Assignment, Delegation, Subordination Agreements
Assignment, Delegation, Subordination San Diego Summary
Assignment, delegation, and subordination agreements are commonly used in a variety of business transactions, including:
• Transferring rights in personal property;
• Transferring rights in intellectual property;
• Recovering payment under promissory notes;
• Pursuing a claim of a creditor;
• Transferring intangible assets, such as securities and ownership interests; and
• Modifying the order of lien holders against a debtor.
Assignment, Delegation, Subordination San Diego Details
Assignments are the contractual transfer of rights from one party to one or more other parties to the assignment contract. The party assigning rights is referred to as the assignor, and the party receiving the assigned rights is the assignee. Rights may generally be assigned by an assignment contract or a contract containing an assignment clause provided there was no prohibition against assignment when the rights were originally acquired, the rights were not established in reliance upon some quality of the assigning party (e.g. creditworthiness), the rights are not more onerous after assignment, and assignment is not prohibited by public policy.
Delegations are the contractual transfer of obligations from one party to one or more other parties to the delegation contract. The party assigning obligations is referred to as the obligor, and the party receiving the obligation is the obligee. Obligations may generally be delegated by a delegation contract or a contract containing a delegation clause, provided there was no prohibition against delegation when the obligation was originally acquired, assuming the delegation does not involve the personal services of one party, and delegation is not prohibited by public policy. It is also worth noting that when a delegation is executed, the obligor remains responsible for the obligations in the event that the obligee defaults in performance.
Assignment and Delegation
Assignments and delegations often occur simultaneously. For example, if a contractor assigns his obligation to build a house, it is likely that the contractor also assigns the money he was to be paid for building the house.
For more information about assignment and delegation, refer to section 2-210 of the Uniform Commercial Code.
A subordination contract or contractual clause is used to modify the order of lien holders against a debtor. For example, if one lien holder has first lien status against a debtor and a second lien holder has the second lien status against the same debtor, the lien holders can agree to swap lien holder positions or otherwise share identical lien holder status.