Non-Assignment Sample Clauses

No assignment

No assignment clause samples

No Assignment .ExecutiverepresentsandwarrantsthatExecutive has made no assignment or other transfer, and covenants that Executive will make no assignment or other transfer, of any interest in any claim which Executive may have against the Company or any of the other Releasees (as defined in the Release).

11/06/2020 (Summit Midstream Partners, LP)

17. No Assignment . The Employee represents and warrants that Employee has made no assignment , and will make no assignment , of any claim, action, or right of any kind whatsoever, embodied in any of the matters referred to in this Agreement, and that no person or entity of any kind had or has any interest in any of the demands, obligations, actions, claims, debts, liabilities, rights, contracts, damages, attorneys’ fees, costs, expenses, losses, or claims referred to in this Agreement. By signing this Agreement, Employee has released all claims against the Releasees on behalf of Employee’s self, heirs, spouse, representatives, attorneys, advisors, family members, agents, or assigns.

05/01/2019 (NUVASIVE INC)

6. NO ASSIGNMENT . No party hereto may assign its rights, interests or obligations hereunder to any other person (except by operation of law) without the prior written consent of each other party hereto; provided, however, that the Guarantor may assign all or a portion of its obligations hereunder, with prior written notice to the Guaranteed Party accompanied by a guarantee in the form identical to this Limited Guarantee duly executed and delivered by the assignee, to an Affiliate of the Guarantor; provided, further, that no such assignment shall relieve the Guarantor of any liability or obligations hereunder except to the extent actually performed or satisfied by the assignee.

11/21/2017 (JA Solar Holdings Co., Ltd.)

5. No Assignment . This letter and the commitment of the Investor described herein shall not be assignable by Parent without the prior written consent of the Investor, and the granting of such consent in a given instance shall be solely in the discretion of the Investor and, if granted, shall not constitute a waiver of this requirement as to any subsequent assignment. The Investor may without the prior written consent of Parent assign some or all of its obligations under Section1 to any of its Affiliates if such assignment is not reasonably expected to have the effect of impairing or delaying the Closing or the funding of the Investor’s Commitment at the time set forth in Section1, but may not otherwise assign its rights or obligations hereunder. No assignment by the Investor of any of its obligations hereunder will relieve the Investor of its obligations under this letter. Any purported assignment in contravention of this Section5 shall be void.

07/17/2017 (NCI, Inc.)

12. No Assignment . This Note shall not be assignable by Payee without the prior written consent of Maker.

08/17/2018 (Collective Wisdom Technologies, Inc.)

C. No Assignment . A Participant or Participant’s beneficiary shall have no right to anticipate, alienate, sell, transfer, assign, pledge or encumber any right to receive any incentive made under the Plan, nor will any Participant or Participant’s beneficiary have any lien on any assets of any Participating Employer, or any affiliate thereof, by reason of any Award made under the Plan.

02/14/2017 (Vistra Energy Corp)

9) NO ASSIGNMENT . The Option Agreement and the Option Rights shall not be assignable, whether by operation of law or otherwise, and any attempt to do so shall be void.


11. No Assignment . The Commitments evidenced by this Agreement shall not be assignable, in whole or in part, by Newco without each Fund’s prior written consent, and the granting of such consent in a given instance shall be solely in the discretion of such Fund, and, if granted, shall not constitute a waiver of this requirement as to any subsequent assignment. No assignment by any Fund shall relieve such Fund of any of its obligations under this Agreement (including, without limitation, with respect to the Commitment), and, without limitation of the foregoing, if any assignee is unable or unwilling to fund, including by reason of the failure to obtain any approvals required by any Governmental Authorities relating to such assignment, the assignor Fund shall fund the previously assigned portion of its Commitment. Any purported assignment of this Agreement or the Commitment in contravention of this Section11 shall be void.

10/30/2017 (Gigamon Inc.)

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Contract Clauses

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Assignment clause defined.

Assignment clauses are legally binding provisions in contracts that give a party the chance to engage in a transfer of ownership or assign their contractual obligations and rights to a different contracting party.

In other words, an assignment clause can reassign contracts to another party. They can commonly be seen in contracts related to business purchases.

Here’s an article about assignment clauses.

