assignment vs deed

Deed of Assignment or Deed of Novation: Key Differences and Legal Implications of Novation and Assignment Contracts

Novation and assignment stand out as pivotal processes for the transfer of contractual rights and obligations. These legal concepts allow a party to the contract to adapt to changing circumstances, ensuring that business arrangements remain relevant and effective. This article explores the nuances of novation and assignment, shedding light on their distinct legal implications, procedures, and practical applications. Whether you’re a business owner navigating the transfer of service contracts, or an individual looking to understand your rights and responsibilities in a contractual relationship, or a key stakeholder in a construction contract, this guide will equip you with the essential knowledge to navigate these complex legal processes.

Table of Contents

• What is a Deed of Novation? 
• What is a Deed of Assignment? 

Key Differences Between Novation and Assignment Deeds

Need a deed of novation or assignment key factors to consider, selecting the right assignment clause for your contract – helping you make the right choice, what is a deed of novation.

Novation is a legal process that allows a new party to a contract to take the place of an original party in a contract, thereby transferring both the responsibilities and benefits under the contract to a third party. In common law, transferring contractual obligations through novation requires the agreement of all original parties involved in the contract, as well as the new party. This is because novation effectively terminates the original contract and establishes a new one.

A novation clause typically specifies that a contract cannot be novated without the written consent of the current parties. The inclusion of such a clause aims to preclude the possibility of novation based on verbal consent or inferred from the actions of a continuing party. Nevertheless, courts will assess the actual events that transpired, and a novation clause may not always be enforceable. It’s possible for a novation clause to allow for future novation by one party acting alone to a party of their choosing. Courts will enforce a novation carried out in this manner if it is sanctioned by the correct interpretation of the original contract.

Novation is frequently encountered in business and contract law, offering a means for parties to transfer their contractual rights and duties to another, which can be useful if the original party cannot meet their obligations or wishes to transfer their contract rights. For novation to occur, there must be unanimous consent for the substitution of the new party for the original one, necessitating a three-way agreement among the original party, the new party, and the remaining contract party. Moreover, the novation agreement must be documented in writing and signed by all involved parties. Understanding novation is essential in the realms of contracts and business dealings, as it provides a way for parties to delegate their contractual rights and responsibilities while freeing themselves from the original agreement.

What is a Deed of Assignment?

A deed of assignment is a legal document that facilitates the transfer of a specific right or benefit from one party (the assignor) to another (the assignee). This process allows the assignee to step into the assignor’s position, taking over both the rights and obligations under the original contract. In construction, this might occur when a main contractor assigns rights under a subcontract to the employer, allowing the employer to enforce specific subcontractor duties directly if the contractor fails.

Key aspects of an assignment include:

• Continuation of the Original Contract: The initial agreement remains valid and enforceable, despite the transfer of rights or benefits.
• Assumption of Rights and Obligations: The assignee assumes the role of the assignor, adopting all associated rights and responsibilities as outlined in the original contract.
• Requirement for Written Form: The assignment must be documented in writing, signed by the assignor, and officially communicated to the obligor (the party obligated under the contract).
• Subject to Terms and Law: The ability to assign rights or benefits is governed by the specific terms of the contract and relevant legal statutes.

At common law, parties generally have the right to assign their contractual rights without needing consent from the other party involved in the contract. However, this does not apply if the rights are inherently personal or if the contract includes an assignment clause that restricts or modifies this general right. Many contracts contain a provision requiring the consent of the other party for an assignment to occur, ensuring that rights are not transferred without the other party’s knowledge.

Once an assignment of rights is made, the assignee gains the right to benefit from the contract and can initiate legal proceedings to enforce these rights. This enforcement can be done either independently or alongside the assignor, depending on whether the assignment is legal or equitable. It’s important to note that while rights under the contract can be assigned, the contractual obligations or burdens cannot be transferred in this manner. Therefore, the assignor remains liable for any obligations under the contract that are not yet fulfilled at the time of the assignment.

Choosing Between Assignment and Novation in a Construction Contract

Choosing between a deed of novation and an assignment agreement depends on the specific circumstances and objectives of the parties involved in a contract. Both options serve to transfer rights and obligations but in fundamentally different ways, each with its own legal implications, risks, and benefits. Understanding these differences and considering various factors can help in making an informed decision that aligns with your goals.

The choice between assignment and novation in a construction project scenario, where, for instance, an employer wishes to engage a subcontractor directly due to loss of confidence in the main contractor, hinges on several factors. These are:

• Nature of the Contract:  The type of contract you’re dealing with (e.g., service, sales) can influence which option is more suitable. For instance, novation might be preferred for service contracts where obligations are personal and specific to the original parties.
• Parties Involved: Consent is a key factor. Novation requires the agreement of all original and new parties, making it a viable option only when such consent is attainable. Assignment might be more feasible if obtaining consent from all parties poses a challenge.
• Complexity of the Transaction: For transactions involving multiple parties and obligations, novation could be more appropriate as it ensures a clean transfer of all rights and obligations. Assignment might leave the original party with ongoing responsibilities.
• Time and Cost: Consider the practical aspects, such as the time and financial cost associated with each option. Novation typically involves more complex legal processes and might be more time-consuming and costly than an assignment.

If the intention is merely to transfer the rights of the subcontractor’s work to the employer without altering the subcontractor’s obligations under a contract, an assignment might suffice. However, if the goal is to completely transfer the main contractor’s contractual role and obligations to the employer or another entity, novation would be necessary, ensuring that all parties consent to this new arrangement and the original contractor is released from their obligations.

The legal interpretations and court decisions highlight the importance of the document’s substance over its label. Even if a document is titled a “Deed of Assignment,” it could function as a novation if it transfers obligations and responsibilities and involves the consent of all parties. The key is to clearly understand and define the objective behind changing the contractual relationships and to use a deed — assignment or novation — that best achieves the desired legal and practical outcomes, ensuring the continuity and successful completion of the construction project.

Understanding the distinction between assignment deeds and novation deeds is crucial for anyone involved in contractual agreements. Novation offers a clean slate by transferring both rights and obligations to a new party, requiring the consent of all involved. Assignment, conversely, allows for the transfer of contractual benefits without altering the original contract’s obligations. Each method serves different strategic purposes, from simplifying transitions to preserving original contractual duties. The choice between novation and assignment hinges on specific legal, financial, and practical considerations unique to each situation. At PBL Law Group, we specialise in providing comprehensive legal advice and support in contract law. Our team is dedicated to helping clients understand their options and make informed decisions that align with their legal and business objectives. Let’s discuss!

Authored By Raea Khan

Director Lawyer, PBL Law Group

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Assignment vs Novation: Everything You Need to Know

Assignment vs. novation: What's the difference? An assignment agreement transfers one party's rights and obligations under a contract to another party. 4 min read updated on September 19, 2022

Assignment vs. novation: What's the difference? An assignment agreement transfers one party's rights and obligations under a contract to another party. The party transferring their rights and duties is the assignor; the party receiving them is the assignee. Novation is a mechanism where one party transfers all its obligations and rights under a contract to a third party, with the consent of the original counterparty.

The transfer of a benefit or interest from one party to another is referred to as an assignment. While the benefits can be transferred, the obligation or burden behind the contract cannot be. A contract assignment occurs when a party assigns their contractual rights to a third party. The benefit that the issuing party would have received from the contract is now assigned to the third party. The party appointing their rights is referred to as the assignor, while the party obtaining the rights is the assignee. 

The assignor continues to carry the burden and can be held liable by the assignee for failing to fulfill their duties under the contract. Purchasing an indemnity clause from the assignee may help protect the assignor from a future liability. Unlike notation, assignment contracts do not annul the initial agreement and do not establish a new agreement. The original or initial contract continues to be enforced. 

