definition ban on assignment

Ban on Assignment definition

Examples of ban on assignment in a sentence.

In order to calculate the additional costs passed onto suppliers due to Ban on Assignment , we have estimated the increase in the service charge using the 2015 survey carried out for BIS by ABFA - based on their treatment of a typical £1m turnover client.

It means that in the 2015 ABFA survey, they did not report any “prepayment percentage” for their Ban on Assignment business, because they do no business on these particular invoices.

In order to calculate the total cost passed onto suppliers of bearing the financers’ extra risk due to Ban on Assignment , we have estimated the increase in the discount charge using a new survey carried out for BIS by ABFA.

The increase in finance on nullifying Ban on Assignment is calculated using the following equation, for each bank and turnover band, separately for concentrated and non-concentrated finance.

In our hypothetical example of Microbank, a very small financer with only 255 clients, clients with Ban on Assignment are charged an additional 0.5% discount fee, clients with concentration an additional 0.5% and clients with both BoA and concentration an additional 0.75%.

The reduction in the discount fee on nullifying Ban on Assignment is calculated using the following equation, for each bank and turnover band, separately for suppliers with concentrated and non-concentrated sales books.

For our hypothetical Microbank, we have taken that without concentration removing Ban on Assignment will increase the prepayment % from 75% to 85%.

In our hypothetical example of Microbank, clients with Ban on Assignment are charged an additional 0.25% service charge, clients with concentration an additional 0.25% and clients with both an additional 0.75%.

The reduction in the service charge on nullifying Ban on Assignment is calculated using the following equation, for each bank and turnover band, separately for concentrated and non-concentrated finance.

This is based on a review of the most restrictive type of Ban on Assignment clauses and our estimate of their frequency within our clients’ debtor books.

Related to Ban on Assignment

Qualified assignment agreement means an agreement providing for a qualified assignment within the meaning of section 130 of the Internal Revenue Code.

First Assignment means: the relevant Assignment; orif, prior to the relevant Assignment:

Assignment Agreements The following Assignment, Assumption and Recognition Agreements, each dated as of March 29, 2006, whereby certain Servicing Agreements solely with respect to the related Mortgage Loans were assigned to the Depositor for the benefit of the Certificateholders:

Loan Assignment has the meaning set forth in the Purchase and Sale Agreement.

Addendum and Assignment Agreement The Addendum and Assignment Agreement, dated as of January 31, 1995, between MLCC and the Master Servicer.

IP Assignment Agreement has the meaning set forth in Section 3.2(a)(iii).

Lender Assignment Agreement means an assignment agreement substantially in the form of Exhibit D hereto.

Assignment/Amendment We reserve the right to change this Service Agreement (including the price or to charge an additional fee) and to delegate any of Our obligations at Our sole discretion provided We give You thirty (30) days’ prior written notice of the changes. The changes will become effective thirty (30) days after We send You the notice. If You do not like the changes, You may cancel this Service Agreement. You may not change this Service Agreement or delegate any of Your obligations. Should certain terms or conditions in this Service Agreement be held to be invalid or unenforceable, the remainder of the terms and conditions in this Service Agreement shall remain valid. Transfer: This Service Agreement is not transferable by You. Responsibility for benefits owed to You: This is not an insurance policy; it is a Service Agreement. HomeServe will serve as Your point-of-contact for all questions or concerns. Our obligations under this Service Agreement are insured under a service contract reimbursement insurance policy. If We fail to pay or to deliver service on a claim within sixty (60) days after proof of loss has been filed, or in the event You cancel this Service Agreement and We fail to issue any applicable refund within sixty (60) days after cancellation, You are entitled to make a claim against the insurer, Virginia Surety Company, Inc., 000 Xxxx Xxxxxxx Xxxx., 11th Floor, Chicago, IL 60604, 0-000-000-0000. Our Liability: To the extent permitted by applicable law, (1) You agree that We and HomeServe, and both of our parents, successors, affiliates, approved technicians and our and their officers, directors, employees, affiliates, agents and contractors shall not be liable to You or anyone else for: (a) any actual losses or direct damages that exceed the lowest applicable per covered repair benefit limit set out above; or (b) any amount of any form of indirect, special, punitive, incidental or consequential losses or damages, including those caused by any fault, failure, delay or defect in providing services under this Service Agreement, and (2) these limitations and waivers shall apply to all claims and all liabilities and shall survive the cancellation or expiration of this Service Agreement. You may have other rights that vary from state to state. Arbitration: YOU, NAW AND HOMESERVE ALL AGREE TO RESOLVE DISPUTES ONLY BY FINAL AND BINDING ARBITRATION OR IN SMALL CLAIMS COURT as follows:

term assignment means, in relation to an employee, i. a term assignment within the meaning of the local collective agreement, or ii. where no such definition exists, a term assignment will be defined as twelve (12) days of continuous employment in one assignment

Assignment / job means the work to be performed by the Consultant pursuant to the Contract.

Assignment of Management Agreement means the Assignment of Management Agreement and Subordination of Management Fees, dated the same date as this Loan Agreement, among Borrower, Lender and Property Manager, including all schedules, riders, allonges and addenda, as such Assignment of Management Agreement may be amended from time to time, and any future Assignment of Management Agreement and Subordination of Management Fees executed in accordance with Section 6.09(d).

Assignment of Agreements means that certain Assignment of Agreements, Licenses, Permits and Contracts, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee.

Assignment Agreement means an Assignment and Assumption Agreement substantially in the form of Exhibit E, with such amendments or modifications as may be approved by Administrative Agent.

Asset Management Agreement means, as the context requires, any agreement entered into between a Series and an Asset Manager pursuant to which such Asset Manager is appointed as manager of the relevant Series Assets, as amended from time to time.

prospective assignment means an assignment that is intended to be made in the future, upon the occurrence of a stated event, whether or not the occurrence of the event is certain;

Reaffirmation Agreement means that certain Reaffirmation Agreement, dated as of the date hereof, between the Loan Parties and the Administrative Agent, for the benefit of the Administrative Agent and the Lenders and the other holders of the Secured Obligations.

Waiver Agreement means an agreement between

IP Assignment a collateral assignment or security agreement pursuant to which an Obligor grants a Lien on its Intellectual Property to Agent, as security for the Obligations.

Purchase Agreement Assignment means that certain Purchase Agreement Assignment [NW 1997 J], dated as of March 18, 1998, between Lessee and Lessor, as the same may be amended, supplemented or modified from time to time, with a form of Consent and Agreement to be executed by the Manufacturer attached thereto.

New Management Agreement means the management agreement to be entered into between Buyer and the Manager for the operation and management of the Hotel on and after the Closing Date.

Consent Agreement means this Consent Agreement, duly signed and concluded between the Commission and the Respondent, as contemplated in section 40(1) of the Act.

Trademark Assignment Agreement has the meaning set forth in Section 2.01.

Assignment of Recognition Agreement With respect to a Cooperative Loan, an assignment of the Recognition Agreement sufficient under the laws of the jurisdiction wherein the related Cooperative Unit is located to reflect the assignment of such Recognition Agreement.

