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Q: As a seller, we received the following clause in a commercial offer, and are wondering what it means or if we should be concerned.
10. ASSIGNMENT: Purchaser shall be allowed to assign all or any portion of its rights or obligations hereunder without the prior written consent of Seller. Notwithstanding the foregoing, but expressly subject to all terms, conditions, liabilities, and obligations hereunder, Purchaser may assign this Agreement to an entity partially owned and controlled or partnered with by Purchaser with prior written notice to Seller but without Seller’s consent; provided Purchaser is not released from obligations under this Agreement. As used herein, “control” means the ability to direct the management decisions of such assignee by reason of the relationship interests in the assignee.
Your assistance in this matter is greatly appreciated.
A: The clause is contradictory: first it states….
“Purchaser shall be allowed to assign all or any portion of its rights or obligations hereunder without the prior written consent of Seller.”
Of course you do not want the buyer to be able to assigning the contract to anyone without your consent. How would you know if the person they are assigning it to can actually close?
Secondly is states….
“Notwithstanding the foregoing, but expressly subject to all terms, conditions, liabilities, and obligations hereunder, Purchaser may assign this Agreement to an entity partially owned and controlled or partnered with by Purchaser with prior written notice to Seller but without Seller’s consent; provided Purchaser is not released from obligations under this Agreement. As used herein, “control” means the ability to direct the management decisions of such assignee by reason of the relationship interests in the assignee.”
This is a more common assignment clause where a buyer may want to assign the contract to a new purchasing entity (i.e an LLC or a Corporation). In this scenario, the byer can assign without seller’s permission as long as the buyer is still a controlling person in the new entity. (i.e a 50% or more ownership)
In either case you are best protected if seller must approve ANY assignment.
MAYBE YOU REWRITE THE PARAGRAPH TO SAY:
10. ASSIGNMENT: Purchaser shall NOT be allowed to assign all or any portion of its rights or obligations hereunder without the prior written consent of Seller. Notwithstanding the foregoing, but expressly subject to all terms, conditions, liabilities, and obligations hereunder, Purchaser shall be allowed to assign all or any portion of its rights or obligations hereunder with the prior written consent of Seller, WHICH WILL NOT BE UNREASONABLY WITHHELD, to an entity partially owned and controlled or partnered with by Purchaser; provided Purchaser is not released from obligations under this Agreement. As used herein, “control” means the ability to direct the management decisions of such assignee by reason of the relationship interests in the assignee.
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