assignment and assumption vs bill of sale

Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

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Updated on: November 24, 2023 · 3 min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

• The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
• The assignor must agree to assign their rights and duties under the contract to the assignee.
• The assignee must agree to accept, or "assume," those contractual rights and duties.
• The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

• First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
• All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
• Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

• Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
• The effective date of the assignment and assumption agreement
• Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
• Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
• Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
• A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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Bill of Sale vs Assignment and Assumption Agreement: Understanding the Legal Differences

Unraveling the mystery of bill of sale vs assignment and assumption agreement, bill of sale vs assignment and assumption agreement.

When comes transfer assets business ownership, two legal documents often play: bill sale Assignment and Assumption Agreement. These two documents serve different purposes and have different implications for both the seller and the buyer.

The bill of sale is a legal document used to transfer ownership of personal property from one party to another. Includes detailed description property sold, purchase price, names buyer seller. The bill sale serves proof transfer used resolve disputes ownership property.

Assignment and Assumption Agreement

On hand, Assignment and Assumption Agreement used one party wants transfer its rights obligations under contract another party. This document outlines the specific rights and obligations being transferred, as well as any conditions or limitations on the transfer. It Commonly used in business acquisitions mergers transfer contracts, leases, other obligations one party another.

Key Differences

While documents involve transfer property rights, several key differences bill sale Assignment and Assumption Agreement. The following table outlines some differences:

To illustrate the differences between the two documents, let`s consider a case study of a small business acquisition. In this scenario, the seller wants to transfer both the physical assets of the business as well as its existing contracts and leases to the buyer. A bill sale would used transfer ownership physical assets, while Assignment and Assumption Agreement would used transfer contracts leases.

Bill sale Assignment and Assumption Agreement important legal documents transfer assets business ownership. Understanding the differences between these two documents is crucial for both buyers and sellers in ensuring a smooth and legally sound transfer of property and rights. Whether you are buying or selling, it is important to seek legal counsel to determine which document or combination of documents is necessary for your specific transaction.

Legal Contract: Bill of Sale vs Assignment and Assumption Agreement

In legal realm, distinction bill sale Assignment and Assumption Agreement crucial. Both documents serve as instruments for the transfer of property rights, but they differ in their scope and legal implications. This contract aims to delineate the specific characteristics and implications of each instrument, providing clarity and guidance for parties involved in such transactions.

1. Definitions

1.1 Bill Sale: An official document serves evidence transfer tangible personal property one party another.

1.2 Assignment and Assumption Agreement: A legal contract transfers both rights obligations one party another, often context business contractual relationship.

2. Legal Framework

The legal validity enforceability bill sale Assignment and Assumption Agreement subject relevant laws statutes governing contracts property transactions. The Uniform Commercial Code (UCC) and other applicable state laws provide the foundational framework for the interpretation and enforcement of these instruments.

3. Specific Provisions

4. legal advice.

Given complexities nuances inherent bill sale Assignment and Assumption Agreement, parties strongly advised seek legal counsel ensure their rights obligations adequately protected enforced.

5. Governing Law

This contract shall be governed by and construed in accordance with the laws of the state of [Insert State], without regard to its conflict of law principles.

6. Execution

This contract may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

7. Miscellaneous

Any modification, amendment, or waiver of any provision of this contract shall be effective only if in writing and signed by the parties hereto.

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Assignment and Assumption Agreement | Practical Law

Assignment and Assumption Agreement

Practical law standard document 0-381-9984  (approx. 10 pages).

Bill Of Sale Agreement

Jump to section, what is a bill of sale agreement.

A bill of sale agreement is a legal document that records the transfer of ownership of an asset to a second party in exchange for money. A bill of sale agreement can be used to record the sale of aircraft, automobiles, motorcycles, and watercraft. It also can be used to record the sale of personal property, such as equipment, musical instruments, or furniture.

Generally, a bill of sale agreement is drafted by the seller and includes the details of the transaction. It protects both the buyer and the seller, should disagreements arise in the future.

Common Sections in Bill Of Sale Agreements

Below is a list of common sections included in Bill Of Sale Agreements. These sections are linked to the below sample agreement for you to explore.

Bill Of Sale Agreement Sample

Reference : Security Exchange Commission - Edgar Database, EX-99.2 5 g93524exv99w2.htm EX-99.2 FORM OF BILL OF SALE , Viewed October 21, 2021, View Source on SEC .

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M&A Transaction Structures: The Difference Between an Asset Sale and a Stock Sale

By: Jack R. Magee and Robert E. Futrell, Jr.

In any M&A transaction, one of the first questions for the parties to the transaction is how the deal should be structured. Whether to provide for the buyer to acquire the assets or the stock (or other equity interests) of the target company will impact virtually every aspect of the deal. At times, the choice for the optimal structure is apparent and quickly agreed; other times, parties can spend significant time and resources working to agree on this threshold determination. When the time comes to draft the definitive purchase agreement, there will be significant differences in the agreement depending on the type of transaction structure agreed upon by the buyer and the seller.

This article does not address the tax considerations involved in pursuing an asset deal versus a stock deal; however, the choice of structure often is driven by tax implications that are complex and deal specific. Involving tax counsel and accounting advisors early in an M&A process, ideally before negotiating a letter of intent or other acquisition proposal, can save time and money in the long run.

An asset sale transaction involves the sale of some or all of the assets used in a business from a selling company to a buyer. The purchased assets often encompass all or substantially all of the assets of the company; other times, the transferred assets include only those used in a specific division or certain selected assets of the company. In an asset deal, typically the buyer will assume only certain specified liabilities of the business from the selling company.