Permitted Assignment means a Permitted Subsidiary Assignment or a Permitted Third-Party Assignment.

Existing Management Agreement means that certain management agreement between the Seller and the Existing Manager for the operation and management of the Hotel.

Patent Assignment Agreement means the patent assignment agreement substantially in the form of Exhibit A.

• assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Ban on Assignment

Ban on Assignment . It is a clause in a contract between  a vendor and a buyer which prevents the vendor from assigning the related receivables. It can make ineffective any assignment of the receivables arising out of the contract. In some legal environments, the factoring agreement may overrule the ban on assignment.

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Considering the need and shape of future reform, ban on assignment clauses.

Receivables financing is a very important source of finance for small businesses.  Anything which limits the availability of this type of financing, or which increases its costs, requires examination.   Receivables financiers take an assignment or a charge over the receivables they finance.

Some contracts for the supply of goods or services by small businesses include a clause banning assignment of the receivables arising under the contracts: we call these ‘ban on assignment clauses’.   If receivables arising from such a contract are the subject of an assignment to a receivables financier, it may be difficult  for an assignee to enforce collection of those receivables if the assignor experiences financial difficulties, and the debtor can refuse to pay the financier directly.   The concern which arises is whether these difficulties  mean that finance of such receivables is refused, or that steps have to be taken which increase the cost of financing.

Statutory controls on the effect of ban on assignment clauses have been introduced in a number of jurisdictions as well as in the 1988 UNIDROIT Convention on International Factoring, the 2001 UN Convention on the Assignment of Receivables in International Trade, the 2007 UNCITRAL Legislative Guide on Secured Transactions and, more recently, have been included in the UNCITRAL draft Model Law on Secured Transactions. The draft regulations in the Law Commission Consultation Paper 176 and Report 296 also included a limited override of such clauses.    The project is considering whether a limited override should be introduced into English law, and, if so, what the limits should be.

Detailed arguments for and against a limited override are set out in presentations delivered at a recent seminar for receivables financiers . 

It is reasonably clear that outside the context of trade receivables financing, ban on assignment clauses perform a useful and important function, and should not be overridden.   The important debate focuses on whether a limited override would improve access to financing for small businesses.

In order to inform this debate, we are very keen to find out the views of anyone who is interested in this area.    We have drafted a short survey for those financing against receivables, looking at whether ban on assignment clauses cause problems and increase costs, methods used to overcome difficulties in enforcement and frequency of the use of such clauses.

If you are involved in the receivables financing industry, please take a few moments to fill in the  survey and send a scanned copy to [email protected]

Nullification of a ban on invoice assignment clauses was proposed in the form of a power of a Secretary of State to make Regulations in clause 1 of the Small Business, Enterprise and Employment Bill (SMEE Bill). At the beginning of the year BIS conducted consultation on the Bill, which closed in February 2015. The summary of responses along with draft regulations are available here . On 26th March the SMEE Bill ill received royal assent.

The text of the Small Business, Enterprise and Employment Act 2015 can be found  here .

On 9 August 2015, the Government responded to its consultation and announced that a ban on anti-assignment clauses would be brought in under the Act early next year . The Asset Based Finance Association and the National Federation for Small Businesses have spoken in support of the move.

As of the 31st December 2018, the Business Contract Terms (Assignment of Receivables) Regulations 2018  will nullify the effect of terms in contracts that impose conditions or restrictions on the assignment of receivables in contracts with SMEs.

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Are Anti-Assignment Clauses Enforceable?

Written by: Brittainy Boessel

July 22, 2020

8 minute read

Contracts, in general, are freely assignable, which means that either party can transfer its contractual obligations or rights to a third party. But sometimes contracts include anti-assignment clauses to limit or prohibit assignment. Read on to discover the basics of assignment and anti-assignment clauses, what makes them unenforceable, and learn how to negotiate them.

What Is Assignment?

An assignment is like a transfer. If an agreement permits assignment, a party could assign — or transfer — its obligation to another party. The second party — the one to whom the contract was assigned — would then be required to provide the products or services.

Assignments don’t necessarily relieve liability for the party who transfers the agreement. Depending on the contract, the party who assigned its obligations may remain a guarantor of— or responsible for—the performance of the third party assigned the work. In other words, the party to the contract (the assignor) would be responsible for breaches committed by the party to which it assigned its performance (the assignee). To remove itself from the liability of the agreement, the assignor would need to seek a novation , which cancels the first contract and creates a new contract between the party that is the assignee and the original counterparty to the contract.

What is an Anti-Assignment Clause?

Anti-assignment clauses—also sometimes referred to as assignment clauses or non-assignment clauses—can appear in various forms. Essentially, they prevent one or both contracting parties from assigning some or all of their respective contractual obligations or rights to a third party.

Anti-Assignment Language to Look for in a Contract

When reading through your contract, you can typically find a separate paragraph entitled “Assignment,” “Non-assignment,” or “Anti-assignment.” Sometimes you’ll find the assignment language buried within a “Miscellaneous Provisions” section, which contains all the boilerplate language of a contract, such as severability and waiver provisions.

Contracts include two primary types of anti-assignment clauses. The first type categorically precludes all assignments of rights and duties. It usually reads something like this: “Neither Party may assign, delegate, or transfer this agreement or any of its rights or obligations under this agreement.”

The second type prohibits assignments unless the assigning party obtains the prior written consent of the other party. It usually reads something like this: “Neither this agreement nor any right, interest, or obligation herein may be assigned, transferred, or delegated to a third party without the prior written permission of the other party, and whose consent may be withheld for any reason.”

Some clauses may state that a change of control, such as a merger, consolidation, or acquisition, is considered an assignment. Read carefully , because you want to ensure that you won’t be in breach if you transfer the contract to an affiliate.

Additionally, check the termination section of your agreement. Some termination clauses may state that a non-assigning party may terminate the contract in the event of a non-permitted assignment. Or a termination clause may state that the agreement automatically terminates upon such a transfer.

Without an anti-assignment provision, contracts are generally assignable even absent the consent of the counterparty. The Uniform Commercial Code (UCC), a group of laws governing the sale of goods, prefers the free transferability of all types of property, including contracts.

Still, courts normally enforce anti-assignment clauses that are negotiated and agreed upon by both parties, depending on the applicable law, the jurisdiction governing the contract, and the language agreed upon in the contract. Be aware though that courts tend to narrowly interpret anti-assignment clauses. For instance, an anti-assignment clause may prohibit assignment but fail to state that an assignment in violation of the contract will be invalid. In this case, a party may be able to file a suit for breach of contract, but the court may not permit it to invalidate the assignment.

Even without a solid anti-assignment clause, there may still be an opportunity to prevent certain assignments. Courts may not enforce assignments to which the counterparty did not consent, even in the absence of a valid anti-assignment clause, especially if the contract is personal in nature. Some obligations can be performed equally well by a third party, such as a requirement to make payments. But a personal obligation involves a special relationship between parties or requires special levels of expertise, discretion, or reputation. For example, personal service contracts, including employment agreements, are personal enough in nature that they’re not transferable unless the non-transferring party consents.

