When a vendor sells its business to a competitor, can your contract go with it? When a customer assigns its receivable to a factor, can you ignore the new payee? When a software company is acquired, do all of its license agreements transfer automatically? These are assignment and delegation questions, and Minnesota’s default rules favor transferability more than most CEOs assume.
Drafting around the default takes specific language: a generic “no assignment” clause does less work than it appears to, and the Uniform Commercial Code overrides anti-assignment language entirely for certain payment streams. This article walks through the rules, the carve-outs, and the language choices that actually control outcomes. For the broader picture on contract drafting and risk allocation, see our contracts practice area overview.
What is the default rule on assigning a Minnesota contract?
Minnesota’s default rule is that contract rights are assignable. For contracts governed by Article 2 of the UCC (sales of goods), Minn. Stat. § 336.2-210 codifies the rule directly: unless the parties agree otherwise, all rights of either seller or buyer can be assigned.
For other commercial contracts, Minnesota common law reaches the same starting point. Assignability is the rule; non-assignability is the exception that has to be drafted in.
The assumption that runs the other way (that contracts are personal and non-transferable absent explicit consent) is wrong as a starting point. In my practice, I see CEOs surprised on both sides of this: surprised when a vendor’s acquirer steps in to perform without their consent, and surprised when their own counterparty raises an objection that has no contractual hook. The default cuts toward freedom to transfer.
There are three statutory carve-outs from that default in § 336.2-210(2). An assignment is blocked if it would materially change the duty of the other party, materially increase the burden or risk imposed on the other party, or materially impair the other party’s chance of obtaining return performance. “Materially” is doing serious work in that test. Routine assignments of payment rights almost never meet it. Assignments that change who actually performs services often do.
Section 336.2-210(2) also contains an affirmative carve-out in the other direction: a right to damages for breach of the whole contract, and a right arising out of the assignor’s full performance of its obligations, can be assigned despite contrary contract language. Accrued claims and earned receivables remain transferable even when the live contract is locked down (see FAQ on assigning damages for a past breach).
What is the difference between assignment and delegation?
These two terms get used interchangeably in everyday speech and they should not be. Assignment transfers contract rights, the right to receive performance or payment. Delegation transfers contract duties, the obligation to perform. The same transaction often does both at once, and treating them separately is the first move in any clean drafting analysis.
The UCC’s structure makes the distinction practical. Under § 336.2-210(1), a party can perform a duty through a delegate “unless otherwise agreed or unless the other party has a substantial interest in having the original promisor perform or control the acts required by the contract.” That second clause is the personal-services bar, codified for sales but echoing the broader common-law rule. Under § 336.2-210(2), rights are freely assignable subject to the materiality limits. Different rules, different exceptions.
A critical companion rule sits in § 336.2-210(1): “No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.” Even when delegation is permitted, the original obligor stays on the hook. This surprises sellers in asset sales who thought they were walking away clean. Without an express novation (a three-party agreement releasing the original obligor), the original party remains liable if the delegate fails.
When can the other side block a transfer that my contract permits?
Even where the contract is silent or assignment is otherwise permitted, the counterparty has a few legitimate handholds.
The first is the materiality test in § 336.2-210(2). If the assignment materially changes the duty, burden, risk, or chance of return performance, the other party can refuse to recognize it. Whether that test is met depends on the specific facts: assigning a payment right to a factor is one thing; assigning a long-term services contract to a competitor with hostile incentives is another.
The second is the personal-services bar. Under § 336.2-210(1) and the parallel common-law rule, a duty cannot be delegated when the counterparty has a substantial interest in having the original obligor perform. The doctrine applies most readily to contracts whose value depends on a specific person’s skill, judgment, or relationship: a closely-held consulting engagement, a custom design contract, a non-fungible professional services arrangement. It applies less readily to commodity goods or services where one performer is interchangeable with another.
The third is contract language. If the parties drafted a real anti-assignment clause (more on what “real” means below), that clause governs subject to the UCC overrides discussed in the next sections.
When does the personal-services exception apply?
The personal-services exception is narrower than CEOs sometimes hope. Most ordinary commercial contracts (supply agreements, distribution agreements, software licenses, vendor agreements for fungible services) do not qualify as personal-services contracts under Minnesota’s default rule, even when the CEO felt the deal was personal at the time of signing.