Assignment contracts generally do not require the authorization from all parties in the agreement. Based on the terms, the assignor will most likely only need to notify the nonassigning party.

In regards to a contract being assignable, if an agreement seems silent or unclear, courts have decided that the contract is typically assignable. However, this does not apply to personal service contracts where consent is mandatory. The Supreme Court of Canada , or SCC, has determined that a personal service contract must be created for the original parties based on the special characteristics, skills, or confidences that are uniquely displayed between them. Many times, the courts need to intervene to determine whether an agreement is indeed a personal service contract.

Overall, assignment is more convenient for the assignor than novation. The assignor is not required to ask for approval from a third party in order to assign their interest in an agreement to the assignee. The assignor should be aware of the potential liability risk if the assignee doesn't perform their duties as stated in the assigned contract.

Novation has the potential to limit future liabilities to an assignor, but it also is usually more burdensome for the parties involved. Additionally, it's not always achievable if a third party refuses to give consent.

It's essential for the two parties in an agreement to appraise their relationship before transitioning to novation. An assignment is preferential for parties that would like to continue performing their obligations, but also transition some of their rights to another party.

A novation occurs when a party would like to transfer both the benefits and the burden within a contract to another party. Similar to assignment, the benefits are transferred, but unlike assignment, the burden is also transferred. When a novation is completed, the original contract is deleted and is replaced with a new one. In this new contract, a third party is now responsible for the obligations and rights. Generally, novation does not cancel any past obligations or rights under the initial contract, although it is possible to novate these as well.

Novation needs to be approved by both parties of the original contract and the new joining third party. Some amount of consideration must also be provided in the new contract in order for it to be novated, unless the novation is cited in a deed that is signed by all parties to the contract. In this situation, consideration is referring to something of value that is being gained through the contract.

Novation occurs when the purchaser to the original agreement is attempting to replace the seller of an original contract. Once novated, the original seller is released from any obligation under the initial contract. The SCC has established a three-point test to implement novation. The asserting party must prove:

• The purchaser accepts complete liability
• The creditor to the original contract accepts the purchaser as the official debtor, and not simply as a guarantor or agent of the seller
• The creditor to the original contract accepts the new contract as the replacement for the old one

Also, the SSC insisted that if a new agreement doesn't exist, the court would not find novation unless the precedence was unusually compelling.

If you need help determining if assignment vs. novation is best for you, you can  post your job  on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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Content Approved by UpCounsel

• Contract Transfer
• Novation Agreement
• What is Novation of Contract
• Novation of Contract
• Contract Novation Letter
• Deed of Novation
• Contract Novation
• Loan Novation Agreement
• Assignment of Rights Example
• Contract Novation Agreement

Understanding Deed of Assignment: Definition, Uses, and Legal Implications Explained

A deed of assignment is a legal document that transfers the ownership of a tangible or intangible asset from one party (assignor) to another (assignee). It is used to formalize the transfer of rights, interests, or benefits associated with the asset specified in the deed. This document is commonly used in various legal and financial transactions to ensure clarity and enforceability of the transfer.

Table of Contents

Key characteristics of deed of assignment.

• Legal Form : It is a formal written document recognized under legal jurisdictions.
• Transfer of Rights : Involves transferring ownership or interests in a specific asset.
• Specificity : Clearly defines the asset being transferred and the terms of transfer.
• Enforceability : Once executed, it becomes legally binding on both parties.

How Deed of Assignment Works

Examples and usage, 1. transfer of debt example.

• Definition : A debtor assigns their debt obligation to a new creditor.
• Process : A deed of assignment is used to transfer the rights to receive payment from the debtor to the new creditor.

2. Intellectual Property Transfer

• Definition : An author assigns their copyright in a book to a publishing company.
• Procedure : A deed of assignment outlines the transfer of intellectual property rights from the author to the publisher.

Advantages of Deed of Assignment

• Legal Clarity : Provides a clear record of the transfer of rights or interests.
• Enforceability : Ensures that the assignee can legally enforce their rights against the assignor.
• Asset Protection : Helps protect the rights of the assignee against claims by third parties.

Challenges of Deed of Assignment

Considerations.

• Legal Requirements : Must adhere to specific legal formalities to be enforceable.
• Risk of Breach : Potential for disputes over the validity or terms of the assignment.

Importance of Deed of Assignment

Practical applications, legal transfers.

• Debt Assignments : Transferring debt obligations from one creditor to another.
• Property Transfers : Assigning ownership rights in real estate or intellectual property.

Real-world Implications

Legal and financial security.

• Contractual Agreements : Facilitates smooth transfers of rights and responsibilities.
• Risk Management : Helps mitigate risks associated with ownership disputes or claims.

Example Scenario

Application in debt assignment, scenario: debt transfer deed of assignment.

• Context : A company assigns its accounts receivable to a factoring company.
• Procedure : Signing a deed of assignment outlining the transfer of rights to receive payment from debtors to the factoring company.

A deed of assignment is a crucial legal instrument used to transfer ownership or rights from one party to another. Whether for debts, intellectual property, or other assets, it ensures clarity and enforceability in legal transactions. By documenting the specifics of the transfer and adhering to legal requirements, parties can safeguard their interests and ensure that the transfer is legally binding. Understanding the purpose and implications of a deed of assignment is essential for navigating legal transfers of rights and assets effectively. It provides a structured approach to asset transfers, protecting the rights of both assignors and assignees under legal frameworks. Overall, deeds of assignment play a significant role in facilitating smooth and legally secure transfers of various types of assets and rights between parties.

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Deed of Assignment (for Intellectual Property)

In the realm of intellectual property, a Deed of Assignment is a formal legal document used to transfer all rights, title, and interest in intellectual property from the assignor (original owner) to the assignee (new owner). This is crucial for the correct transfer of patents, copyrights, trademarks, and other IP rights. The deed typically requires specific legal formalities, sometimes notarization, to ensure it is legally enforceable.

To be legally effective a deed of assignment must contain:

• Title of the Document : It should clearly be labeled as a "Deed of Assignment" to identify the nature of the document.
• Date : The date on which the deed is executed should be clearly mentioned.
• Parties Involved : Full names and addresses of both the assignor (the party transferring the rights) and the assignee (the party receiving the rights). This identifies the parties to the agreement.
• Recitals : This section provides the background of the transaction. It typically includes details about the ownership of the assignor and the intention behind the assignment.
• Definition and Interpretation : Any terms used within the deed that have specific meanings should be clearly defined in this section.
• Description of the Property or Rights : A detailed description of the property or rights being assigned. For intellectual property, this would include details like patent numbers, trademark registrations , or descriptions of the copyrighted material.
• Terms of Assignment : This should include the extent of the rights being transferred, any conditions or limitations on the assignment, and any obligations the assignor or assignee must fulfill as part of the agreement.
• Warranties and Representations : The assignor typically makes certain warranties regarding their ownership of the property and the absence of encumbrances or third-party claims against it.
• Governing Law : The deed should specify which jurisdiction's laws govern the interpretation and enforcement of the agreement.
• Execution and Witnesses : The deed must be signed by both parties, and depending on jurisdictional requirements, it may also need to be witnessed and possibly notarized.
• Schedules or Annexures : If there are detailed lists or descriptions (like a list of patent numbers or property descriptions), these are often attached as schedules to the main body of the deed.

Letter of Assignment (for Trademarks and Patents)

This is a less formal document compared to the Deed of Assignment and is often used to record the assignment of rights or licensing of intellectual property on a temporary or limited basis. While it can outline the terms of the assignment, it may not be sufficient for the full transfer of legal title of IP rights. It's more commonly used in situations like assigning the rights to use a copyrighted work or a trademark license.

For example, company X allows company Y to use their trademark for specific products in a specific country for a specific period.  

At the same time, company X can use a Letter of Assignment to transfer a trademark to someone. In this case, it will be similar to the Deed of Assignment. 