In general, assignment is not enforceable when:

• The contract prohibits and voids assignment

As discussed above, contract provisions can prohibit and void an assignment.

• The assignment materially changes the contract

If the assignment would significantly impact the performance of the contract — for instance, if it greatly increases the risks or burden imposed on the other party — then a court would likely not enforce the assignment.

• The assignment violates the law

Certain laws prevent assignments. For example, some states legislate that an employee cannot assign its future wages to a third party.

• The assignment violates public policy

If the assignment would harm public policy interests, it will be void. For instance, victims may not assign their personal injury claims to third parties to discourage excessive litigation.

Negotiating Anti-Assignment Clauses

In certain situations, the inclusion of an anti-assignment clause may not be in a party’s best interests. If a party depends on a unique service provider or a specific person to perform, then it must make sure that that service provider or person can’t assign work to an unknown third party without its consent. For instance, if you pay a premium to hire a renowned jazz band to perform at your charity gala, you don’t want a local high school garage band to show up instead. In any situation involving unique services or providers, make sure you have the right to consent prior to any assignment under the agreement.

Another example of the importance of assignability is in mergers and acquisitions. When a company purchases another business, the acquired business’s existing customer base and supplier contracts make it more valuable . Consequently, if a party hopes to eventually sell its business, it would want the right to assign its existing contracts to the buyer. Otherwise, potential buyers may be scared off because of the time and money it will take to transfer the existing agreements. Plus, the existence of anti-assignment clauses may heavily impact the selling price. If it’s possible you may sell your business, ensure that you have the right to assign your contracts and that consent is not solely within the discretion of the counterparty.

If you want the right to assign the contract, but your agreement does not permit assignments, you’ll need to negotiate with your counterparty on this point. If the clause in your agreement prohibits all assignments, try to include a carve out by allowing assignment of your rights and obligations upon the prior written consent of the other party. Add that the counterparty shall not unreasonably withhold or delay consent. You may also want to carve out an exception to the anti-assignment clause by excluding assignments between affiliates or necessitated by change of control transactions, such as mergers or acquisitions.

Courts tend to construe anti-assignment and anti-delegation clauses narrowly. As mentioned, a number of courts have held that an anti-assignment clause does not remove the power of a party to assign the contract and invalidate the contract unless the provision explicitly states that such assignments will be invalid or void. Thus, if you want to make an assignment that violates your agreement, rather than creating an opportunity for a breach of contract case, explicitly state in your contract that such assignments are invalid or void.

If you don’t want the counterparty to be able to assign its rights or obligations, state your preference clearly in your agreement with one of these options.

• Require consent always

Include a clause such as, “Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, and any assignment or delegation that violates this provision shall be void.”

• Don’t require consent for affiliates or successors

Include a clause such as, “Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, except that no consent is required (a) for assignment to an entity in which the transferring party owns greater than 50 percent of the assets; or (b) in connection with any sale, transfer, or disposition of all or substantially all of its business or assets; provided that no such assignment will receive an assigning party of its obligations under this agreement. Any assignment or delegation that violates this provision shall be void.”

• Require consent to be given reasonably

Include a clause such as, “Neither party may assign or delegate this agreement or its rights or obligations under this agreement without the prior written consent of the other party, whose consent shall not be unreasonably withheld or delayed. Any assignment or delegation that violates this provision shall be void.”

Note that you will not be able to prevent assignments resulting from court orders or by operation of law, such as those ordered through a bankruptcy hearing.

When you enter a contractual relationship, make sure to clearly determine your rights and obligations, as well as those of the other party. If it may be important for your business to have the right to assign all or parts of the contract, negotiate for the removal of the anti-assignment clause, or request changes to it to provide sufficient flexibility for you to assign.

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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork - not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice of assignment.

What issues are there with serving notice of assignment?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment.

The case concerned the assignment of a trade mark licence to GNIC . The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist.

At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC , as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Best practice for serving notice of assignment

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

For further advice on serving notice of assignment please contact Kirsty Barnes or Catherine Phillips  from our Banking & Finance team.

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UNDERSTANDING THE ANTI-ASSIGNMENT CLAUSE IN CONTRACTS

Introduction.

Contracts, generally, are freely assignable i.e., either party can freely transfer one’s obligations or rights to a third party. This is what an assignment clause signifies. An assignment is a transfer of rights and liabilities that the third party must then discharge to the other party. But sometimes, some contracts include an Anti-assignment clause to obstruct or limit assignment. They prevent either party to contract to transfer contractual obligations and/or rights to a third party.

The early legal system was against assigning contract rights as it considered them highly personal and intelligible. Fear of litigation, fear of maintenance, and champerty are some of the other reasons that many commentators feel led to the development of a non-assignability clause. However, with the passage of time and the development of technology, the work-load increased mani-fold necessitating the assignment of some rights and liabilities to the third party; now assignment of rights has become a general trend and non-assignment has taken a backseat which especially needs to be drafted to forbid assignment.

An anti-assignment clause also referred to as a non-assignment clause is a boilerplate clause that either bar completely or partially either of the party to the contract from transferring their rights and obligations under the contract to a third party without due permission from the non-assigning party.

FORMS OF ANTI-ASSIGNMENT CLAUSE

A non-assignment clause in a contract can be presented to the oblige in varied forms depending on the nature of the contract and its terms and conditions.

It may take the following forms-

• Assignments of contract rights and liabilities may be completely prohibited, or;
• Assignments may be limited to entities within the same group as the assignor.
• The agreement may prohibit any transfers of the obligation without the approval of the obligor, which should not be unreasonably denied.

IMPORTANCE OF ANTI-ASSIGNMENT CLAUSE

A non-assignment clause limits the obligor’s contractual obligations to the obligee. The courts construe the clause in favor of the non-assigning party i.e., the obliger. Since the oblige afterward assigns its rights, the obliger then needs to also cooperate with the assignee i.e., a third-party or a stranger to the contract for the performance of the contract; therefore, the courts assume that only the party that can complain about the assignment is the non-assigning party.

SCOPE OF ANTI-ASSIGNMENT CLAUSE

Anti-assignment clauses in contracts have become a frequent practice because, without them, contracts are freely assignable. However, there are certain contracts where the assignment is excused by the statutes itself, however, the anti-assignment clause is still drafted into the contract for efficient enforcement. For example, Section 37 of the Indian Contract Act [1] prohibits the practice of “offering to perform” where it is against the lex-terrae. Such contracts could be of IPR where the nature of the contract is personal [2] or could be an employment agreement where an assignment without permission would lead to significant and unfavorable consequences for non-assigning parties. For all other contracts, anti-assignment clauses can be used with ease.

