When entering into a services contract, you may be focused on the business terms such as the scope of services and the fees to be paid and gloss over the provisions towards the end of a contract that look like boilerplate provisions. These provisions include the governing law of the contract and assignment provisions that typically restrict one party’s ability to transfer the contract to a third party without the consent of the other party. So, why be so hung up on an assignment clause?
Well, paying careful attention to an assignment clause may save you headaches down the road if a service provider you are expecting to carry out services for many years in a contract suddenly decides to merge with another company or sells its shares to another party that you are not too confident in or concerned about. If you were expecting to rely on the assignment clause to prohibit the transfer of your contract to the newly merged company or new owners, you would be disappointed to find out that the assignment clause is not the mechanism to achieve that if your assignment provision does not include a restriction on a change in control of the service provider.
Having a change of control restriction in your assignment clause will help restrict the transferability of your contract if there is a change in ownership of the service provider to minimize any impact on the quality and level of services you expect to receive. If you are currently negotiating a services contract or thinking of entering into one, we can help you review the assignment clause to protect your interests.
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