Intellectual Property Sales Agreement

An IP Sales Agreement is a detailed contract that stipulates the terms and conditions of the sale of intellectual property. It covers aspects such as the specific rights being sold, payment terms, warranties regarding the ownership and validity of the IP, and any limitations or conditions on the use of the IP. This document is essential in transactions involving the sale of IP assets.

However, clients usually prefer to keep this document confidential and prepare special deeds of assignment or letter of assignment for different countries.

IP Transfer Declaration

In the context of intellectual property, a Declaration is often used to assert ownership or the originality of an IP asset. For example, inventors may use declarations in patent applications to declare their invention is original, or authors may use it to assert copyright ownership. It's a formal statement, sometimes required by IP offices or courts.

When assigning a trademark, the Declaration can be a valid document to function as a proof of the transfer. For example, a director of company X declares that the company had sold its Intellectual Property to company Y. 

Merger Document

When companies or entities with significant IP assets merge, an IP Merger Document is used. This document outlines how the intellectual property owned by the merging entities will be combined or managed. It includes details about the transfer, integration, or handling of patents, copyrights, trademarks, and any other intellectual property affected by the merger.

In all these cases, the precise drafting of documents is critical to ensure that IP rights are adequately protected and transferred. Legal advice is often necessary to navigate the complexities of intellectual property laws.

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Assignment and deed of assignment

What is assignment?

Like moveable and immoveable property, claims can also be sold. The transfer of a personal claim is called assignment. A creditor can transfer a personal claim to a third party. This third party will then supersede the original creditor. The creditor who sells the claim is called the assignor, the acquirer of the claim is called the assignee. The debtor is no party to this transfer, but the assignment has consequences for him: he will have to pay his debt to the new creditor.

Deed of assignment

There are some formal requirements for assignment. A distinction can be made between assignments with and without a notice to the debtor. Both forms of assignment have to be effected in writing, by deed of assignment to be more specific. The deed may be drafted between the creditor and the third party (private instrument) or in the presence of a civil-law notary (authentic instrument). The claim that is to be transferred must be sufficiently specified.

Notification of assignment and assignment without notice to the debtor

In case of an assignment with notification, the assignment will have to be notified to the debtor so he will know that he will have to pay to another party, as the debtor is not a party to the transfer. An assignment without notification does not require a notice to the debtor, but the deed of assignment will have to registered with the Tax Authorities. The debtor can be discharged from all his obligations by paying to the original creditor until he is notified of the assignment.

Assignment in practice

Collection agencies often buy up claims of businesses for the purpose of collecting these themselves. This is called factoring. Assignments also often play a part in insurance matters. If an insured party has suffered damage that may be recovered from a third party, the insurer may take over the claim for compensation from the insured party. The insurer then pays out the amount of the claim to the insured party and thus obtains a claim against the third party.

News- letter

Understanding a deed of assignment for intellectual property

A deed of transfer is used to change the ownership of intellectual property, a common occurrence in business. Explore how and when to use one.

Find out more about intellectual property basics

by   Brette Sember, J.D.

Brette is a former attorney and has been a writer and editor for more than 25 years. She is the author of more than 4...

Read more...

Updated on: November 24, 2023 · 3 min read

Understanding intellectual property in business

How to transfer intellectual property rights in business, what to include in a deed of assignment, registering new ownership, restrictions on intellectual property transfers.

Most companies have intellectual property as part of their assets, including software, product design, or copyright to white papers. Buying or selling such property is done using a document called a deed of assignment.

A large part of what a business consists of may be tied to intellectual property . It's easy to see physical property a company owns, such as a building, office furniture, or inventory, but intellectual property can be more challenging to identify.

Most businesses have intellectual property, or works created by human minds or, in some cases, by computers. Some examples of intellectual property include architectural drawings, ad campaigns, company or product names, inventions, and source code.

Examples of when transfers of intellectual property might happen include when a company is buying another company, when you are setting up an LLC and want to transfer your intellectual property into the company, or when a business buys product rights from another company or individual.

A deed of assignment can be done in one transaction, instead of one transaction for each item of intellectual property, by transferring all ownership rights of all intellectual property detailed in the deed. The document is signed by both the buyer and seller. No payment is required for it to be valid.

A deed of assignment must be in writing and should include:

• The names and addresses of the assignor and assignee
• A description of the program or product for which the rights are being transferred
• A statement that all intellectual property rights to the property are being transferred
• Signatures of the parties and the date of the agreement execution

The deed could also include the following sections, where applicable:

• Consideration, or payment, to be made to the original owner.
• Warranties, or promises that the intellectual property rights being assigned don't infringe on anyone else's intellectual property rights . For example, in a deed regarding the transfer of a copyright, this section could state that the copyrighted work is original and not owned by someone else.
• Indemnification, or promise by the seller to reimburse the assignee if there is some problem with title to the property.
• Future assignments. For example, the agreement could be ongoing, so that anything the assignor creates in the future for this product or program is also transferred to the buyer.

Although a deed of assignment transfers ownership in intellectual property , it does not change the registration of the ownership. The assignee is responsible for handling all registration requirements.

For example, if a patent is transferred via a deed of assignment, the new owner must record the change in ownership with the U.S. Patent and Trademark Office. Similarly, the transfer of a copyright is recorded with the U.S. Copyright Office.

Transfers of intellectual property must comply with U.S. laws. One obvious caveat is that you can't transfer property you don't own. Transfers must also comply with antitrust laws, which are set up to prevent one company from completely dominating an industry.

If intellectual property rights are being transferred overseas, the transfer must comply with Export Administration Regulations and the International Traffic in Arms Regulations , which are designed to protect national security and trade.

The deed of assignment can be a crucial part of a business deal or transaction. You can create a deed of assignment yourself, or you can work with an attorney .

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Out-law / your daily need-to-know.

Out-Law Guide 4 min. read

Assignment and novation

19 Aug 2011, 4:40 pm

Assignment involves the transfer of an interest or benefit from one person to another. However the 'burden', or obligations, under a contract cannot be transferred.

Assignment in construction contracts

As noted above only the benefits of a contract can be assigned - not the burden. In the context of a building contract:

• the employer may assign its right to have the works constructed, and its right to sue the contractor in the event that the works are defective – but not its obligation to pay for the works;
• the contractor may assign its right to payment of the contract sum - but not its obligation to construct the works in accordance with the building contract or its obligation to meet any valid claims, for example for defects.

After assignment, the assignee is entitled to the benefit of the contract and to bring proceedings against the other contracting party to enforce its rights. The assignor still owes obligations to the other contracting party, and will remain liable to perform any part of the contract that still has to be fulfilled since the burden cannot be assigned. In practice, what usually happens is that the assignee takes over the performance of the contract with effect from assignment and the assignor will generally ask to be indemnified against any breach or failure to perform by the assignee.  The assignor will remain liable for any past liabilities incurred before the assignment.

In construction contracts, the issue of assignment often arises in looking at whether collateral warranties granted to parties outside of the main construction contract can be assigned.

Funders may require the developer to assign contractual rights against the contractor and the design team as security to the funder, as well as the benefit of performance bonds and parent company guarantees. The developer may assign such rights to the purchaser either during or after completion of the construction phase.

Contractual assignment provisions

Many contracts exclude or qualify the right to assignment, and the courts have confirmed that a clause which provides that a party to a contract may not assign the benefit of that contract without the consent of the other party is legally effective and will extend to all rights and benefits arising under the contract, including the right to any remedies. Other common qualifications on the right to assign include:

• a restriction on assignment without the consent of the other party, whether or not such consent is not to be unreasonably withheld or delayed;
• only one of the parties may assign;
• only certain rights may be assigned – for example, warranties and indemnities may be excluded;
• a limit on the number of assignments - as is almost always the case in respect of collateral warranties;
• a right to assign only to a named assignee or class of assignee.