Examples of the use of the Anti-Assignment Clause

• In Franchise Agreement, this clause clearly outlines the extent of the permissibility of the assignment of the intellectual property of the franchise.
• In a Purchase and Sale Agreement, the purchaser may need to assign its rights and obligations to be able to obtain financing more easily. Certainly, the seller would need to keep some control over the financing parts of the transaction through a non-assignment clause to be on the safer side and protect himself against dealing with any strange entity.
• In Asset Acquisition Agreement , a purchaser only obtains those assets and liabilities of a target listed in the agreement. In the case of an asset acquisition. In the case of an asset acquisition, any agreement with an anti-assignment clause will be activated. [3]
• In the Stockholders’ Agreement, this clause will kick in (if included), the moment stockholder tries to transfer, assign, hypothecate, mortgage, or alienate any or all stocks in a corporation. This is the case where there is a complete ban on assignment, however the same can be assigned if however, there are exemptions to non-assignment by operation by law. [4]
• Almost in all Commercial Lease Agreements, there is an anti-assignment clause. The transfer of ownership may be forbidden by an anti-assignment clause, so before selling the business, you must seek permission from your proprietor; however, this permission should not be withheld against the interests of the lease.

However, the list is not exhaustive. There are still a lot of businesses where the anti-assignment clause is used including but not limited to joint-venture agreements, partnership agreements, limited liability company operating agreements, real estate contracts, bills of sale, Assignment, and transaction financing agreements, etc.

ENFORCEABILITY OF ANTI-ASSIGNMENT CLAUSE

This restrictive clause’s effect will be triggered the moment there is any breach of this clause. According to the traditional view, a contract is void if this restrictive clause is violated; however, the modern view holds that a breach of it will only result in a claim for damages; the contract is not ipso-facto void unless expressly stated in the contract. Along with this view, the court will consider the relevant law, the jurisdiction that governs the contract, and the language of the contract to enforce this clause.

MERITS OF ANTI-ASSIGNMENT CLAUSE

A contract with an anti-assignment clause thrives with the following advantages-

• The relationship between the assignor and the obligor is preserved, while the connection between the obligor and the assignee is either limited or eliminated.
• The obligor is safeguarded by this, as they may not want to be in a situation where they must mention a set-off defence against one party and a counterclaim against the other or become involved in a disagreement between the assignor and assignee under the contract of assignment. [5]

DEMERITS OF ANTI-ASSIGNMENT CLAUSE

The anti-Assignment clause also suffers from the following disadvantages-

• In cases where this clause is violated, it is extremely difficult to quantify and measure the damages.
• It can be a lengthy and exasperating process for businesses that are on the brink of bankruptcy, such as start-ups, to finalize the closure until they get the approval of all the commercial entities with whom they had a contract that included a non-assignment clause.
• In the event of a change in ownership, such as a merger or acquisition, a business may feel uneasy about the new owner of its partner company. To have a say in the selection of the other party’s owner, the business may include a clause in the agreement that mandates their approval before the change can occur, allowing them to indirectly manage the situation.

In conclusion, an anti-assignment clause is a provision in a contract that prohibits one party from transferring or assigning their rights or obligations under the contract to a third party without the other party’s consent. This clause is commonly used in contracts to protect the interests of the parties involved and to ensure that the original parties to the contract are the ones who will perform the obligations and receive the benefits. Anti-assignment clauses can be beneficial for both parties in a contract. For the party who is providing goods or services, it ensures that they are dealing with the same party throughout the duration of the contract, which can help to maintain consistency and quality. For the party who is receiving the goods or services, it can assure that they are dealing with a party that has the necessary expertise and resources to fulfill the obligations under the contract. However, there are also potential drawbacks to anti-assignment clauses. They can limit a party’s ability to transfer their rights or obligations under the contract, which can be problematic if the party needs to assign the contract due to unforeseen circumstances. Additionally, anti-assignment clauses can make it more difficult for a party to obtain financing or sell their business, as potential buyers or lenders may be hesitant to take on a contract with such a clause. Overall, the use of anti-assignment clauses in contracts should be carefully considered and tailored to the specific needs of the parties involved. It is important to strike a balance between protecting the interests of the parties and allowing for flexibility in the event of unforeseen circumstances.

Author(s) Name: Avee Singh Dalal (Dr B.R. Ambedkar National Law University, Sonipat)

References:

[1] The Indian Contract Act, 1872, Sec. 37, No. 9, Acts of Parliament, 1872 (India)

[2] Kapilaben v. Ashok Kumar Jayantilal Sheth, (2020) 20 SCC 648

[3] Aaron R Katz, A Guide to Understanding Anti-Assignment Clauses, GT ISRAEL LAW BLOG (Feb. 18, 2023, 5:15 PM), https://www.gtlaw-israelpractice.com/2016/02/04/a-guide-to-understanding-anti-assignment-clauses/ .

[4] The Law of Offices of STIMMEL, STIMMEL & ROESER, https://www.stimmel-law.com/en/articles/assignments-basic-law (last visited Feb. 18, 2023).

[5] Michael Bridge, The nature of assignment and non-assignment clauses, LSE RESEARCH ONLINE (2015), https://eprints.lse.ac.uk/61892/1/The_Nature.pdf .

§ 2-210. Delegation of Performance; Assignment of Rights.

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(1) A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract . No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.

(2) Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract , or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreement otherwise.

(3)Unless the circumstances indicate the contrary a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the assignor's performance.

(4) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract .

(5) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (Section 2-609 ).

Walker Morris / Insights / Receivables Finance: the prohibition on assignment is now in force

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Receivables Finance: the prohibition on assignment is now in force

18th January 2019

The Business Contract Terms (Assignment of Receivables) Regulations 2018 came into force on 31 December 2018 meaning that parties to a contract in the UK may no longer be able to prohibit the assignment of receivables arising in respect of supplies made under it, even if it is a long term supply contract providing for multiple deliveries.

As we reported in December 2017 , draft regulations were laid before Parliament in September of that year which proposed to make any term in a business contract that prohibited or restricted the assignment of receivables automatically ineffective. Those draft regulations were subsequently withdrawn amid concerns that they would create uncertainty in the finance markets.

The main areas of concern were that:

• the legislation appeared to be retrospective therefore catching contracts that were already in place;
• the types of assignment which fell within the regulations were not described sufficiently well enough to create certainty; and
• there was no protection for the debtor who may have stipulated for a non-assignment clause in the expectation that its rights of set off would be preserved.

However, the government has since revisited the legislation and on 24 November 2018 the Business Contract Terms (Assignment of Receivables) Regulations 2018 (the Regulations ) came into force. The Regulations apply to contracts (with a few exceptions described below) created after 31 December 2018 and mean that parties will no longer be able to prohibit the assignment of receivables in the UK. The Regulations make it clear that the prohibition is not retrospective and so the Regulations only apply to new contracts. In effect, this means that one party to a contract cannot prevent the other party from choosing who should receive payments under a contract for the supply of goods, services or intangible assets.

The Regulations also render unenforceable any terms which prevent a person who has been assigned the receivable from being able to enforce the contract, or determine its validity or value (for example by preventing the disclosure of the information required to commence court proceedings for its collection).

