Contract tip - Assignment

An assignment is a transfer of rights under a contract. In other words, a person who was a party to the original contract wishes to transfer the rights under the contract to a person who was not a party to the original contract.

For example, assume X and Y enter into a contract in which X will pay Y $50 if Y mows X’s lawn. Y then assigns the payment rights to Z. Y (the Assignor) has assigned the contract rights to Z (the Assignee), who will receive the $50 from X (the Obligor). (But Y does NOT assign the responsibility of mowing the lawn to Z. Y's transfer of duties to Z would be classified as a "delegation" as opposed to an assignment.)

Almost all contract benefits can be assigned. The law favors the free assignability of contractual rights. However, some contracts will include a clause that either prohibits or invalidates assignments.

● Clause prohibiting assignments: If the contractual provision prohibits assignments, the assignor breaches the agreement by assigning away the contractual rights, but the assignee will still be able to enforce his or her rights against the obligor.

● Clause invalidating assignments: On the other hand, if the contractual provision states that attempts to assign are “void,” the assignee cannot sue the obligor (because there was never any power or right to assign).

Contract Tip - The Force Majeure Clause

Force Majeure (French for “superior force”) is a provision in a contract that excuses one or both parties’ performance of their contractual obligations when that performance becomes impossible or impracticable due to an extraordinary event that arises beyond the control of the parties.

Force majeure events typically enumerated in contracts include wars, riots, strikes, severe weather events (such as a hurricane), severe acts of nature (such as a volcano eruption), and acts of governmental authorities (such as expropriation). After the terrorist attacks of September 11, 2001, many people started adding "terrorism" to their list of force majeure events. In today's COVID-19 era, people are one again re-evaluating their contracts and adding "virus pandemics" to their list of enumerated events.

Generally, force majeure clauses are interpreted narrowly. The parties must spell out what constitutes force majeure in the contract itself. If the contract does not include a force majeure provision (or if the relevant event does not fall within the scope of the force majeure clause), a party may have to rely on common law doctrines such as “impossibility of performance” or “frustration of purpose” in order to be discharged of contractual obligations.

Contract Tip - Must a Contract be in Writing?

We have all seen formal contracts, with terms in small print and paragraphs that begin with words like “wherefore.” However, this is not required for a contract to be legally enforceable. In order to have a valid contract, there only needs to be a few elements: 1) an offer by one party, 2) an acceptance by the other party, and 3) something of value that each party exchanges with the other (known as “consideration”). A writing is NOT one of these requirements. Therefore, a verbal (oral) contract is just as enforceable as a written contract, as long as it has the above three elements.

However, the Statute of Frauds requires certain types of contracts to be in writing. Examples of contracts that must be in writing include:

● Contracts for the sale of an interest in real property. ● Contracts for the sale of goods of $500 or more. ● Contracts in consideration of marriage (such as prenuptial agreements). ● Contracts that cannot be fully completed within one year of the making of the contract. ● Contracts involving a promise to pay another person’s debt (known as “surety contracts”).

As long as the contract is not within the Statute of Frauds or another state law requiring a writing, there is no legal requirement to have the contract in writing. However, the best practice is to put all contracts in writing. A verbal contract is difficult to prove. Since there is no writing, the person must find other evidence to prove that the contract existed in the first place. Further, a verbal contract is difficult to enforce because the terms of the contract were not written down. To be on the safe side, putting the contract in a signed writing is the best way to protect both parties.