Note that in some agreements where there is a prohibition on assignment, it is sometimes possible to find the reservation of specific rights to create a trust or establish security over the subject matter of the agreement instead.

Legal and equitable assignment

The Law of Property Act creates the ability to legally assign a debt or any other chose in action where the debtor, trustee or other relevant person is notified in writing. If the assignment complied with the formalities in the Act it is a legal assignment, otherwise it will be an equitable assignment.

Some transfers can only take effect as an equitable assignment, for example:

• an oral assignment;
• an assignment by way of charge;
• an assignment of only part of the chosen in action;
• an assignment of which notice has not been given to the debtor;
• an agreement to assign.

If the assignment is equitable rather than legal, the assignor cannot enforce the assigned property in its own name and to do so must join the assignee in any action. This is designed to protect the debtor from later proceedings brought by the assignor or another assignee from enforcing the action without notice of the earlier assignment.

Security assignments

Using assignment as a way of taking security requires special care, as follows:

• if the assignment is by way of charge, the assignor retains the right to sue for any loss it suffers caused by a breach of the other contract party;
• if there is an outright assignment coupled with an entitlement to a re-assignment back once the secured obligation has been performed, it is an assignment by way of legal mortgage.

Please see our separate Out-Law guide for more information on types of security.

Restrictions on assignment

There are restrictions on the assignment of certain types of interest on public policy grounds, as follows:

• certain personal contracts – for example, a contract for the employment of a personal servant or for the benefit of a motor insurance policy cannot be assigned;
• a bare cause of action or 'right to sue' where the assignee has no commercial interest in the subject matter of the underlying transaction cannot be assigned;
• certain rights conferred by statute – for example, a liquidator's powers to bring wrongful trading proceedings against a director – cannot be assigned;
• an assignment of a contract may not necessarily transfer the benefit of an arbitration agreement contained in the contract;
• the assignment of certain rights is regulated – for example, the assignment of company shares or copyright.

If you want to transfer the burden of a contract as well as the benefits under it, you have to novate. Like assignment, novation transfers the benefits under a contract but unlike assignment, novation transfers the burden under a contract as well.

In a novation the original contract is extinguished and is replaced by a new one in which a third party takes up rights and obligations which duplicate those of one of the original parties to the contract. Novation does not cancel past rights and obligations under the original contract, although the parties can agree to novate these as well.

Novation is only possible with the consent of the original contracting parties as well as the new party. Consideration (the 'price' paid, whether financial or otherwise, by the new party in return for the contract being novated to it) must be provided for this new contract unless the novation is documented in a deed signed by all three parties.

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Deed of Absolute Sale vs. Deed of Assignment

A deed of absolute sale and a deed of assignment both transfer property ownership from one party to another. People use a deed of absolute sale most often in a typical real property sale in which a buyer purchases a property from a seller. Bankruptcy courts most often use a deed of assignment to transfer property from the property owner to the bankruptcy court. Take a look to learn more about the deed of assignment versus absolute deed of sale meaning and better understand how these affect the parties involved.

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What's a Deed of Assignment?

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A deed of assignment occurs when a debtor transfers property to a creditor, usually a bankruptcy court trustee. The bankruptcy court trustee is then responsible for facilitating the sale of the property. Once the property sells, the trustee splits the proceeds equally among the creditors. The creditors then apply these proceeds to the debtor's outstanding balances.

Property Exclusion in Bankruptcy

Insolvent debtors are not required to complete a deed of assignment to the bankruptcy court. Bankruptcy courts often allow an exclusion for the insolvent debtor's primary home . Depending on the debtor's location, there may be a limit to the home equity allowed for the exclusion. However, the bankruptcy court may require insolvent debtors to complete a deed of assignment for additional real properties, such as second homes and vacation homes.

This means the insolvent debtor may keep his primary home – with consideration for any home equity limits – from inclusion in the bankruptcy proceedings. However, the bankruptcy court may require him to complete a deed of assignment on his secondary or vacation homes to sell and use the proceeds toward paying his creditors.

Absolute and Conditional Sales

Property sale transactions are typically either conditional or absolute.

Conditional sales occur when the transfer of the property from one party to another party will not be completed, and the title to the property will not be transferred until certain conditions of the sale contract are met either by the buyer or by the seller. For example, if a property has outdated plumbing, the buyer can require the seller to update the plumbing as a condition of the sale.

An absolute sale occurs when the sales contract has no conditions. This means that the property transfer will happen as long as the buyer pays the seller the amount of money agreed on.

Absolute Deed of Sale Meaning

To understand a deed of sale vs deed of absolute sale, know that a deed of absolute sale is a when a seller transfers or conveys the title of a property to the other party without condition except for the payment for the property. For example, a seller lists her property for $100,000, and a buyer comes along and gives her $100,000 for the property without requiring her to do anything to the property. A deed of absolute sale is completed, and the title of the property transfers from the seller to the buyer.

• Upcounsel: Deed of Assignment: Everything You Need to Know
• USLegal: Absolute Sale
• Amourgis & Associates Attorneys at Law: What Property is Considered Exempt in an Ohio Bankruptcy?

Assignment of Deed of Trust Vs. Deed or Grant Deed

A grant deed is used to transfer ownership rights in real estate.

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More Articles

•   1. What Is the Difference Between the Deed of Absolute Sale and the Deed of Assignment?
•   2. What is an Assignment of Trust Deed?
•   3. Warranty Deed Vs. Deed of Trust

Property rights in real estate are valuable and invariably the subject of a legal document called a deed. To transfer ownership rights in real estate, a grant deed is commonly used. When a loan is obtained to purchase real estate, a deed of trust is often used to give the lender rights in the real estate to secure repayment of the loan. An assignment of deed of trust is used by a lender when it sells its loan secured by a deed of trust.

Property Deeds

Real estate transactions that involve the transfer of property rights require a deed to ensure the transfer of rights is effective. All deeds are written documents that include a description of the affected real estate and the names of the persons whose property rights are being transferred. Although not legally require to make the transfer effective, deeds are routinely recorded with the local government office responsible for recording real estate transactions. A recorded deed gives the public notice regarding property rights in a particular parcel of real estate, such as ownership, easements and liens. Recording a deed can also protect a property owner against future claims that his property rights are invalid.

A grant deed is used to transfer real estate ownership from one person to another. The transfer of ownership can be for a full parcel of real estate or just a portion of the real estate. Grant deeds are most often used in real estate sales between an unrelated buyer and seller. However, a grant deed may also be used to transfer ownership as a gift. When a grant deed is used, the person transferring ownership rights is promising to the person receiving ownership rights that these rights have not been previously transferred to anyone else.

Deed of Trust

A deed of trust is used in a three-party transaction involving the repayment of a debt. The first party is a real estate owner or buyer who is borrowing money that can be used for any purpose, but is typically used to fund the purchase of the real estate. The second party is the lender, such as a bank or other financial institution, providing the funds to the borrower. To secure repayment of the loan, the borrower signs a deed of trust which transfers legal title to his real estate to a third party, called the trustee, who can be any individual or company that does not have any interest in the loan or real estate. The borrower continues to have the beneficial use of the property with the trustee only taking action if the borrower defaults on his loan. If the lender and borrow cannot work out a resolution of the default, the lender can instruct the trustee to conduct a foreclosure sale of the real estate and deliver the sale proceeds to the lender to repay the loan.

Assignment of Deed of Trust

Loans that are secured by a deed of trust often include repayment terms that extend for several years or more. From a lender’s perspective, a loan secured by a deed of trust is a fairly safe investment when the value of the real estate is sufficient to repay the loan in the event of a borrower's default. This aspect makes existing loans secured by a deed of trust suitable for sale from the original lender to another lender during the life of the loan. To complete the sale of a loan secured by a deed of trust, the original lender uses a document called an assignment of deed of trust to transfer its rights in the deed of trust to a new lender.