The Regulations are aimed at improving access to invoice financing for small and medium-sized enterprises and the government speculates that this will provide a £1 billion, long-term, boost to the economy. Invoice financing allows businesses to assign their right to be paid by a customer to a finance provider. In return the finance provider provides the business with up-front funds, thereby speeding up the business’ working capital cycle (provided the debtor ultimately pays the assigned invoice). Before 1 January 2019, smaller businesses would usually be forced to engage with larger customers on those customers’ standard terms, which often contained non-assignment clauses. As a result, some smaller businesses were restricted from engaging with invoice financing opportunities. This should now change.

The Regulations apply to contracts for the supply of goods, services or intangible assets where the supplier has the right to be paid under the contract. There are, however, a number of exceptions including:

• a large enterprise or part of a large group (as defined by the Companies Act 2006); or
• a special purpose vehicle, set up to hold assets or finance commercial transactions involving it incurring a liability under an agreement of £10 million or more.
• The Regulations also do not apply to services of a financial nature. The definition of ‘financial nature’ is construed widely and includes, amongst other things, leasing, loan relationships and all types of securitisation and derivative transactions.
• The Regulations do not apply to contracts which have as their purpose the acquiring, disposing or transferring of ownership in a firm (as defined in the Companies Act 2006) whether incorporated or established, or of a business or undertaking. However, for this exemption to apply, the contract must include a statement to that effect.
• The Regulations generally do not apply to contracts that relate to non-UK businesses. However, parties cannot contract out of the Regulations by changing the contract’s governing law, if the only reason for doing so is to circumvent the regulations.
• There are also a number of other types of contracts which the Regulations do not apply to, including consumer contracts, real estate contracts, public-private partnership contracts and rental contracts. Interestingly, the Regulations will apply to building contracts which, up to now have been impossible to finance, in practice, through an invoice discounting arrangement.

Practical application

The Regulations will lead to the need for certain changes to the drafting and implementation of commercial contracts:

• No assignment clauses –  An eligible supplier will be able to assign their receivables to a debt purchaser without having to seek their customers’ prior consent. This means a blanket non-assignment clause will no longer work for on its own to preserve rights of set off;
• Confidentiality provisions –  Confidentiality obligations can still be imposed on suppliers, except for any “essential information” that enables the identification of the receivables following assignment. This means information that enables the identification of receivables (so as to facilitate their collection) may be disclosed by a supplier to a third party purchaser for the purpose of receivables assignment or transfer without constituting a breach of confidentiality.
• Set-off –  The Explanatory Note to the Regulations clarifies that a contractual right to set-off is not considered as a restriction on transfer of receivables for the purpose of the Regulations. Although the right to set-off is maintained, businesses may want to consider the practical impact of the Regulations on the mechanism to exercise the right to set-off, such as how cash flow will be affected if you are no longer able to consolidate future transactions to set-off against one original invoice that has already been assigned to a third party.

Many commercial arrangements will be unaffected by this change in legislation. However this will depend, in relation to contracts entered into this year and beyond, on the terms of the contract and the nature of what is being supplied under it. A key point to note is that the Regulations will not nullify the contract as a whole or, indeed, the whole of the clause restricting assignment, but only to the extent applicable to receivables.

Providers of invoice finance will still need to carry out due diligence, at least for now, on taking on any new invoice discounting client to ascertain the extent to which the debtor book may still contain debts which are subject to restrictions on assignment or are otherwise subject to rights of set off.

Small and medium sized companies seeking to avail themselves of the new rules should seek advice before doing so. Invoice discounting products can be an extremely effective way of assisting a growing business meet its working capital needs. However, lumpy cash flow, or bad debt experience (including habitual slow payers in the customer base) can lead to disaster if not properly managed.

If you need advice on how the Regulations may affect your business please get in touch.

Please select your interests

Regulations banning the prohibition on assignment of receivables come into force

Controversial regulations that nullify contractual clauses restricting the assignment of receivables came into force on 24 November 2018.

The Small Business, Enterprise and Employment Act 2015 allows regulations to be made invalidating contractual restrictions on the assignment of receivables in particular types of contracts. The Government’s stated intention behind this provision was to remove barriers inhibiting small businesses from gaining access to invoice finance.

Initial draft regulations, (the Business Contract Terms (Restrictions on Assignment of Receivables) Regulations 2015) were published for consultation in 2014, with a revised version published in September 2017. These 2017 draft regulations were withdrawn, however, two months after their publication. This followed wide-ranging feedback from, among others, the City of London Law Society and the Financial Markets Law Committee.

Among the criticism directed at the draft regulations was that they were too wide ranging and did not sufficiently identify the supply of goods and services by SMEs as the particular finance sector to which the regulations should apply. There was also significant concern that the wider finance markets, which make use of receivables finance, should not be caught by the regulations.

In July 2018, the government published a further revised draft of the regulations - the draft Business Contract Terms (Assignment of Receivables) Regulations 2018. These contained several modifications from the 2017 version, including specifying that the restrictions do not apply where the person to whom the receivable is owed is a large enterprise or a special purpose vehicle and adding to the list of types of contract that are exempt (e.g. a contract to acquire a business or an ownership interest in a firm.)

The Regulations were finally published on 30 November 2018 with no substantive changes from the draft version published in July. They were made on 23 November 2018 and came into force on 24 November 2018.

What is the effect of the Regulations?

Under the Regulations, any term in a contract entered into on or after 31 December 2018, “has no effect to the extent that it prohibits or imposes a condition, or other restriction, on the assignment of a receivable arising under that contract or any other contract between the same parties” (Regulation 2).

A receivable is broadly defined as a right to be paid any amount under a contract for the supply of goods, services or intangible assets. There is no definition of “assignment” in the Regulations, which has caused some uncertainty over what types of transaction this term will cover.

As well as nullifying terms that prohibit the assignment of receivables, the Regulations also make ineffective any term that imposes a condition or other restriction on their assignment. This would include a term which prevents an assignee from determining the validity or value of the receivable or their ability to enforce it. These provisions should prevent devices such as confidentiality clauses from being used to circumvent the legislation.

The Regulations list categories of information which are relevant to these anti-avoidance provisions and if a contract restricts an assignee from obtaining this information, that restriction will be void. The categories of information include the identity of the parties, the goods or services that gave rise to the receivable and the date on which they were supplied, the amount payable (including VAT) and the credit period for paying the receivable.

Exemptions for “large” suppliers or SPVs

Regulation 2 does not apply to contracts where the supplier of the goods or services (i.e. the person entitled to the receivable) was, at the time of the assignment, a “large” enterprise or a “special purpose vehicle”. This means that contractual prohibitions or restrictions on assignment will continue to be valid where the supplier falls into one of these categories at the time of the assignment.

