Here are a few examples of the role an assignor plays in some common scenarios.
Auto Loan
The contract between a consumer with a car lease and a dealership is frequently assigned to a third party. The initial contract is signed between the car buyer and the car dealership when a vehicle is bought or leased. The buyer and the dealership are the two original party members of the contract. The car dealership (the assignor) will sell the loan on the car to a bank (the assignee) in an assignment. The bank now holds the rights to collect money from the car owner in exchange for ownership of the vehicle. The bank notifies the car owner (the “obligor”), and payments are made to the bank instead of the dealership.
Apartment Lease
It’s not uncommon for a tenant to move before the end of their lease. If the original contract allows for an assignment of the lease to another person, tenants can transfer that lease to another person in an assignment. It is more commonly called a lease takeover or lease transfer. Here, the tenant (assignor) transfers the rights of living in the property to the new tenant (assignee). The apartment community is the obligor, the original tenant is the assignor, and the new tenant is the assignee.
Real Estate
It’s also common to see assignments in real estate. One tool real estate investors may use is a real estate assignment contract. This is more commonly known as wholesaling, selling contracts, flipping contracts, or assignment of real estate. In this type of transaction, a real estate investor finds a property to buy from an owner. They sign a contract for the property at a sales price they both agree to. Next, instead of closing the sale, the real estate investor will find a new buyer for the property at the agreed-upon contract price. What the real estate investor is selling is the right to buy the property from the original owner for the terms agreed on in the contract. In exchange, the real estate investor earns an assignment fee, usually around $5,000. In this example, the original owner of the property is the obligor, the real estate investor is the assignor, and the end buyer is the assignee.
How Does an Assignor Work?
Generally speaking, all contract rights may be assigned by the assignor. There are a few exceptions, including where:
Prohibited by statuteThe contract bans an assignment of contractAssignment would materially change the risk or alter the duties of the obligorThe contract assigned is for personal services
An assignment takes place when the assignor is interested in finding a replacement to fulfill or receive the benefits of the original contract. It may be out of necessity, convenience, generosity, or another reason. A failed business, for example, may need to find a replacement for the lease agreement on its place of business. Rather than continue to make payments to a landlord, the business (assignor) may be able to find a new tenant (assignee) to take the right of occupying the property in exchange for paying rent to the landlord (obligor). This is only possible if the contract allows for an assignment. Another reason an assignor may want to transfer rights is for convenience. In a previous example, a car dealership (assignor) sold car loans to a bank (assignee). This frees up the dealership to sell cars instead of service loans. It makes more sense for the bank to service a car loan instead of a dealership doing so. Each of the parties in the assignment has a role, as shown in the examples given. The assignor’s role: The assignor is the party that transfers its contractual rights to another party. These contractual rights include both the contractual obligations and the benefits. The assignee steps into the assignor’s role to fulfill the contract with the obligor. The assignor no longer has a role in the contract after the assignment of the contract is complete. An assignor only acts as an assignor when transferring rights and obligations of a contract to an assignee. In other words, the assignor would continue in its role as promisee (as opposed to assignor) if no assignment was made. The assignee’s role: The assignee is the party that accepts the contractual rights from the assignor. The assignee can be an individual, group, business, or other entity. The assignee is not an original party to the contract, but steps in to fill the role specified in the contract by the assignor. The obligor’s role: The obligor is the original party member with a contract with the assignor. When the contract is assigned from the assignor to the assignee, the obligor now owes the benefit (like rent or car payment) to the assignee.
Assignor vs. Delegator
An assignor is similar to a delegator. A delegator frees themselves of the responsibilities of the assignment by delegating them to a third party. However, unlike an assignor, a delegator is not completely free of the obligations (or benefits). If the delegatee fails to perform the duties of the assignment, the delegator is still responsible to perform the duties of the original contract.
