Assignment of a contract

A contract is a legal agreement entered into between two parties on a voluntary basis, where a series of rights and duties to be fulfilled by both parties are specified; such agreement may be made in writing or orally.

However, in the field of business there is a legal figure called assignment of contract. This figure consists of one of the two parties (hereinafter referred to as the assignor) deciding to pass its assets and liabilities of the contract to a third party (hereinafter referred to as the assignee), in order not to let the interests that had originally led to the creation of the original contract expire.

This legal figure is supported by articles 887 to 893 of the mercantile code, and it is in article 887 where it is expressed what type of contracts are feasible to make an assignment.

This article specifies that “In commercial contracts of periodic or successive performance, each of the parties may be substituted by a third party in all or part of the relations arising from the contract without the need for express acceptance of the assigned contracting party, if such substitution has not been prohibited or limited by law or by stipulation of the parties themselves….“.

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

1. The first is that not all contracts can be assigned,
2. And second, the parties that entered into the contract may stipulate and make it clear in the clauses that such contract may not be assigned.

Further on the same article continues:“…The same substitution may be made in mercantile contracts of instantaneous execution which have not yet been performed in whole or in part, and in those entered into intuitu personae, but in these cases the acceptance of the assigned contracting party shall be necessary.”

For these two types of contracts there are certain special conditions for the assignment.

• For the first case, it is required that the tasks of the contract have not been fulfilled, so there is still an economic motive that drives the termination of the contract and that moves both parties.
• For the second caseThis type of contract is entered into due to the subject’s own capabilities to fulfill the objectives of the contract, however, there is the possibility of an assignment of the contract, when the assignor informs the other party of the process, and the other party accepts.

Pursuant to article 888 of the commercial code the assignment of a contract can be made in written or oral form, depending on whether the original contract was made in written form 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.

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

In summary, the assignment of a contract is a legal figure that allows one of the parties to assign its position to a third party, in order not to extinguish and preserve the legal and patrimonial relations with the party that started the contract in the first place.

This figure requires that the contract is likely to be assigned or has no clause that prevents it, and to be effective, the other party must be informed of the conclusion of the figure.