Broadly speaking, a supplier will be “large” unless:

• it is an individual, an unincorporated association or a partnership (excluding LLPs or limited partnerships)
• it falls within the small companies or small LLPs regime in the relevant financial year (as set out in ss 381-384 Companies Act 2006) and it was not a member of a large group in that year, or
• it qualifies as a medium-sized company or LLP (as defined in ss 465-467 Companies Act 2006) in the relevant financial year and was not a member of a large group in that year.

A firm will be a “special purpose vehicle” (wherever it is incorporated or established) if its primary purpose is to hold assets (other than trading stock) or to finance commercial transactions and in either case, it incurs a contractual liability of £10m or more.

Exempt contracts

Regulation 2 also does not apply to several types of specified contract. These include:

• a contract for, or entered into, in connection with prescribed financial services (which includes any service of a financial nature)
• a contract for or in connection with the transfer of any ownership interest in a firm or a business (including transitional services agreements) and which includes a statement to that effect
• a contract which concerns any interest in land, and
• a contract where none of the parties has entered into it in the course of carrying on a business in the UK.

Other exemptions exist for certain project finance contracts, petroleum licenses, contracts concerning national security, securities options, swaps and other derivatives.

Applicable law

The Regulations apply to terms in a contract to which the law of England and Wales or the law of Northern Ireland applies, and at least one of the parties has entered into it in the course of carrying on business in the UK.

Although the Regulations will not generally apply to contracts governed by foreign laws, they do include deeming provisions to prevent parties from choosing Scottish, or another non-UK governing law, in order to avoid their operation.

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This document (and any information accessed through links in this document) is provided for information purposes only and does not constitute legal advice. Professional legal advice should be obtained before taking or refraining from any action as a result of the contents of this document.

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• Business and industry

Invoice finance: nullifying the ban on invoice assignment contract clauses

Download the full outcome.

Government response: nullification of ban on invoice assignment clauses

Ref: BIS/15/441

PDF , 209 KB , 3 pages

Detail of outcome

We plan to stop bans on invoice assignment clauses in business to business contracts. These powers are granted to us through the Small Business, Employment and Enterprise Act 2015 .

Feedback received

Summary of responses to the nullification of ban on invoice assignment clauses

PDF , 201 KB , 13 pages

Detail of feedback received

We received 20 responses to the consultation. These mainly came from:

• business representative bodies
• invoice financiers and law practitioners

We also had some responses from large businesses in the retail and construction industry. A full list of respondents is available in Annex A of the summary of responses.

Original consultation

We’re asking for views on our proposals to nullify bans on invoice assignment terms in business to business commercial contracts.

This consultation ran from 9am on 6 December 2014 to 11:45pm on 11 February 2015

Consultation description

Invoice finance allows a business to give the right to future payment to a finance provider in exchange for a loan up to the full value of the invoice. It can provide a vital source of finance if a business has to wait a long time between completing a job and receiving payment.

The ban on invoice assignment is often part of a more general ban on an assignment clause in the contract to stop a supplier from sub-contracting. As a result, a business’ access to invoice finance is often unintentionally restricted.

In December 2013, we published our discussion paper Building a responsible payment culture . This asked whether removing contractual barriers to selling invoices would be helpful to small businesses by increasing their access to different finance options. The majority of respondents agreed that it would be helpful.

We announced in the government response that we would legislate to remove these barriers to financing. Clauses 1 and 2 of the Small Business, Enterprise and Employment Bill provide the broad legislative power to do this.

We propose to introduce a regulation that would nullify any bans on invoice assignment terms in business to business commercial contracts. We want to know your views on our proposals, the draft regulations and the costs and benefits of the measure on both companies and the invoice finance market.

Small Business, Enterprise and Employment Bill: nullification of ban on invoice assignment clauses

Ref: BIS/14/1232

PDF , 240 KB , 19 pages

Draft Statutory Instrument: Business Contract Terms (Restrictions on Assignment of Receivables) Regulations 2015

Ref: BIS/14/1232/AN1

PDF , 181 KB , 2 pages

Measure to nullify ban on assignment clauses in a debtors terms of sale: impact assessment

Ref: BIS/14/1233

PDF , 982 KB , 47 pages

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Added government response.

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Florida’s DeSantis signs one of the country’s most restrictive social media bans for minors

Florida Gov. Ron DeSantis signs a bill that will ban social media accounts for children under 14 and require parental permission for 14- and 15-year-olds.

FILE 0 Florida Gov. Ron DeSantis applauds during a press conference at the Central Florida Tourism Oversight District headquarters at Walt Disney World, in Lake Buena Vista, Fla., Thursday, Feb. 22, 2024. Florida will have one of the country’s most restrictive social media bans for minors — if it withstands expected legal challenges — under a bill signed by Republican Florida Gov. Ron DeSantis on Monday, March 25, 2024. (Joe Burbank/Orlando Sentinel via AP, File)

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TALLAHASSEE, Fla. (AP) — Florida will have one of the country’s most restrictive social media bans for minors — if it withstands expected legal challenges — under a bill signed by Republican Florida Gov. Ron DeSantis on Monday.

The bill will ban social media accounts for children under 14 and require parental permission for 14- and 15-year-olds. It was slightly watered down from a proposal DeSantis vetoed earlier this month , a week before the annual legislative session ended.

The new law was Republican Speaker Paul Renner’s top legislative priority. It takes effect Jan. 1.

“A child in their brain development doesn’t have the ability to know that they’re being sucked into these addictive technologies and to see the harm and step away from it, and because of that we have to step in for them,” Renner said at the bill-signing ceremony held at a Jacksonville school.

The bill DeSantis vetoed would have banned minors under 16 from popular social media platforms regardless of parental consent. But before the veto, he worked out compromise language with Renner to alleviate the governor’s concerns and the Legislature sent DeSantis a second bill.

Several states have considered similar legislation. In Arkansas, a federal judge in August blocked enforcement of a law that required parental consent for minors to create new social media accounts.

AP AUDIO: Florida’s DeSantis signs one of the country’s most restrictive social media bans for minors

At a signing ceremony, Florida Governor Ron DeSantis says being a dad has informed his views on Florida House Bill 3, which bans social media accounts for children under 14 and require parental permission for 15- and 16-year-olds.

Supporters in Florida hope the bill will withstand legal challenges because it would ban social media formats based on addictive features such as notification alerts and auto-play videos, rather than on their content.

Renner said he expects social media companies to “sue the second after this is signed. But you know what? We’re going to beat them. We’re going to beat them and we’re never, ever going to stop.”

DeSantis also acknowledged the law will be challenged on First Amendment issues, and bemoaned the fact the “Stop Woke Act” he signed into law two years ago was recently struck down by an appeals court with a majority of Republican-appointed judges. They ruled it violated free speech rights by banning private business from including discussions about racial inequality in employee training.

“Any time I see a bill, if I don’t think it’s constitutional, I veto it,” said DeSantis, a lawyer, expressing confidence that the social media ban will be upheld. “We not only satisfied me, but we also satisfied, I think, a fair application of the law and Constitution.”

Khara Boender, a state policy director for the Computer & Communications Industry Association, said in a news release that she understands the concern for online safety but expressed doubt the law will “meaningfully achieve those goals without infringing on the First Amendment rights of younger users.”