The test is not subjective trust; it is whether the counterparty has a substantial interest in this specific performer. Examples that typically qualify: a one-person consulting engagement where the consultant’s reputation is the deliverable, an executive employment agreement, a closely-tailored creative or design contract, a referral relationship dependent on a specific individual’s network. Examples that typically do not qualify: a managed-services contract with a vendor of substantial size, a software-as-a-service license, a goods supply contract where the supplier is fungible.
If your business depends on the identity of the counterparty, do not rely on the personal-services exception to do that work for you. Write it into the contract. A clause that says “this contract may not be assigned, and the duties hereunder may not be delegated, without [Party]’s prior written consent” is far more reliable than hoping a court characterizes your deal as personal. For broader treatment of how to allocate the risks that contract drafting can and cannot solve, see our piece on integration clauses and side letters.
How does Minnesota handle anti-assignment clauses on receivables?
This is the rule most CEOs do not know about, and it changes negotiating leverage materially. Under Minn. Stat. § 336.9-406, a contract term that prohibits, restricts, or requires consent for the assignment of an account, chattel paper, or payment intangible is ineffective.
The same is true of any term providing that an assignment may give rise to a default, breach, recoupment, termination, or remedy. The statute simply turns those clauses off as to receivables.
The practical consequence: if your customer owes you money, you can sell that receivable to a factor or pledge it as security regardless of what the underlying contract says. The customer cannot enforce a “no assignment of payments” clause to block the transfer or to call a default. This is by design. Article 9 of the UCC was rewritten to make accounts receivable freely transferable; commercial finance depends on it.
Section 336.9-406(d) itself reaches accounts, chattel paper, payment intangibles, and promissory notes. Minn. Stat. § 336.9-408 fills in where § 336.9-406(d) does not reach: certain sales of payment intangibles and promissory notes, plus health-care-insurance receivables and general intangibles (including contracts, permits, licenses, and franchises) for security-interest purposes. The § 336.9-408 override is narrower (it goes to creating, attaching, and perfecting a security interest, not to outright sale of the underlying performance), but the principle is the same: anti-assignment language cannot lock up financeable assets.
If you are drafting a customer contract and you want anti-assignment protection, understand what § 336.9-406 and § 336.9-408 take off the table. You can still reach assignments of performance duties and assignments of the contract as a whole. You cannot reach the receivable.
What language makes an anti-assignment clause actually work?
Two drafting choices matter most.
First, distinguish what you are restricting. A clause that prohibits “assignment of this Agreement” without specifying rights vs. duties runs into Minn. Stat. § 336.2-210(4), which provides that a prohibition of assignment of “the contract” is to be construed as barring only the delegation of performance.
The default reading lets the assignor still transfer accrued rights to payment. If you want to block both rights and duties, the clause should say so expressly: “Neither party may assign any right under this Agreement nor delegate any duty hereunder, in whole or in part, without the prior written consent of the other party.”
Second, choose between a covenant and a nullification. “Shall not assign” creates a duty whose breach gives rise to damages and possibly termination, but the assignment itself may still transfer the rights to the assignee. “Any purported assignment in violation of this section shall be void and of no effect” attempts to nullify the transfer itself, leaving the assignee with nothing.
The two formulations have very different consequences when the counterparty is determined to transfer anyway. Pair the nullification language with a clear consent standard (“not to be unreasonably withheld” or “in [Party]’s sole discretion”) so the other side knows the rule of decision in advance.
A third drafting move that pays for itself is the change-of-control trigger. A bare anti-assignment clause does not reach a stock sale or merger; the contracting entity is the same legal person. If you care about who ultimately controls your counterparty, define the triggering events: “Any direct or indirect change in voting control of [Party], whether by stock sale, merger, consolidation, or otherwise, shall be deemed an assignment for purposes of this section.” Without that language, your protection is partial.
What happens to my obligations after I assign or delegate?
Assignment of rights does not affect the assignor’s existing duties; the assignor still owes whatever it owes. Delegation of duties is where the surprises live.