Assignment Clause Explained

Assignment contracts are helpful when you need to maintain an ongoing obligation regardless of ownership. Some agreements have limitations or prohibitions on assignments, while other parties can freely enter into them.

Here’s another article about assignment clauses.

Purpose of Assignment Clause

The purpose of assignment clauses is to establish the terms around transferring contractual obligations. The Uniform Commercial Code (UCC) permits the enforceability of assignment clauses.

Assignment Clause Examples

Examples of assignment clauses include:

Here’s an article about the different types of assignment clauses.

Assignment Clause Samples

Sample 1 – sales contract.

Assignment; Survival .  Neither party shall assign all or any portion of the Contract without the other party’s prior written consent, which consent shall not be unreasonably withheld; provided, however, that either party may, without such consent, assign this Agreement, in whole or in part, in connection with the transfer or sale of all or substantially all of the assets or business of such Party relating to the product(s) to which this Agreement relates. The Contract shall bind and inure to the benefit of the successors and permitted assigns of the respective parties. Any assignment or transfer not in accordance with this Contract shall be void. In order that the parties may fully exercise their rights and perform their obligations arising under the Contract, any provisions of the Contract that are required to ensure such exercise or performance (including any obligation accrued as of the termination date) shall survive the termination of the Contract.

Reference :

Security Exchange Commission - Edgar Database,  EX-10.29 3 dex1029.htm SALES CONTRACT , Viewed May 10, 2021, < >.

Sample 2 – Purchase and Sale Agreement

Assignment . Purchaser shall not assign this Agreement or any interest therein to any Person, without the prior written consent of Seller, which consent may be withheld in Seller’s sole discretion. Notwithstanding the foregoing, upon prior written notice to Seller, Purchaser may designate any Affiliate as its nominee to receive title to the Property, or assign all of its right, title and interest in this Agreement to any Affiliate of Purchaser by providing written notice to Seller no later than five (5) Business Days prior to the Closing; provided, however, that (a) such Affiliate remains an Affiliate of Purchaser, (b) Purchaser shall not be released from any of its liabilities and obligations under this Agreement by reason of such designation or assignment, (c) such designation or assignment shall not be effective until Purchaser has provided Seller with a fully executed copy of such designation or assignment and assumption instrument, which shall (i) provide that Purchaser and such designee or assignee shall be jointly and severally liable for all liabilities and obligations of Purchaser under this Agreement, (ii) provide that Purchaser and its designee or assignee agree to pay any additional transfer tax as a result of such designation or assignment, (iii) include a representation and warranty in favor of Seller that all representations and warranties made by Purchaser in this Agreement are true and correct with respect to such designee or assignee as of the date of such designation or assignment, and will be true and correct as of the Closing, and (iv) otherwise be in form and substance satisfactory to Seller and (d) such Assignee is approved by Manager as an assignee of the Management Agreement under Article X of the Management Agreement. For purposes of this Section 16.4, “Affiliate” shall include any direct or indirect member or shareholder of the Person in question, in addition to any Person that would be deemed an Affiliate pursuant to the definition of “Affiliate” under Section 1.1 hereof and not by way of limitation of such definition.

Security Exchange Commission - Edgar Database,  EX-10.8 3 dex108.htm PURCHASE AND SALE AGREEMENT , Viewed May 10, 2021, < >.

Sample 3 – Share Purchase Agreement

Assignment . Neither this Agreement nor any right or obligation hereunder may be assigned by any Party without the prior written consent of the other Parties, and any attempted assignment without the required consents shall be void.

Security Exchange Commission - Edgar Database,  EX-4.12 3 dex412.htm SHARE PURCHASE AGREEMENT , Viewed May 10, 2021, < >.

Sample 4 – Asset Purchase Agreement

Assignment . This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, at any time after the Closing, are freely assignable by Buyer. This Agreement and any of the rights, interests, or obligations incurred hereunder, in part or as a whole, are assignable by Seller only upon the prior written consent of Buyer, which consent shall not be unreasonably withheld. This Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns.

Security Exchange Commission - Edgar Database,  EX-2.1 2 dex21.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < >.