She also anticipated a legal challenge.

“This law could create substantial obstacles for young people seeking access to online information, a right afforded to all Americans regardless of age,” Bonder said.

The bill overwhelmingly passed both chambers, with some Democrats joining a majority of Republicans who supported the measure. Opponents argued it is unconstitutional and government shouldn’t interfere with decisions parents make with their children.

“This bill goes too far in taking away parents’ rights,” Democratic Rep. Anna Eskamani said in a news release. “Instead of banning social media access, it would be better to ensure improved parental oversight tools, improved access to data to stop bad actors, alongside major investments in Florida’s mental health systems and programs.”

This story has been corrected to show that parental permission is required for 14- and 15-year-olds, not 16-year-olds.

The Government restricts bans on assignment

United Kingdom |  Publication |  November 2018

Legislation now in force preventing parties from prohibiting the assignment of receivables under certain contracts.

At the moment, a contract can prohibit or restrict the parties’ ability to assign or transfer rights created under the contract. The extent of the restriction is a matter of interpretation of the clause concerned. If one of the parties to the contract attempts to assign the benefit of the contract in breach of the restriction, the purported assignment is ineffective.

One of the key assets of any business is its receivables, and restrictions on assignment can prevent the parties from factoring receivables or otherwise raising finance on them. The Government has decided that it should be easier for businesses to raise finance on their receivables. Accordingly the Small Business, Enterprise and Employment Act 2015 allows regulations to be made to invalidate restrictions on the assignment of receivables in particular types of contract. The regulations have now been made. They are contained in The Business Contract Terms (Assignment of Receivables) Regulations 2018. Draft regulations published in July, have been approved by both Houses of Parliament and are now in force.

What types of contracts do the Regulations apply to?

The Regulations apply to contracts for the supply of goods, services or intangible assets under which the supplier is entitled to be paid money. But there are a number of important exclusions from their application, including the following:

• They only apply to contracts entered into on or after 31 December 2018.
• They only apply where the person who supplies the goods, services or intangible assets concerned, and is therefore entitled to the receivable, is a small or medium-sized enterprise which is not a special purpose vehicle. Whether or not an entity qualifies in any particular case requires a detailed examination of the precise wording of the
• Regulations. Counter-intuitively, the test is not applied at the time the contract is entered into, but at the time the assignment takes place.
• There is a specific exemption for contracts “for, or entered into in connection with, prescribed financial services”: These are widely defined to include “any service of a financial nature”.
• There are specific exclusions for particular types of contract, including certain commodities, project finance, energy, land, share purchase and business purchase contracts and operating leases.
• As a general rule, it would seem that the Regulations only apply to contracts governed by English law or the law of Northern Ireland, but they prevent the parties from choosing a foreign law if it can be established that the purpose of doing so was to evade the Regulations.
• The Regulations do not apply if none of the parties to the contract has entered into it in the course of carrying on a business in the United Kingdom.

What is the effect of the Regulations?

The Regulations provide that “a term in a contract has no effect to the extent that it prohibits or imposes a condition, or other restriction , on the assignment of a receivable arising under that contract or any other contract between the same parties.”

A receivable is the right to be paid any amount under a contract for the supply of goods, services, or intangible assets. The Regulations do not prevent the parties from restricting the assignment of other contract rights.

More difficult is to establish what is meant by assignment. Receivables are transferred in various ways in practice. Sometimes the transfer is outright (for instance by way of sale); and sometimes it is by way of security (for instance to secure a loan). The transfer may be effected by a statutory assignment, an equitable assignment, a charge or a trust. “Assignment” is not defined in the Regulations, and so there is some doubt as to which of these transactions are covered.

Although charges are not expressly referred to, they might be covered by the expression “assignment” if it is given a broad interpretation. But because of the uncertainty, the best course is to take an assignment by way of security over a receivable where there is, or might be, a restriction. That way, it is clear that the Regulations do apply.

Non-assignment clauses come in a variety of forms. They will be covered by the Regulations if they prohibit or impose a condition , or other restriction on the assignment of a receivable. The Regulations expressly invalidate terms which prevent the assignee from determining the validity or value of the receivable or their ability to enforce it. Whether or not the Regulations apply in any particular case will require an analysis of the precise terms of the restriction.

The Regulations will be of particular importance to businesses involved in the financing of receivables. And they will also be of concern to buyers because they will override their contractual protections.

• Financial institutions

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The Oversight Board weighs in on Meta’s most-moderated word

T he Oversight Board is urging Meta to change the way it moderates the word “shaheed,” an Arabic term that has led to more takedowns than any other word or phrase on the company’s platforms. Meta asked the group for help crafting new rules last year after attempts to revamp it internally stalled.

The Arabic word “shaheed” is often translated as “martyr,” though the board notes that this isn’t an exact definition and the word can have “multiple meanings.” But Meta’s current rules are based only on the “martyr” definition, which the company says implies praise. This has led to a “blanket ban” on the word when used in conjunction with people designated as “dangerous individuals” by the company.

However, this policy ignores the “linguistic complexity” of the word, which is “often used, even with reference to dangerous individuals, in reporting and neutral commentary, academic discussion, human rights debates and even more passive ways,” the Oversight Board says in its opinion. “There is strong reason to believe the multiple meanings of ‘shaheed’ result in the removal of a substantial amount of material not intended as praise of terrorists or their violent actions.”

In their recommendations to Meta, the Oversight Board says that the company should end its “blanket ban” on the word being used to reference “dangerous individuals,” and that posts should only be removed if there are other clear “signals of violence” or if the content breaks other policies. The board also wants Meta to better explain how it uses automated systems to enforce these rules.

If Meta adopts the Oversight Board’s recommendations, it could have a significant impact on the platform’s Arabic-speaking users. The board notes that the word, because it is so common, likely “accounts for more content removals under the Community Standards than any other single word or phrase,” across the company’s apps.

“Meta has been operating under the assumption that censorship can and will improve safety, but the evidence suggests that censorship can marginalize whole populations while not improving safety at all,” the board’s co-chair (and former Danish prime minister) Helle Thorning-Schmidt said in a statement. “The Board is especially concerned that Meta’s approach impacts journalism and civic discourse because media organizations and commentators might shy away from reporting on designated entities to avoid content removals.”

This is hardly the first time Meta has been criticized for moderation policies that disproportionately impact Arabic-speaking users. A 2022 report commissioned by the company found that Meta’s moderators were less accurate when assessing Palestinian Arabic, resulting in “false strikes” on users’ accounts. The company apologized last year after Instagram’s automated translations began inserting the word “terrorist” into the profiles of some Palestinian users.

The opinion is also yet another example of how long it can take for Meta’s Oversight Board to influence the social network’s policies. The company first asked the board to weigh in on the rules more than a year ago (the Oversight Board said it “paused” the publication of the policy after October 7 attacks in Israel to ensure its rules “held up” to the “extreme stress” of the conflict in Gaza). Meta will now have two months to respond to the recommendations, though actual changes to the company’s policies and practices could take several more weeks or months to implement.

