Assignment of a contract

Contract Assignment in Colombia: A Complete Guide

A contract is a legal agreement voluntarily entered into by two parties, specifying a series of rights and obligations to be fulfilled by both; this agreement can be made in writing or orally.

Contract Assignment: A Legal Figure

In the business world, there is a legal figure known as contract assignment. This figure consists of one of the two parties (hereinafter called the assignor) deciding to transfer their assets and liabilities of the contract to a third party (hereinafter called the assignee), with the objective of not letting the interests that initially led to the creation of the original contract lapse.

This legal figure is supported by articles 887 to 893 of the Commercial Code, and it is in article 887 where it is stated what types of contracts are feasible for an assignment to be made.

This article specifies that "In commercial contracts of periodic or successive execution, each of the parties may be replaced by a third party, in whole or in part of the relationships derived from the contract without the need for express acceptance of the assigned contracting party, if by law or by stipulation of the parties themselves such substitution has not been prohibited or limited…".

Conditions for Contract Assignment

The interesting thing about this article is that it informs us that there are certain conditions for a contract to be assigned:

1. First, not all contracts can be assigned,
2. And second, the parties who entered into the contract may stipulate and make it clear in the clauses that said contract cannot be assigned.

Further on, the same article continues: "…The same substitution may be made in commercial contracts of immediate execution that have not yet been fulfilled in whole or in part, and in those entered into intuitu personae, but in these cases the acceptance of the assigned contracting party will be necessary.”

Special Conditions for Types of Contracts

For these two types of contracts, there are special conditions to be able to carry out the assignment.

• For the first case, it is required that the tasks of the contract have not been fulfilled; in this way, there is still an economic reason that drives the resolution of the contract and motivates both parties.
• For the second case, these types of contracts are celebrated due to the inherent capacities that the subject possesses for the fulfillment of the objectives of the contract; however, there is the possibility of carrying out an assignment of the contract when the assignor informs the other party of the process, and the other party accepts.

Formalities of Contract Assignment

According to article 888 of the Commercial Code, the assignment of a contract can be made in writing or orally, depending on whether the original contract was made in writing or not.

When the contract consists of a public deed, the assignment must be made by means of a private deed with prior authentication and signature of the assignor.

Mandatory Notification

Finally, article 892 specifies that it is mandatory to inform the other party that a contract assignment has been made, this with the objective of informing who the new creditor will be; if this is not informed, a breach of contract will occur, and punishment will be given according to the criminal code for fraud.

Summary

In short, contract assignment is a legal figure that allows one of the parties to cede its position to a third party, in order to not extinguish and preserve the legal and patrimonial relationships with which it began in the first place.

This figure requires that the contract be likely to be assigned or that it does not have clauses that prevent it, and for it to be effective, the other party must be informed of the celebration of the figure.

If you need help with this process, you can contact us.