Sample 5 – Asset Purchase Agreement

Assignment; Binding Effect; Severability

This Agreement may not be assigned by any party hereto without the other party’s written consent; provided, that Buyer may transfer or assign in whole or in part to one or more Buyer Designee its right to purchase all or a portion of the Purchased Assets, but no such transfer or assignment will relieve Buyer of its obligations hereunder. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use reasonable commercial efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision.

Security Exchange Commission - Edgar Database,  EX-2.4 2 dex24.htm ASSET PURCHASE AGREEMENT , Viewed May 10, 2021, < >.

Common Contracts with Assignment Clauses

Common contracts with assignment clauses include:

Assignment Clause FAQs

Assignment clauses are powerful when used correctly. Check out the assignment clause FAQs below to learn more:

What is an assignment clause in real estate?

Assignment clauses in real estate transfer legal obligations from one owner to another party. They also allow house flippers to engage in a contract negotiation with a seller and then assign the real estate to the buyer while collecting a fee for their services. Real estate lawyers assist in the drafting of assignment clauses in real estate transactions.

What does no assignment clause mean?

No assignment clauses prohibit the transfer or assignment of contract obligations from one part to another.

What’s the purpose of the transfer and assignment clause in the purchase agreement?

The purpose of the transfer and assignment clause in the purchase agreement is to protect all involved parties’ rights and ensure that assignments are not to be unreasonably withheld. Contract lawyers can help you avoid legal mistakes when drafting your business contracts’ transfer and assignment clauses.

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Assignment or no-assignment of contracts?

Many contracts will provide for a prohibition to assign the rights and obligations under the agreement – so-called  assignment clauses . Normally, each party should be able to negotiate that the approval of the other party to an assignment will not be unreasonably withheld or delayed:

Assignment. No Party shall assign its rights or obligations under this Agreement in whole or in part, without the prior written approval of the other Party, which approval shall not be unreasonably withheld, conditioned or delayed.

Carve-outs allowing assignment . In many cases, the parties would like to make an extra carve-out for intra-group restructurings of activities or the performance under the contract by an affiliate, whether for tax or other geographical reasons. This would be the typical example for the applicability of  shall not be unreasonably withheld .

However, contracting parties may seek more certainty. Uncertainty becomes particularly problematic when a party prepares a divestment of the business. Obviously, when the new investor in such business is a competitor of the customer, the latter’s refusal to unconditionally approve assignment is reasonable. In other cases, the parties want to be free to assign the agreement (i.e. the rights and related obligations) as part of a sale of the entire business to which such agreement relates. The uncertainty may be covered by a specific exception:

…, except that Seller may assign its rights and obligations under this Agreement in connection with a sale of all or a substantial part of its business to which such rights and obligations pertain.

The more complete version will also require a re-assignment in case of divestment of the Affiliated Company and have an additional provision:

Seller shall procure that an assignee Affiliate assigns back the assigned rights and obligations, immediately prior to such assignee ceasing to be an Affiliate of it.

Personal nature of the contract . The exception and related assign-back provision can, of course, accommodate both parties. Note, however, that there is a greater logic that a purchaser does not want to source from its competitors or from suppliers with a questionable background (e.g. suppliers obtaining products manufactured by children or in an environment-polluting way) than vice versa. Child labour or pollution of the environment are matters that a company would typically want to control upwards the product chain and not down. For a discussion of the wording  shall  not be unreasonably withheld, conditioned or delayed , click here .

Assignment and transaction financing (pledge) . In case of private equity and other leveraged transactions, the purchaser may need to be able to assign its rights (and obligations) freely under the share purchase agreement, in order to be able to obtain financing more easily. In such case, the seller would keep some control over the financing parts of the transaction by a restrictive assignment clause.

The caveat that assignment shall not unreasonably be withheld or conditioned will give the seller at least the opportunity to review the financing obligations and analyse the potential consequences of an assignment of the rights (and obligations) under the share purchase agreement to the banks and other lenders involved. A relaxed assignment clause facilitating the purchaser would be as follows:

Assignment. No Party may assign or transfer any of its rights or obligations under this Agreement without the prior written approval of the other Party, except that: (a)   each Party may assign any of its rights under this Agreement to its Affiliates; and (b)   Purchaser may assign any of its rights under this Agreement to any of its lenders or to any person acquiring all or substantially all of the rights or assets of Target after the Completion Date, provided, however, that no such assignment shall relieve an assigning Party of its obligations under this Agreement.  For the avoidance of doubt, Purchaser may grant security interests in its rights under this Agreement to its lenders.