• FindLaw: What Are Property Deeds?
• Cornell University Law School Legal Information Institute: Deed of Trust
• California Department of Real Estate: Trust Deed Investments -- What You Should Know?

Joe Stone is a freelance writer in California who has been writing professionally since 2005. His articles have been published on LIVESTRONG.COM, SFgate.com and Chron.com. He also has experience in background investigations and spent almost two decades in legal practice. Stone received his law degree from Southwestern University School of Law and a Bachelor of Arts in philosophy from California State University, Los Angeles.

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Deed of Assignment vs Novation: A Comprehensive Guide

Home > Uncategorized > Deed of Assignment vs Novation: A Comprehensive Guide

• April 17, 2023

Deed of assignment and novation are two legal tools used to transfer contractual rights and obligations from one party to another. While both serve similar purposes, they differ in their implications and the extent of the transfer of rights and obligations. In this comprehensive guide, we will explore the key differences between the deeds of assignment and novation and provide insights into their respective uses.

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Deed of assignment and novation.

In the world of legal contracts, there are various tools available to transfer rights and obligations from one party to another. Two commonly used tools are deeds of assignment and novation. Both legal tools allow parties to transfer rights and obligations under a contract, but there are some differences between them.

A deed of assignment is a legal document that transfers the rights and obligations of one party to another party. It is often used in situations where one party wants to transfer its rights or obligations under a contract to another party without changing any other terms of the original contract. For example, if a homeowner wants to transfer their rights and obligations under a construction contract to a new contractor, they can use a deed of assignment to do so.

On the other hand, novation is a legal mechanism that allows parties to transfer both the rights and obligations of one party to another, and simultaneously replace one party in the original contract with a new party. In other words, novation replaces one party to the contract with another party, whereas a deed of assignment does not replace any party to the contract.

Novation is commonly used in situations where there is a change in ownership of a business or where a contractor wants to transfer its contractual obligations to a subcontractor. The novation process involves three parties: the original parties to the contract, the incoming party who will take over the obligations, and the outgoing party who will be released from their obligations.

In the following sections, we will delve deeper into the differences between the deeds of assignment and novation and explain how each legal tool works in practice.

Differences Between Deed of Assignment and Novation

When it comes to transferring rights and obligations under a contract, two legal tools commonly used are deeds of assignment and novation. Although both mechanisms involve the transfer of rights and obligations, they differ in various aspects, including the impact on the original contract and the consent required from the involved parties.

Rights and Obligations

Under a deed of assignment, the assignor transfers their rights and obligations to the assignee, but the original contract remains in force. In contrast, novation involves the creation of a new contract in which the original contract is extinguished, and a new contract is formed between the transferor, the transferee, and the obligor.

Original Contract

A deed of assignment does not affect the original contract between the assignor and the obligor, and the obligor must still perform their obligations to the assignee. In contrast, novation extinguishes the original contract, and the obligor’s obligations are owed to the transferee under the new contract.

New Contract or Deed

A deed of assignment does not require the creation of a new contract or deed, as the original contract remains in force. However, novation requires the creation of a new contract or deed, as the original contract is extinguished.

Consent Requirements

For a deed of assignment to be effective, the assignor must provide notice of the assignment to the obligor, but the obligor’s consent is not required. In contrast, novation requires the consent of all parties involved, including the transferor, the transferee, and the obligor.

It is crucial to understand the differences between a deed of assignment and a novation to choose the appropriate legal tool for transferring rights and obligations. Consider seeking legal advice before deciding which mechanism to use.

Novation in Detail

Novation is a legal process that transfers rights and obligations from one party to another. It differs from a deed of assignment in that it involves the substitution of a new party for an original party, rather than just the transfer of rights.

How a Novation Works

Novation requires the consent of all parties involved, including the new party that is taking on the rights and obligations. The process involves the following steps:

• Agreement: The parties involved must agree to the novation and the terms of the new arrangement.
• Documentation: A novation agreement must be drafted and signed by all parties involved.
• Communication: All relevant parties, such as banks or insurers, must be informed of the novation and give their consent.
• Implementation: The novation takes effect once all parties have signed the agreement and the necessary documentation has been completed.

Advantages and Disadvantages of Novation

There are several advantages to using novation in various situations, such as:

• It allows for the substitution of parties without the need for a new contract.
• It can simplify complex contractual arrangements.
• It can allow for a transfer of obligations to a party better equipped to fulfil them.

However, novation also has some potential drawbacks, such as:

• It requires the consent of all parties involved, which can be difficult to obtain.
• It can result in the loss of important rights or benefits for the original party.
• It can be more expensive and time-consuming than other legal tools.

Examples of Novation

Examples of novation include:

• When a new contractor takes over a construction project from the original contractor, assuming all the rights and obligations under the original contract.
• A subcontractor is working on a construction project for a main contractor. The subcontractor wants to assign the contract to another subcontractor due to financial difficulties. The main contractor agrees to novate the contract to the new subcontractor, who then takes over the subcontractor’s obligations and responsibilities.
• An engineering firm is contracted by a city to design and construct a new road. The engineering firm decides to sell the design and construction contract to another firm. The city agrees to novate the contract to the new firm so that the new firm can complete the project.
• A supplier has a contract with a contractor to supply building materials for a construction project. The supplier decides to sell the business to another company. The contractor agrees to novate the contract to the new company so that the new company can fulfil the supplier’s obligations under the contract.

Assignment in Detail

When a party to a contract transfers their rights and obligations to a third party, this is referred to as an assignment. The process of assignment is less complex than that of novation, as it does not require the formation of a new contract. Instead, a contract that already exists between two parties is simply transferred to a third party. Here are some details of the assignment:

How an Assignment Works

The process of assignment generally involves the following steps:

• The original parties to the contract must agree to the assignment.
• The assignor (the party transferring their rights and obligations) must provide written notice of the assignment to the other party.
• The assignee (the third party taking over the rights and obligations) must accept the assignment in writing.

Advantages and Disadvantages of Assignment

Like novation, assignment has its advantages and disadvantages. Some of the benefits of using assignment include:

• Flexibility: Assignment is a more flexible process than novation, as it doesn’t require the formation of a new contract.
• Simplicity: The process of assignment is less complex and less time-consuming than that of novation.

However, there are also some disadvantages to using assignment:

• No release from liability: Unlike novation, assignment does not release the assignor from their obligations under the original contract.
• Lack of control: The original party to the contract may be concerned about losing control over who they are dealing with if an assignment takes place.

Examples of Assignment

Here are some examples of assignments in the construction industry:

• A subcontractor assigns their right to receive payment for their work to a third party, such as a lender, to secure a loan.
• A contractor assigns their right to receive payment from the owner to a supplier or vendor to pay for materials or equipment used in the project.
• A developer assigns their right to receive payments from buyers of individual units in a development to a lender to secure financing for the project.
• A contractor assigns their right to receive payment from the owner to a joint venture partner to share the risk and reward of the project.
• An owner assigns their right to receive payments from a contractor to a surety to secure a performance bond for the project.

No Assignment Clauses in Construction Contracts

No assignment clauses are common in construction contracts and can have significant implications for both parties involved. These clauses prevent the transfer of rights or obligations to a third party without prior consent from the other party. In the context of construction contracts, the party with the most interest in such clauses is the Principal, who is usually the owner of the project.

Purpose of No Assignment Clauses

There are several reasons why Principals include no assignment clauses in construction contracts. These include:

• Maintaining control: By preventing the assignment of rights and obligations, the Principal maintains control over the project and ensures that all decisions and actions are made by the original contracting parties.
• Protecting interests: No assignment clauses can help protect the Principal’s interests by preventing the transfer of obligations to a third party who may not have the same level of expertise or resources as the original party.
• Avoiding conflicts: No assignment clauses can prevent conflicts that may arise from a change in the parties involved in the contract.