“We want people to be able to use our platforms to share their views, and have a set of policies to help them do so safely,” a Meta spokesperson said in a statement. “We aim to apply these policies fairly but doing so at scale brings global challenges, which is why in February 2023 we sought the Oversight Board's guidance on how we treat the word ‘shaheed’ when referring to designated individuals or organizations. We will review the Board’s feedback and respond within 60 days.”

Newport Beach increases enforcement on sidewalk vendors

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The Newport Beach City Council unanimously passed the second reading of a new ordinance that will crack down on street vendors doing business in unpermitted areas of the city.

The ordinance first came before the City Council on March 12 when members approved it. Mayor Pro Tem Joe Stapleton said at the time that the issue of vendors setting up where they are not allowed has had a direct impact on residents and business owners in his district, which includes the Balboa Peninsula and west Newport Beach.

The new ordinance enhances existing code enforcement to allow for the seizure of items and equipment used in violation of existing code, the adoption of an impounding fee, staffing changes and the purchase of an all-terrain vehicle and trailer.

“My primary concern is to help protect the interests of Peninsula businesses that are facing competition from unpermitted vendors,” Stapleton said in response to a reporter’s question Wednesday, noting that people have told him that vendors are setting up near the piers and up and down the city’s beaches.

“I want to support the lawful, permitted businesses in our community,” he said.

Sidewalk vending regulations were first adopted in November 2018 after changes in state law forced Newport Beach to lift its ban on vendors.

According to those regulations , sidewalk vendors are allowed to operate but must avoid specific locations, including the Balboa Island boardwalk, the Oceanfront boardwalk, East Balboa Boulevard between Adams Street and A Street, Marine Avenue on Balboa Island, East Coast Highway between Avocado Avenue and Hazel Drive, and the Civic Center. Vendors are also restricted from operating within 200 feet of most public-safety buildings, such as police and fire stations, or within 100 feet of other sidewalk vendors, schools, public picnic areas and community centers.

They’re also not allowed to operate on any public property that does not meet the definition of a sidewalk or walkway, which means alleys, beaches, piers, squares, streets, street ends or parking lots are off limits.

If found in violation of city code, vendors can be fined anywhere from $100 to $500, depending on how many times they’ve been cited within a given year. For being in violation and also lacking a permit, vendors can be fined between $250 to $1,000, again depending on how many times they’ve been cited within a given year.

In a report prepared for the City Council, staff said there has been an increase in unpermitted vending taking place that extends beyond the sidewalks and onto the piers and beaches.

Visits to the reportedly affected areas by the Daily Pilot on Tuesday, Wednesday and Thursday afternoons turned up no sight of any street vendors, though Assistant City Manager Seimone Jurjis noted they often set up for business on weekends, spring break and summertime, when there are more visitors from out of town.

The vendors have been required to get permits since 2019, but only two have been issued in the past, according to Jurjis, and there are currently no active permits.

City staff noted in a report for a previous council meeting that one of the challenges of dealing with street vendors has been that those who flout the restrictions often don’t carry or are not willing to provide identification to officers who are there to write citations. Further, the vendors might leave for a short time, then return to those locations after officers are gone. Staff also said beaches are difficult to patrol, given the terrain and their vast size.

Enforcement of the street vendor ordinance is handled by the city’s community development department. Jurjis confirmed Wednesday that code enforcement made contact with 40 vendors operating illegally in 2023. He said that because there is no existing outreach to advise vendors of the regulations, it will be up to the discretion of code enforcement officers as to whether they issue a warning, a citation or if equipment seizure is warranted.

Restaurateur Mario Marovic, who owns Malarky’s Irish Pub, Blackie’s By the Sea and other businesses in and around Newport, said he’s hopeful the beefed-up regulations on street vendors will be good for local businesses. He said not only do the vendors compete unfairly with restaurants, but there is also concern over their food-safety practices.

“We follow city code. We follow the health department’s codes. We pay payroll taxes. We meet the wage requirements. We’re regulated. We’re audited. We pay mortgages and rent, but these guys show up and contribute nothing to the city or its sales tax. There’s no regulations on food safety, its quality or storage. It hurts locally owned and managed businesses,” Marovic said, adding that he’s seen more street vendors pop up in the last two years and has seen them selling canned alcohol on beaches.

“We’re under heavy scrutiny to just get open ... but these guys show up and just have no rules,” he said.

“We need more enforcement, period. 100%. There’s no questions about that. We’ve got issues with the homeless in our area, but now with the food vendors and everything else, how are businesses that are operating the correct way going to survive when we have all these negative impacts? It blows me away.”

Micah Schiesel, a partner at Super Panga, a taquería nearby Newport Pier, agreed, saying that it seems street vendors have an unfair advantage with wage and hour laws compared to brick-and-mortar establishments.

“Not only does their business detract from local businesses who have paid a premium for build-outs, obtained proper permits, paying or exceeding mandated hourly [minimum wage] rates, but supporting street vendors impact the city’s ability to capture sales tax, which is the primary revenue generated for the city by local businesses,” Schiesel said. “I would like to think that additional enforcement would be a deterrent.

“Some concerns are the lack of proper health department adherence in regard to safety and sanitation,” he continued, “as well as selling alcohol in a public area, which can pose safety concerns for local businesses.”

Marovic and Schiesel are not the only Orange County business owners concerned about sidewalk vendors. Other cities are facing difficulties with them too, including Santa Ana and Anaheim, where officials are trying to figure out how to regulate vendors through permitting and enforcement, even as vendors say they can’t afford the application fees or meet the requirements to qualify for an application and instead are willing to risk losing their equipment.

It costs $183 to submit an application for a permit in Newport Beach, which can be denied. The California Retail Food Code requires vendors to have a county health permit. Orange County health officials confirmed it costs $151 for a prepackaged food cart and $696 for a full-service food truck permit, but that is without the additional cost of other things vendors may need — such as sinks and water tanks — in order to meet code requirements.

Despite some of the concerns raised by business owners and the city, not everyone is worried. A beachgoer who declined to give his name said Tuesday he often visits from Costa Mesa whre he sees more sidewalk vendors than he ever does in Newport. He remembered once seeing a hot dog cart nearby Newport Pier, but that it’s since disappeared — a sign, he thought, of code enforcement.

Gretchen Smith, who often visits town with her family, said she rarely sees any sidewalk vendors in Newport Beach, compared to the number she encounters in Riverside, where she lives. But more than that, she said she doesn’t really have an issue with them.

“I like [seeing street vendors], and my kids grew up on that,” Smith said. “I don’t really think that they bother people, but I do think they should be responsible for health and safety and have their food handler’s license on them.”

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Lilly Nguyen covers Newport Beach for the Daily Pilot. Before joining the Pilot, she worked for the Orange County Register as a freelance reporter and general assignment intern. She earned her bachelor’s in journalism at Cal State Long Beach. (714) 966-4623.

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