Note that an assignment clause does not relieve the parties to an assignment from fulfilling the requirements of the applicable law to such assigned rights and obligations. In order to give an assignment of rights its full effect (i.e. enforceability against the debtor and an obligation on the debtor to perform vis-à-vis the assignee only) most jurisdictions require a (written) assignment notice to the debtor [1] .

Contract law and assignment of obligations . An assignment of obligations would usually be subject to the consent of the debtor although under English law a distinction is drawn between novation and the assignment of a contract; whereby the latter does not require consent although will only be effective so as to assign the ‘benefit’ and not the ‘burden’ of the contract.

[1]  See CFR Section III.5.1 (Art. III. – 5:104 ff.) and compare the  U.N. Convention on the Assignment of Receivables in International Trade  (12 December 2004).

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The Contractor's Perspective

Anti-assignment act, novation agreements under federal contracts.

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A unique aspect of doing business with the federal government is the built-in limits on a contractor’s right to assign the contract or the right to payment under the contract to third parties. The Anti-Assignment Act ( 41 U.S.C. § 6305 ) prohibits the transfer of a government contract or interest in a government contract to a third party. An assignment of a contract in violation of this law voids the contract except for the Government’s right to pursue a breach of contract remedies. What’s a contractor to do when it is acquired/merged with another firm, is restructured, or goes through a variety of other types of corporate transaction? The Federal Acquisition Regulations recognize that firms involved in government contracts get bought and sold from time to time and includes procedures for the novation of contracts in certain situations to avoid a potential violation of the Anti-Assignment Act. … Continue Reading Novation Agreements Under Federal Contracts

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Lease Defaults and Restructuring: The Impact of a Tenant’s Bankruptcy (Part 1 of 3)

The COVID-19 pandemic’s enormous impact on the commercial real estate industry is now evident. For commercial tenants, customers are scarce, demand for goods and services has dried up, and supply chains have been frozen. Additionally, most states have implemented restrictive measures, such as “stay at home” orders, leading to the widespread closure of nonessential businesses. Although governors of a few states are beginning to lift their stay at home orders, the vast majority of American businesses remain under such orders; and even after such orders are lifted, it is difficult to project how long the economy will be depressed.

Accordingly, commercial landlords have been forced to rapidly prepare for and address the inability of tenants to sustain their rental obligations. In order for landlords to formulate their strategy, among other factors, they must be aware of the applicable lease provisions, their available remedies, the short-term and long-term financial viability of the defaulting tenant and the rental market for the leased premises. On the other side of the bargaining table, tenants who are unable to pay their lease obligations need to likewise be aware of these same factors, in order to determine their strategy to request a deferral or abatement of rent, lease termination, or to not to pay the rent due.

Lurking in the background is the potential bankruptcy of the tenant, which may have a material impact on the landlord’s and the tenant’s rights and remedies; and accordingly, a significant impact on the landlord’s and the tenant’s strategy with respect to both the exercise of remedies and lease restructuring negotiations.

In this three-part bankruptcy series on lease defaults and restructuring, we will highlight the relevant principles of bankruptcy law that affect the landlord/tenant relationship if the tenant voluntarily or involuntarily enters bankruptcy. Thereafter, we will address strategic considerations that landlords should consider when a tenant bankruptcy is a real possibility, as well as issues that commercial tenants should consider when contemplating filing bankruptcy. In this article, we will discuss the automatic stay, tenant’s pre and post-petition lease obligations in bankruptcy, possible suspension of Chapter 11 cases, and unenforceability of termination provisions and anti-assignment clauses in bankruptcy.

l. The Automatic Stay

Upon the commencement of the bankruptcy case, an “automatic stay” goes into effect. The automatic stay protects debtors that file bankruptcy by prohibiting any creditor acts to obtain possession of or exercise control over property of the debtor’s bankruptcy estate. Among other consequences, the automatic stay halts the commencement or continuation of any judicial, administrative or other action or proceeding against the debtor that was commenced (or could have been commenced) before the bankruptcy filing date.