How to Negotiate a No Assignment Clause

If a Principal wishes to include a no assignment clause in a construction contract, they should be prepared to negotiate this with the other party. Here are some tips for negotiating a no assignment clause:

• Be clear about the reasons for the clause: The Principal should explain their reasons for including the no assignment clause and how it will benefit both parties.
• Consider exceptions: The Principal should consider including exceptions to the no assignment clause, such as allowing assignment with prior written consent or in the event of a sale of the business.
• Be reasonable: The Principal should ensure that the no assignment clause is reasonable and does not unfairly restrict the other party’s ability to conduct their business.
• Seek legal advice: Both parties should seek legal advice before finalising the contract to ensure that the no assignment clause is enforceable and does not contravene any laws or regulations.

No assignment clauses are an important consideration in construction contracts and should be negotiated carefully to protect the interests of all parties involved.

In conclusion, both deeds of assignment and novation are important legal tools that allow for the transfer of rights and obligations in a contract. However, they differ in terms of the impact on the original contract, the need for a new contract or deed, and the consent requirements of involved parties. It is important to carefully consider the specific circumstances and objectives of the parties involved before choosing the appropriate legal tool.

In the case of construction contracts, no assignment clauses play a crucial role in protecting the interests of Principals. They ensure that the Principal has control over who performs the works and avoids having to work with an unknown or untested contractor. Principals must understand the purpose of no assignment clauses and negotiate them carefully to ensure that their interests are protected.

Ultimately, seeking legal advice is recommended when deciding which legal tool to use or negotiating the terms of a contract. A lawyer can provide guidance on the best course of action and ensure that the parties involved are aware of their rights and obligations.

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Deed of Assignment and the Notice of Assignment -What is the Difference?

In this article, Richard Gray barrister takes a brief look at the differences between a Deed of Assignment and a Notice of Assignment and the effect of the assignment on the contracting party

At the end of 2020, Elysium Law were instructed to act for a significant number of clients in relation to claims made by a company known as Felicitas Solutions Ltd (an Isle of Man Company) for recovery of loans which had been assigned out of various trust companies following loan planning entered into by various employees/contractors.

Following our detailed response, as to which please see the article on our website written by my colleague Ruby Keeler-Williams , the threatened litigation by way of debt claims seem to disappear. It is important to note that the original loans had been assigned by various Trustees to Felicitas, by reason of which, Felicitas stood in the shoes of the original creditor, which allowed the threatened action to be pursued.

After a period of inertia, Our Clients, as well as others, have been served with demand letters by a new assignee known as West 28 th Street Ltd . Accompanying the demand letters is a Notice of Assignment, by reason of which the Assignee has informed the alleged debtor of the Assignees right to enforce the debt.

Following two conferences we held last week and a number of phone call enquiries which we have received, we have been asked to comment upon the purport and effect of the Notice of Assignment, which the alleged debtors have received. Questions such as what does this mean (relating to the content) but more importantly is the ‘Notice’ valid?

Here I want to look briefly at the differences between the two documents.

There is no need for payment to make the assignment valid and therefore it is normally created by Deed.

 The creation of a legal assignment is governed by Section 136 of the Law of Property Act 1925:

136 Legal assignments of things in action.

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—

(a) the legal right to such debt or thing in action;

(b) all legal and other remedies for the same; and

(c) the power to give a good discharge for the same without the concurrence of the assignor:

Some of the basic requirements for a legal assignment are;

• The assignment must not be subject to conditions.
• The rights to be assigned must not relate to only part of a debt, or other legal chose in action.
• The assignment must be in writing and signed by the assignor.
• The other party or parties to the agreement must be given notice of the assignment.

Notice of assignment

To create a legal assignment, section 136 requires that express notice in writing of the assignment must be given to the other contracting party (the debtor).

Notice must be in writing

Section 136 of the LPA 1925 requires “express notice in writing” to be given to the other original contracting party (or parties).

 Must the notice take any particular form?

The short answer is no. Other than the requirement that it is in writing, there is no prescribed form for the notice of assignment or its contents. However, common sense suggests that the notice must clearly identify the agreement concerned.

Can we  challenge the Notice?

No. You can challenge the validity of the assignment assignment by ‘attacking the Deed, which must conform with Section 136. In this specific case, the Notice sent by West 28 th Street in itself is valid. Clearly, any claims made must be effected by a compliant Deed and it is that which will require detailed consideration before any right to claim under the alleged debt is considered.

Can I demand sight of the assignment agreement

On receiving a notice of assignment, you may seek to satisfy yourself that the assignment has in fact taken place. The Court of Appeal has confirmed that this is a valid concern, but that does not give an automatic right to require sight of the assignment agreement.

In Van Lynn Developments Limited v Pelias Construction Co [1969]1QB 607  Lord  Denning said:

“After receiving the notice, the debtor will be entitled, of course, to require a sight of the assignment so as to be satisfied that it is valid…”

The Court of Appeal subsequently confirmed this  stating the contracting party is entitled to satisfy itself that a valid absolute assignment has taken place, so that it can be confident the assignee can give it a good discharge of its obligations

The important document is the Deed of Assignment, which sets out the rights assigned by the Assignor. The Notice of Assignment is simply a communication that there has been an assignment. The deed is governed by Section 136 of the LP 1925. It should be possible to obtain a copy of the Deed prior to any action taken in respect of it.

For more information on the claims by West 28 th Street or if advice is needed on the drafting of a Deed, then please call us on 0151-328-1968 or visit www.elysium-law.com .

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SUMMARY OF DIFFERENCE BETWEEN CONTRACT OF SALE AND DEED OF ASSIGNMENT

Contract of sale and deed of assignment are both documents used in real estate-related transactions in Nigeria. Although they are both used in property transactions the difference between both documents can be derived from their distinctive features and the role they each individually play in the acquisition of title to landed properties in Nigeria.

Generally, there are five stages involved in the process of acquisition of land in Nigeria, which range from the pre-contract stage to the post-completion stage. The contract of sale is executed at the second stage of a land transaction; it is evidenced in writing and is not mandated to be under seal. It is a preliminary land document executed in the transfer of ownership in the land to another from the seller to the buyer. A contract of sale takes effect after it has been exchanged between parties and it contains not only the basic requirements but goes further to include detailed terms, consideration, and future obligations of what the parties have agreed in respect of the land transaction. Some of the provisions of a contract of sale are:

• Full details of the parties – (name and address).
• Particulars of the property to be transacted (location, survey plan, etc).
• Particulars of witnesses.
• Purchase price of the property.
• Payment of deposit, to whom it is to be paid, and in what capacity.
• Balance and interest on unpaid purchase sum where the payment is to be paid in installments.
• The capacity of the vendor.
• Risk and insurance.
• Possession before completion
• Completion date of the transaction.
• Provision for fixtures and fittings.
• Specific terms, risks, etc.

Where a contract of sale has been executed between parties, an equitable right of the title is passed to the buyer as the vendor still retains legal title to the land and holds the same in trust for the buyer. A vendor cannot transact with the land contrary to the agreement in the contract and no party can rescind the contract without being held liable for a breach of contract.

Features of a Contract of Sale

• In a contract of sale, the vendor is committed to the transaction and the purchaser has sufficient time to investigate the title before the final completion of the transaction.
• The death of either party to the transaction does not terminate the contract as personal representatives can proceed with the contract of sale.
• A contract of sale prevents last-minute withdrawal as withdrawal would amount to a breach of the contract.
• A contract of sale protects the equitable interest of the purchaser
• It crystallizes the position of the parties as terms have been expressly agreed upon.
• The vendor cannot unilaterally and subsequently increase the purchase price as the price has already been fixed in the contract.
• Payment of lesser stamp duties.

