding such rights under the transferred contract (the “assignor”). The act of transferring is referred to as “assigning” or “assignment” and is a concept found in both contract and property law.
Under contract law, when one party assigns a contract, the assignment represents both: (1) a transfer of rights; and (2) a delegation of duties. For example, if A contracts with B to teach B guitar for $50, A can assign this contract to C. Here, A has both: assigned A’s rights under the contract to receive the $50 to C, and delegated A’s duty to teach guitar to C. In this example, A is the “assignor” because he/she assigns the contract to C. A is also the “primary obligor,” meaning he/she will still be liable to B if C fails to teach B guitar. C is the “assignee,” since C is the party to whom A transfers the contract. C is also the “secondary obligor,” since he/she must perform the obligations to B. B is the ultimate recipient of the duty under the assignment, and is the “obligee.”
There are a few notable rules regarding assignments under contract law. First, if an individual has not yet secured the contract to perform duties to another, he/she cannot assign his/her future right to an assignee. That is, if A has not yet contracted with B to teach B guitar, A cannot assign his/her rights to C. Second, rights cannot be assigned when they materially change the obligor’s duty and rights. Third, the primary obligor can sue the assignee directly if the assignee does not perform the assigned duty. In guitar assignment example, if C does not teach B guitar, A can sue C for any liability that A incurs as a result of C’s failure to perform the assigned contract. Fourth, if the promised performance requires a rare genius or skill, then the primary obligor cannot assign the contract.
Lastly, a related concept is novation, which is when the secondary obligor substitutes and releases the primary obligor. If novation occurs, then the primary obligor’s duties are extinguished under the contract. However, novation requires the obligee’s consent. In the guitar example, if A, B, and C agree to novation, then A would not be liable if C fails to teach B guitar.
Under property law, assignment typically arises in landlord-tenant situations. For example, A might be renting from landlord B but wants C, a new tenant, to take over the lease. In this scenario, A might be able to choose between assigning and subleasing the property to C. If assigning, A would be giving C the entire balance of the term, with no reversion to anyone. If subleasing, A would be giving C for a limited period of the remaining term. Significantly, under assignment, C would have privity of estate with the landlord, while under a sublease, C would not.
[Last updated in December of 2021 by the Wex Definitions Team]