Accordingly, absent relief from the automatic stay (which is discussed below), a landlord may not take any action to collect, assess or recover on a claim under a commercial lease that arose before the bankruptcy case, including commencing or continuing an eviction action or attempting to collect pre-petition rent. Even minor actions, such as sending a past-due notice to the tenant, may be enough to violate the automatic stay.

A landlord’s violation of the automatic stay can result in sanctions, including the entry of a court order obligating the landlord to pay the tenant’s actual damages and attorneys’ fees. For this reason, landlords should consult with counsel before taking any actions against tenants, once the tenants enter bankruptcy.

To the extent that a landlord has obtained a cash security deposit from the tenant before the tenant files bankruptcy, the landlord will not be entitled to set off the security deposit against its claims against the tenant, absent relief from the automatic stay or except as set forth in the tenant’s eventual Chapter 11 plan. This presents a timing issue for the landlord, as it may take a long time for the landlord to be able to apply the security deposit.

Alternatively, if the credit support is in the form of a letter of credit from a bank or other third-party issuer (with the landlord as the beneficiary), the automatic stay would generally not prevent the landlord from drawing down on the letter of credit to obtain the proceeds to apply to unpaid lease obligations. This is based on the opinion, held by many courts, that letters of credit and their proceeds are not property of the bankruptcy estate because the issuer of the letter of credit pays the beneficiary with its own funds, not with the debtor's assets. This comes with a caveat, however. If the terms of the lease or the letter of credit require the landlord to first give the tenant notice that it intends to seek payment under the letter of credit, providing that the notice to the tenant may violate the automatic stay; which could delay, or even prevent, the landlord from drawing on the letter of credit. This risk can be mitigated if the letter of credit authorizes the landlord to draw upon it, if it submits a certificate to the issuer that the tenant is in bankruptcy. In addition, if the proceeds realized from the drawing of the letter of credit exceed the amount of the tenant’s then-unpaid obligations under the lease, most leases provide that such excess continues to be held as a cash security deposit; in which event such excess will now be subject to the automatic stay as set forth above (note that this dilemma may be avoided where the letter of credit permits partial draws).

The Bankruptcy Code provides that the bankruptcy court shall lift the automatic stay if (a) “cause” exists, or (b) the debtor does not have equity in the property and the property is not necessary to an effective reorganization, and a landlord may request that the stay be lifted under such rule. However, it is generally difficult for a commercial landlord to obtain relief from the stay to terminate a lease or evict a tenant over the tenant’s objection, particularly early in the bankruptcy case. The bankruptcy court typically will defer to the tenant’s assessment that the lease may have value, or that the lease may be necessary to achieve the tenant’s reorganization. This is particularly true if the lease is “below market” ( i.e. , the rent amount under the lease is less than the prevailing market rate), as the tenant might be able to assign the lease to a third party and receive value in exchange.

Landlords may find more success in convincing the bankruptcy court to lift the automatic stay to simply permit them to set off their cash security deposits against unpaid pre-petition amounts due under the lease. In addition, if the tenant fails to make its post-petition lease payments to the landlord (which are discussed below), the landlord will likely have a strong basis to request the bankruptcy court to lift the automatic stay to permit the landlord to pursue eviction proceedings.

ll. Treatment of a Tenant’s Pre-Petition and Post-Petition Lease Obligations in Bankruptcy

The Bankruptcy Code provides for different treatment of a landlord’s claim for unpaid amounts that became due before the tenant’s bankruptcy filing date (“pre-petition” claims), and landlord’s claim for amounts that become due after the tenant’s bankruptcy filing date (“post-petition” claims).

As noted above, the automatic stay prevents the landlord from taking actions against the tenant on account of the landlord’s pre-petition claim, including setting off any cash security deposit against unpaid pre-petition amounts due under the lease. In addition, the landlord’s pre-petition claim for unpaid amounts due under the lease will be treated as a secured claim to the extent the landlord holds collateral (such as a cash security deposit), and a general unsecured claim to the extent the amount due from the tenant exceeds the value of the collateral that the landlord holds. In many bankruptcy cases, general unsecured creditors receive little or no distribution in the case. In these cases, the landlord’s only practical sources of recovery may be security deposits and third party guarantees.