A benefit of an asset sale is that it allows the parties significant flexibility as to what assets and liabilities are included in the transaction. In particular, for a buyer this provides an opportunity to reduce its risk of assuming unknown liabilities of the acquired business. Additionally, an asset sale allows a buyer to avoid spending money on unwanted assets. For a seller, an asset sale is often not preferred over a stock sale, but in some instances it is ideal for allowing a seller to dispose of just a portion of its holdings. Asset sales often are used in connection with the sale of a distressed business, the sale of a business division, or in transactions where there are significant concerns regarding known and unknown liabilities of the business.

A stock or equity sale transaction involves the sale of the equity interests in a target company from the equity holders to a buyer. In a stock deal, instead of choosing specific assets and liabilities to acquire, the buyer purchases an ownership stake in the entire business. In effect, the buyer acquires the entity instead of acquiring the business from the entity.

A stock sale is often favored by the owners of a selling company because, in general, all of the known and unknown liabilities of the business are transferred to the buyer, and therefore the sellers avoid ongoing exposure to such liabilities (other than as expressly agreed with the buyer). Buyers often resist a stock sale transaction unless the company to be acquired has a clean operating history or there are significant practical difficulties in completing an asset sale, such as restrictions on the transfer of certain assets from the selling company to the buyer or burdensome third party consents needed to transfer the assets.

Though this article has used the term “stock sale” to describe the primary alternative to an asset sale, it should be noted that another common M&A transaction structure, a merger, provides another alternative. A merger is, in many ways, similar to a stock deal in that the buyer acquires the entire entity operating the business, including all of the assets and liabilities of the business. However, if the company has a significant number of stockholders, the stockholders are not easily accessible or there is a risk that all of the stockholders will not support the transaction, then a merger may be preferable to a stock sale. This is due to the fact that a stock sale requires each and every stockholder to agree to sell such holder’s equity, while a merger usually requires approval of less than all of the stockholders. There are other considerations, including tax considerations, to attend to in opting for a merger instead of a stock sale and any party to a potential M&A transaction should discuss these with its legal and tax advisors.

Drafting Considerations

Depending on whether an acquisition is structured as an asset sale or a stock sale (or merger), there will be significant differences in the transaction documents. A substantial portion of an asset purchase agreement is used to identify the assets to be acquired and the liabilities to be assumed by the buyer. Typically, the buyer will want the asset purchase agreement to provide that the buyer disclaims any obligations other than those liabilities that are expressly assumed. If the provisions describing the acquired assets and assumed liabilities are carefully written, then the representations and warranties from the seller can be limited to focus on items that have or might impact such assets and liabilities. In addition to an asset purchase agreement, other ancillary agreements will be required to transfer the assets from the seller to the buyer. These might include a bill of sale, assignment and assumption agreements, intellectual property assignments and corporate name change filings, as well as agreements providing for the hiring of the employees of the business by the buyer.

In a stock sale, the purchase agreement will not describe specific assets and liabilities of the business to be acquired since the entire spectrum of assets and liabilities of the business will transfer to the buyer along with the entity that is purchased. As such, typically the representations and warranties in a stock purchase agreement from the seller to the buyer will be more comprehensive and broader in scope, covering all aspects of the acquired business and the historical operations of the entity. While additional ancillary agreements are required in a stock sale, often fewer are needed than in an asset sale and, typically, the number of third party consents needed to complete the deal is much lower.

Deciding on the best deal structure for an M&A transaction requires evaluation of a number of factors, some of which are complex or deal specific. The determination of the optimal structure should be made as early as possible, since the decision will impact virtually all of the transaction documents. If you are considering a significant M&A transaction, whether as the potential buyer or seller, you should consult with your legal counsel and tax and accounting advisors early in the process to avoid potential delays and unnecessary expense.

* * * * * * *

Jack Magee and Rob Futrell are attorneys in the M&A practice group of Wyrick Robbins Yates & Ponton LLP, which represents clients across a broad range of industries in connection with their significant corporate transactions. The group publishes Practice Briefs periodically as a service to clients and friends. The purpose of this Practice Brief is to provide general information, and it is not intended to provide, and should not be relied upon as, legal advice.

Assignment, Bill of Sale, and Conveyance (Oil & Gas)

Copyright © 2024 LexisNexis and/or its Licensors

This template for an oil and gas assignment, bill of sale, and conveyance agreement is the most commonly used instrument in the oil and gas industry for transferring tangible and intangible personal property, such as contracts, leases, licenses, permits, or development rights, as part of a purchase and sale transaction. This template includes practical guidance, drafting notes, alternate clauses, and optional clauses. The assignment is the operative document that transfers the rights and delegates the duties between the assignor and the assignee. It also provides notice to others that the affected interests have been transferred. The parties should negotiate their respective rights and obligations and memorialize the same in the assignment. To do that, you must thoroughly understand your client's interests so you can protect them through the assignment. The local laws governing transfer of real and personal property interests must also be considered. At the very least the following matters should be addressed in the assignment: • The identity of parties to the conveyance • The required words of conveyance • A recitation of consideration for the grant –and– • A proper description of the property and interests to be conveyed The assignment should be signed by the assignor, acknowledged, and recorded. For more on oil and gas leases, see First Year Associate Resource Kit: Energy & Utilities. For additional information on how to negotiate an assignment agreement, see Commercial Contract Assignment, Offers, Acceptance, Revocation, Assignment, and Delegation of Duties, and Assignment and Assumption Agreements.