Deed of Assignment is the legal instrument executed between a buyer and seller upon the negotiation and completion phase of a sale of land transaction, subject to perfection. It is usually demanded by the buyer of the real property at the conclusion of the property transaction as the final legal document that transfers the interest of title in a land without any conditions attached, beyond the payment of the consideration price of the property. In a deed of assignment, the nomenclature of parties changes from Vendor to Assignor and Buyer to Assignee. Upon the execution of a deed of assignment between parties, there is a permanent transfer of legal title and ownership to land from the assignor to the assignee for a consideration paid and accepted by the assignor.

Deed of assignment is required to be evidenced in writing; to be signed, sealed, and delivered by parties to the transaction. A deed of assignment is said to have been delivered when interest has passed to the Assignee and the interest can be passed with or without a physical handover.

Another major difference between a contract of sale and deed is that under a deed of assignment, the title of land acquired is required to be perfected upon payment of the full consideration and execution of the deed. The perfection of title involves the assignee taken the required steps to register the deed of assignment at the appropriate Land Registry. The process for the perfection of a deed of assignment involves the following three steps;

• Obtaining Governors Consent.
• Stamping of the deed of assignment, and
• Registration of the deed of assignment.

Finally, in a contract of sale, the buyer only acquires equitable interest in the property while the seller retains the legal interest in trust for the buyer. In the deed of assignment, the assignee acquires legal interest in the property and it can serve as a good root of title to subsequent buyers while the interest of the assignor on the same property is completely extinguished.

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LIVING TRUST

What is an assignment of trust deed.

By Tom Streissguth

• What Is a Corporate Assignment of Deed of Trust?

If you own a home, you may have signed a trust deed that gives the mortgage lender a claim on the property. A default on the loan gives the lender the legal authority to foreclose on the loan and take possession of the house. An assignment of a trust deed conveys that claim to another party.

Considerations

Lenders have the right to sell their home loans. This can happen once or several times over the long life of a mortgage. The usual customers for mortgages are banks and other companies that are seeking safe and stable investment returns. This "secondary" market for mortgages is quite active, and a lender has plenty of opportunity to sell a mortgage and turn a profit. Read More: What Is a Corporate Assignment of Deed of Trust?

When a lender sells the loan, it assigns the trust deed to the buyer. “Assignment” means to convey a claim or a right to another party, known as the “assignee.” This is done by creating another legal document — the assignment of trust deed — and having it signed by both buyer and seller. The trust deed, and other documents associated with the loan, become the property of the buyer.

The assignment of trust deed is a short, usually single-page document. The body text gives the names of the deed buyer and the property owner, the date of the original trust deed, and the legal description of the property for which the original deed was executed. It may also give the terms of the deed sale. The seller signs and dates the document, and has it notarized. The buyer then has the assignment of trust deed recorded with the registrar of the county where the property is located.

A borrower has no legal right to block or negotiate the terms of an assignment of trust deed. The assignment does not affect the terms of the loan. The monthly payments remain the same, although the borrower will have to send them to a new address. The new owner of the trust deed becomes the lender and collects all mortgage payments, sometimes on its own and sometimes through a servicing company. If a default occurs, the latest assignee has the right to foreclose and repossess the home.

• US Legal: Assignment of Trust Deed
• Guide to the Stock Market: Assignment of Trust Deed

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.

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Assignment vs. conveyance.

Assignments and conveyances are both transfers of ownership interests in property, including real estate, intellectual property or personal property. You will often see conveyances used in real estate contracts, especially those involving deeds. You typically see assignments used in contracts involving personal property. You must legally document any transfer by assignment or conveyance.

Conveyance Defined

Conveyance refers to the transfer of ownership or interest in real estate or real property from one person or entity to another by a legally acceptable document. Acceptable documents include deeds, mortgages, leases and statements of conveyance. The latter is different from a deed or lease in that it is a much simpler document, usually only one page. You can also use a statement of conveyance to transfer intangible property — for example, a trademark or license — to someone else. You must have a conveyance acknowledged before a notary for it can to be legal.

Assignment Defined

An assignment is the transfer of a claim, right, interest or title to a property, especially personal property. In addition, an assignment refers to the actual document — also called the instrument — you use to record and make the transfer legal or the property you actually assign. When you sell a house, you're making an assignment of that property to the person buying it through that stack of paperwork that you sign at closing.

Assignment in Practice

You typically assign something — real estate, shares in a corporation, rights to the book you wrote — to a person, trust, corporation, limited liability company or charity. For example, if you invest in the stock market with options, your broker may require you to assign your shares to the brokerage firm. It does this in case it needs to sell your shares to satisfy the option agreement terms. Consult with an attorney to ensure that you properly structure the assignment and address any issues.

Conveyance Versus Assignment

Conveyance is a term used to describe what occurs in real estate and real property transactions. For example, when you buy a house, the seller conveys his ownership to you via a deed. In addition, you convey a security interest in your home to your lender via a mortgage. Assignment is a term that most use to cover non-real estate transactions or partial ownership interest. For example, if you donate stock in a company to a charity, you will sign a document assigning those shares to that charity.

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Dissolve a Testamentary Trust →

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Trustee Deed Vs. Warranty Deed →

• Free Dictionary: Assignment
• Investopedia: Conveyance

Tiffany C. Wright has been writing since 2007. She is a business owner, interim CEO and author of "Solving the Capital Equation: Financing Solutions for Small Businesses." Wright has helped companies obtain more than $31 million in financing. She holds a master's degree in finance and entrepreneurial management from the Wharton School of the University of Pennsylvania.

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Tanny   --> 12 December 2016

Sale deed versus deed of assignment

While buying a resale property in a co-operative housing society, I have differing opinion on whether a "sale deed" is appropriate of a "deed of assignment" is appropriate. I consulted several people from legal profession and opinion seems to be divided with some saying Sale Deed is mandatory, some saying Deed of Assignment is ok and some even suggesting rather absurdly - "you tell us what you want and we will do that for you".

My question is - I am looking for specific guidance of whether I register my agreement with a Sale Deed or with a Deed of Assignment. Please can you guide.

 10 Replies

Ms.Usha Kapoor (CEO)     --> 13 December 2016

First draft  asale deed and thendraft  adeed of Assignment and register both of them.If you appreciate this answer please give me all my profile likes.

Kishor Mehta (CEO)     --> 13 December 2016

Kumar Doab (FIN)     --> 13 December 2016

Agreed with Mr. Kishore Mehta.

Rama chary Rachakonda (Secunderabad/Telangana state Highcourt practice watsapp no.9989324294 )     --> 13 December 2016

In real property transactions, a  deed of assignment  is a legal document that transfers the interest of the owner of that interest to the person to whom it is assigned, the assignee. When ownership is transferred, the  deed of assignment  shows the new legal owner of the property.

An "absolute sale" deed is defined by having no conditions attached to the sale except the buyer's payment of the purchase price. When the seller signs and delivers the absolute sale deed, this is generally recognized by law as the moment of sale.

Tanny   --> 13 December 2016

Thank you for explaining the difference between a Sale Deed and a Deed of Assignment. However could you explain in my case which is the one I would go for?

rajeev sharma (Advocate Ex senior manager law )     --> 13 December 2016

please ask reseller what document the builder has executed in his favi\our .if it is sale deed then dont compromise get sale deed executed in your favour

even the seller has a deed of assignment from his previous purchase. In that case will a sale deed or a deed of assignment be appropriate?

Adv. K.S.A.Narasimha Rao ([email protected] )     --> 13 December 2016

Dear Tanny,

Basing on the rights possessed by your prospective seller, the nominclature of the document depends on.

If your Prospective Seller is having only right of possession in respect of the property, then he can only make a deed of Assignment. But if your Seller is having absolute powers to sell the flat, then you can use nominclature as "Sale Deed".

Kindly clarufy if the deed of assignment be cancelled by assignor.