If a landlord holds a pre-petition claim, it must make sure to file a proof of claim in the bankruptcy case by the deadline for the filing of such claims (which is called the bar date). If a landlord fails to file a proof of claim, or files one after the bar date, it may be barred from recovering on its pre-petition claim.

On the other hand, post-petition amounts are called “administrative expenses” and are entitled to priority over general unsecured claims. The Bankruptcy Code requires a tenant to pay its lease obligations that arise post-petition in full, until the tenant either assumes or rejects the lease in its bankruptcy case. The landlord’s collection of post-petition lease payments does not violate the automatic stay, and landlords do not need to obtain an order from the bankruptcy court to receive those post-petition payments. Importantly, the tenant ultimately will be required to pay all of its administrative expenses (including its post-petition lease obligations) in full and in cash, to confirm a Chapter 11 plan in its bankruptcy case.

The Bankruptcy Code requires the tenant to pay its post-petition lease obligations on a current basis, but landlords should be aware that the Bankruptcy Code provides that the bankruptcy court may extend the tenant’s deadline to perform the lease obligations that arise during the first 60 days of the bankruptcy filing. Tenants such as J. Crew ( In re Chinos Holdings, Inc. ) recently have requested the bankruptcy court to grant such a 60-day extension of their deadline to perform their lease obligations, expressly because of the COVID-19 pandemic. Tenants could even try to seek further extensions of that deadline under the bankruptcy court’s equitable powers.

Landlords must also take note of any deadlines that the bankruptcy court may establish for them to file a claim for post-petition administrative expenses. If the court establishes such a deadline, landlords will need to timely file their claims with the bankruptcy court for any unpaid post-petition administrative expenses.

lll. Possible Suspension of Chapter 11 Cases

Because of the exigencies of the COVID-19 pandemic and the stay at home orders that are in effect in many jurisdictions, tenants may ask the bankruptcy court to suspend their bankruptcy case, and thereby also suspend the tenants’ obligation to pay post-petition lease obligations. This recently occurred in the Modell’s Sporting Goods, Inc. bankruptcy case, where the tenant intended to pursue a going-out-of-business sale, which could not be carried out because of the pandemic. In Modell’s , the court suspended the case for approximately 65 days, and permitted the tenant to defer payments of expenses (other than “essential expenses”) during the term of the suspension. Similarly, in the Pier 1 Imports, Inc. case, the bankruptcy court permitted the tenant to temporarily defer making rent payments. Accordingly, landlords that are involved in bankruptcy cases, like Modell’s and Pier 1, that are suspended due to the pandemic, may face delays in receiving post-petition lease payments.

IV. General Unenforceability of Bankruptcy Termination Provisions

Leases commonly include provisions stating that the lease will be terminated or be modified if the tenant commences a bankruptcy case. These provisions, however, are generally unenforceable in bankruptcy (except for very limited exceptions that typically do not apply in the context of a lease that has not expired or been terminated before the bankruptcy case). Specifically, the Bankruptcy Code overrides lease language that provides for termination or modification of the lease based on the tenant’s commencement of a bankruptcy case, the insolvency or financial condition of the tenant at any time before the closing of its bankruptcy case, or the appointment of a trustee in the tenant’s bankruptcy case.

The foregoing rule does not apply to the valid termination of a lease before the tenant’s bankruptcy filing (the general rule is that a lease will be deemed terminated if all final hurdles to termination have been satisfied and the lease is not subject to any form of equitable redemption or statutory grace period). The Bankruptcy Code provides that a tenant cannot assume or assign any lease of nonresidential real property that was validly terminated before the commencement of the bankruptcy case. Accordingly, where the lease was validly terminated before the bankruptcy case commenced, the tenant will likely be required to vacate the premises notwithstanding the bankruptcy filing. Note, however, that tenants may try to contest the validity of any pre-bankruptcy lease terminations during their bankruptcy case. In addition, some states have anti-forfeiture statutes that permit a tenant to revive a terminated lease, while other jurisdictions have equitable principles that permit an otherwise-terminated lease to be resurrected.

