Strategy, Legal & Operations

What do contract “assignments” have to do with your rights?

Man working

Many construction contracts contain assignment provisions. In legal terms, an “assignment” is the transfer of one’s rights to another person. In the same contract, provisions can be added to both prevent and grant assignments. To better understand this, let’s look at two types of assignments often found in contracts.

The buck stops with you

When an owner or another contractor hires you, they don’t want your rights under the project contract to be transferred to someone else, especially someone they do not know. To prevent this, many contracts have assignment provisions to control when and how assignments can be made.

While this type of assignment provision is common, it typically doesn’t prevent you from subcontracting parts of your work to other people. The main stipulation, however, is that you are still ultimately responsible for obligations in the contract, even though you decided to sub out some of the work. The following example is typical of the contact language you will see:

Nothing herein shall prevent contractor from engaging subcontractors and suppliers to perform a portion of the work hereunder. However, contractor shall be and remain as fully responsible for all persons, directly or indirectly, employed by such subcontractors and suppliers as contractor is for its own acts and omissions and those of its agents, servants, and employees.

Cautionary measures

Another type of contract provision requires the contractor to assign to the owner or prime contractor rights to any subcontracts or material orders. For example, consider this likely scenario:

A general contractor hires an electrician to do work on one of its projects. As part of the work, the electrician has to purchase a generator but it will take 16 weeks before the generator gets delivered. The GC expects the electrician to be finished with its work before the generator arrives.

Contract assignment provisions in this case are important because, even though the GC doesn’t have a direct contract with the generator supplier, the GC needs to be able to obtain the generator to keep the job moving forward.

As with any contract language, work with your lawyer to understand assignment provisions and how they impact your rights and responsibilities.