Assignment agreement vs contract take over (cessie vs contractsovername)

September 8, 2020

An assignment agreement or a contract take over is used in cases where one party (Party A) wants to acquire a claim that another party (Party B) has on a third party. Party A can for example acquire the claim or the rights and obligations that Party B has because Party B owes Party A money.

There has to be a legal basis to execute an assignment agreement or a contract take over.

Although the mechanism of an assignment agreement and that of a contract take over can be used in a similar situation, there are key differences between an assignment agreement and a contract take over that should be taken into account when deciding which one will be applied.

An assignment agreement is the agreement used to transfer a claim from one party to another party. The party obtaining the claim will take the place of the party transferring the claim. In the case of an assignment only the claim will be transferred and assigned. There are legal requirements that parties need to adhere to when entering into an assignment agreement, and failure to implement these requirements can affect the validity of the assignment agreement.

In the case of a contract take over, the complete contract is transferred to a new party. This means that the party taking over the contract will become a party to the contract instead of the one transferring the contract and all rights and obligations of the contract will be applicable on the party taking over. The other party/opposite party must agree with the contract take over for this to have effect.

The difference is simple: in the case of an assignment, only the claim will be transferred. In the case of a contract take over the complete legal relationship is taken over. It is important to properly determine which mechanism is needed taking into account the facts and circumstances of the case and the goal to be achieved.

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