In the event the landlord terminated the lease before the bankruptcy case commenced, but the tenant continues to inhabit the premises after the case commences, the best practice is for the landlord to first request relief from the automatic stay before taking steps to evict the tenant.

V. General Unenforceability of Anti-Assignment Clauses in Bankruptcy

In addition to termination provisions, leases commonly contain provisions that prohibit the tenant from assigning the lease to a third party or restrict the tenant’s ability to assign the lease. The Bankruptcy Code overrides almost all of these provisions, specifying that notwithstanding any anti-assignment language in the lease, the tenant may assign the lease as long as certain requirements are met.

In part two of this series of articles, we will continue to explore the relevant principles of bankruptcy law that affect the landlord/tenant relationship. That article will cover lease modification, tenant assumption and rejection of lease agreements, financing issues and going out of business sales.

E-Alert is a quarterly newsletter that features the latest thinking from Tannenbaum Helpern's various departments.

05.26.2020  |  PUBLICATION: E-Alert  |  TOPICS: Bankruptcy , Real Estate  |  INDUSTRIES: Real Estate

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“Change your partner?” Beware of Non-Assignment Clauses in Commercial Contracts

“ I now pronounce you man and wife .”

Congratulations! You are married.

But what if you woke up one morning and found someone other than your spouse at the breakfast table?

“Who are you ?”

“Hi. I am your new spouse. I hope you don’t mind. Your old one decided to move on and appointed me to take over. But don’t worry. I will fulfill all of your former spouse’s marital responsibilities faithfully. And, of course, I am entitled to all of your former spouse’s benefits. We have an appointment with the bank later today to formalize our new joint account. But enough small talk. What’s for breakfast?”

While that scenario is a bit unusual for domestic partners, when it comes to commercial partners — especially commercial partners who are just entering into a business relationship together — there is often a legitimate concern by one — or both — that they avoid waking up one morning to find out that they are in business with someone else.

So how do commercial partners make sure that the party they thought they were going to be doing business with when they signed their contract remains their partner throughout the life of the agreement?

They include in the contract a non-assignment clause.

The basic idea is simple — we entered into this contract because of who you are and what you bring to the table. We don’t want to wake up one morning and find ourselves in business with anyone else but you. Therefore, you are not allowed to transfer your rights or obligations under this contract to anyone else without our consent. If you do, this contract is over and you may have to pay damages as well.

This is simple in concept but watch what happens when the lawyers try to say it. It comes out like this:

“This Agreement and all rights and duties hereunder are personal to Party B and shall not, without the written consent of Party A, be assigned, mortgaged, or otherwise encumbered by Party B or by operation of law.  For purposes of this Agreement, the term “assignment” shall, in addition to the transfer of this Agreement or the rights or obligations thereunder, whether voluntarily, involuntarily, by operation of law, or otherwise, be deemed to include (i) a sale or other transfer by Party B of all or substantially all of its assets; (ii) the merger, amalgamation, consolidation, or reorganization of Party B into or with another corporation or other entity as a result of which Party B is not the surviving corporation; or (iii) any transaction (including any of the foregoing transactions, as well as any in which Party B is the surviving corporation) which, whether by way of sale, gift, or other transfer, whether involving Party B or the record or beneficial owners of equity interests in Party B, results in the transfer of more than twenty percent (20%)  of the voting control of Party B to a party or parties not a principal of Party B at the time of execution of this Agreement.”

Here are some things to look for when you finally get to the end of the contract where the non-assignment clause is usually hiding.

Party B may assign this Agreement and its rights and obligations hereunder in connection with a corporate reorganization, merger or combination, or a sale of all or substantially all of the equity or assets of Party B.

But be careful when the other side says yes, and then the contract comes back looking like this:

Party B may assign this Agreement and its rights and obligations hereunder in connection with a corporate reorganization, merger or combination, or a sale of all or substantially all of the equity or assets of Party B; provided, however, that Party B agrees to remain secondarily liable for the performance of its assignee .

Now you are still on the hook! And, worse, you no longer are in control of what happens. This is not where you want to end up when you are looking to make your big exit.

As always, an experienced commercial attorney will be able to recognize the advantages and disadvantages for both parties of an agreement limiting assignability.

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