Aseem Koradia   --> 15 December 2016

The name of document is immaterial. The content of the document will remain the same. interpretation will be from the content of the document.

Aseem Koradia

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• Arbitration
• Arbitration Clause In Original...

Arbitration Clause In Original Lease Deed Incorporated Into Deed Of Assignment When Deeds Are Interconnected And Consistent: Calcutta High Court

Rajesh kumar.

11 Sep 2024 9:30 AM GMT

The Calcutta High Court bench of Justice Ravi Krishan Kapur has held that if a deed of assignment is properly interpreted as being interconnected and related to the original lease deed containing an arbitration clause, then the parties intended for the arbitration clause to be included in the deed of assignment.

The bench held that interrelationship was not merely superficial but indicative of a deliberate and mutual intent between the parties to incorporate certain terms from the initial lease deed into the new agreement.

The arbitration clause, originally present in the initial lease deed, was a focal point of the dispute. By reading both documents together, the High Court found that the parties had unmistakably intended for the arbitration clause to be carried over into the deed of assignment.

Brief Facts:

Tata Communications Limited (Petitioner) owner of a plot of land located in Kolkata leased this plot to Respondent no. 2 under a lease deed for business purposes. Due to repeated breaches of obligations under the initial lease deed, the parties entered into a tripartite agreement, known as the deed of assignment, which involved Rudrapriya Constructions LLP (Respondent no. 1) continuing the business of event management, food court, and ceremonial functions. Disputes arose between the parties which made the Petitioner to terminate both agreements on 18 December 2023 primarily due to non-payment of lease rentals.

On 15 February 2024, the Petitioner issued a notice under Section 21 of the Arbitration and Conciliation Act invoking the arbitration clause specified in the initial lease deed and the deed of assignment. The Respondents did not respond to this notice. Feeling aggrieved, the Petitioner approached the High Court under Section 11 of the Arbitration Act for appointment of an arbitrator.

In response to the application, Respondent no. 1 raised an objection and argued that the deed of assignment does not contain an arbitration clause since it was not explicitly incorporated.

The Petitioner contended that, when reading the deed of assignment in conjunction with the initial lease deed, it is evident that the arbitration clause in Clause 19.3 of the initial lease deed should be considered incorporated into the deed of assignment. The Petitioner argued that the mutual intention of the parties was to resolve disputes through arbitration, and the deed of assignment is not an independent document but should be viewed as interconnected with the initial lease deed.

Clause 19.3 of the initial lease deed provides as follows:

“19.3: Dispute resolution- (a) Any dispute arising out of or in connection with this Lease Deed (including a dispute regarding the existence, validity or termination of this Lease Deed or the consequences of its nullity) shall be sought to be resolved and settled amicably between the parties, within 15 (Fifteen) Business Days of written notice of such dispute arising, failing which it shall be referred to and finally resolved by arbitration under the Arbitration and Conciliation Act, 1996 …………..”

Observations by the High Court:

The issue before the High Court was whether an arbitration clause from an initial lease deed could be incorporated into a subsequent deed of assignment by reference. The initial lease deed contained a detailed arbitration clause, outlined in Clause 19.3, which provided a mechanism for dispute resolution. This included the appointment of an arbitrator, the conduct of proceedings in English, and the specification that the arbitration would take place in Kolkata. The clause also specified that the arbitration award would be final and binding, and that the costs would be borne equally by the parties.

The deed of assignment, which was executed subsequent to the initial lease deed, contained provisions that confirmed the terms and conditions of the initial lease deed would apply to the assignment, except for the revised terms specifically recorded in the deed of assignment. Notably, the deed of assignment referenced the initial lease deed but did not explicitly incorporate the arbitration clause from the initial lease deed.

The High Court examined Section 7(5) of the Arbitration Act which addresses the incorporation of an arbitration clause from one document into another by reference.

According to Section 7(5), a reference in a contract to a document containing an arbitration clause can constitute an arbitration agreement if the reference is such that it makes the arbitration clause part of the contract. The High Court noted that for incorporation by reference to be effective, the reference must be clear and indicate an intention to include the arbitration clause in the contract. Additionally, the arbitration clause must be suitable for resolving disputes under the new contract and should not contradict its terms.

The High Court that there is need for a clear and specific reference to incorporate an arbitration clause from another document. It reiterated that a general reference to another document does not automatically incorporate its arbitration clause. Instead, there must be a deliberate intent to adopt the arbitration clause which must reflect the parties' mutual agreement to subject their disputes to arbitration as stipulated in the referenced document.

The High Court further highlighted that the intention to incorporate the arbitration clause should be determined through the principles of construction, evaluating whether the reference to the initial lease deed was meant to include its entire content, including the arbitration clause, into the deed of assignment.

It noted that Recital D of the deed of assignment explicitly stated that the assignment was based on mutual discussions and was made with reference to the terms of the initial lease deed as well as the modified terms of the assignment deed. Clause 1.1 of the deed of assignment confirmed that the terms and conditions of the initial lease deed, except for those specifically revised, would apply to the deed of assignment. This included the arbitration clause.

Clause 13 of the deed of assignment made modifications to certain sub-clauses of Clause 19 of the initial lease deed but left the arbitration clause unchanged. The High Court observed that, when reading both the initial lease deed and the deed of assignment together, it was clear that the entirety of Clause 19 including the arbitration clause was incorporated into the deed of assignment. The High Court reasoned that the parties intended to retain the arbitration clause as part of the new agreement given that other sub-clauses of Clause 19 remained unaffected.

The High Court further reasoned that the incorporation of the arbitration clause was consistent with the parties' commercial intent and the nature of the documents. Both the initial lease deed and the deed of assignment were interconnected, and the arbitration clause was not inconsistent with the new terms. The High Court rejected any contention that the arbitration clause should be excluded from the deed of assignment and held that the intention of the parties at the time of executing the deed of assignment was to retain the arbitration clause.

Additionally, the High Court dismissed arguments from the Respondents that the incorporation of the arbitration clause was not valid. It distinguished the present case from previous decisions noting that those cases either involved different factual circumstances or did not address the specific issue of inter-linked documents incorporating arbitration clauses. The High Court found that the deed of assignment, by incorporating the initial lease deed, included the arbitration clause by clear intent and mutual agreement.

The bench held that:

“On a proper construction of the deed of assignment which is inter-connected and inter-related with the initial lease deed, the parties obviously intended the arbitration clause to be incorporated in the deed of assignment. This is the only imputed mutual intention of the parties which can be arrived at on a combined reading of both the documents. Both documents are commercial documents and require to be read together. The parties were dealing at arm's length. It is not possible to severe the two documents. It is true that the rationale behind seeking a specific reference necessary to incorporate an arbitration clause is that the parties are precluded from bringing a dispute before Court, an arbitration agreement has to be a written agreement and an arbitration agreement is of a different nature from other clauses as it constitutes a self- contained collateral contract. Nevertheless, the above construction is so obvious that the parties must have not only formed an intent of the same but are deemed to have agreed to specifically have incorporated the arbitration agreement when executing the deed of assignment.”

Consequently, the High Court allowed the application. It ordered that Justice Indira Banerjee (Retired), Supreme Court of India, be appointed as the Nominee Arbitrator, provided she communicated her consent within three weeks.

Case Title: Tata Communications Limited Vs Rudrapriya Constructions LLP and Anr.

Case Number: AP/77/2024

Advocate for the Petitioner: Mr. Dhruba Ghosh, Senior Advocate Mr. Altamas Alim, Advocate Mr. A. Goyal, Advocate

Advocate for the Respondent: Mr. Sarvapriya Mukherjee, Advocate Mr. Rachit Lakhmani, Advocate Mr. L. R. Mondal, Advocate

Date of Judgment: 5.09.2024

Click Here To Read/Download Order or Judgment