Minn. Stat. § 336.2-210(1) is explicit: “No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.” The original obligor stays on the hook for the delegate’s nonperformance. A seller who assigns its supply contract to a buyer of the business is still liable to the original customer if the new owner fails to perform, unless the customer has consented to a release.
Releasing the original obligor requires a novation: a three-party agreement in which the customer agrees to look only to the new performer and to release the original. Novations are voluntary; the customer is not required to grant one.
In an asset sale or business sale, this is a structural issue: the seller often wants to walk away clean, the customer often wants to keep the seller as a backstop, and the resolution drives whether the contract transfers at all or whether new agreements have to be negotiated. The cleanest structure is to identify novation candidates pre-closing and seek consent then, rather than discovering the issue after the deal closes.
A related point: § 336.2-210(5) provides that an assignment of “the contract” or of “all my rights under the contract” is, by default, both an assignment of rights and a delegation of duties, and the assignee’s acceptance is a promise to perform. So when the assignee takes the contract, it accepts the duties as well, unless the language indicates otherwise (as in an assignment for security).
The assignor is now jointly on the hook with an assignee that has independently promised to perform. That dual exposure is a feature for the non-assigning party and a trap for the assignor that thought it was getting out.
When can the non-delegating party demand assurances?
Yes, under the UCC. Minn. Stat. § 336.2-210(6) allows the non-delegating party to treat any assignment that delegates performance as creating reasonable grounds for insecurity.
Once those grounds exist, Minn. Stat. § 336.2-609 lets the party demand, in writing, adequate assurance of due performance, and to suspend its own performance until the assurance arrives, if commercial reasonableness allows.
The demand has teeth. Under § 336.2-609(4), a justified demand for assurance that goes unanswered for a reasonable time, not exceeding thirty days, is a repudiation of the contract. The non-delegating party can treat the contract as breached, terminate, and pursue remedies. That timeline is one of the few hard windows in this area worth knowing: if you receive a written demand for assurance from a customer or vendor, do not let thirty days run.
The flip side is also useful. If you are the assignor or assignee and you anticipate questions about the new performer’s capacity, get out ahead of them: send a proactive notification with concrete facts (financial capacity, key personnel staying on, transition plan) so the counterparty has no reasonable ground for insecurity in the first place. A well-handled transition closes the door on § 336.2-609 before it opens.
How are assignments handled in M&A and change-of-control situations?
Most CEOs encounter assignment law in the context of a deal: buying a competitor, selling the business, or doing a roll-up. Two structural points govern.
First, asset sales versus stock sales are treated differently by default. An asset sale typically is an assignment, because the buyer is a different legal entity acquiring specific contracts; anti-assignment clauses can apply. A stock sale, by contrast, leaves the contracting entity intact; the contracts stay with the corporation regardless of who owns the corporation, and ordinary anti-assignment clauses do not apply unless the contract reaches change of control expressly. Buyers and sellers structure deals around this, sometimes deliberately, to avoid having to ask hundreds of customers for consent.
Second, in any deal, an early step is the assignment audit: pulling material contracts, identifying anti-assignment and change-of-control language, and triaging consent risk. In M&A diligence I run on closely-held Minnesota deals, this audit usually surfaces a handful of contracts (often five to fifteen on a mid-market deal) where consent risk is real enough to require outreach before closing. The contracts that need consent before closing get queued for outreach early. The contracts that the buyer can take without consent are flagged for confirmation.
The contracts whose anti-assignment clauses are arguably ineffective (receivables under § 336.9-406, for instance) are noted but rarely raise practical issues. Doing this work after closing is far more expensive than doing it before. For deal-side risk allocation more broadly, our piece on carve-outs in indemnification clauses and allocation of legal fees in multi-party claims treats related contract-architecture questions.
Third, a buyer should always ask whether the deal triggers other clauses besides anti-assignment: termination-for-convenience rights, renegotiation triggers, key-person clauses, exclusive-dealing covenants. Anti-assignment is the one that gets the most attention, but it is rarely the only contract term that responds to a change of ownership. For one common adjacent issue, see our discussion of termination-for-convenience clauses in B2B SaaS contracts.
What should I check in a counterparty’s anti-assignment clause before signing?
Before you sign a contract that the counterparty drafted, the assignment-related provisions deserve a close read.
Look for asymmetry. Some clauses bar your assignment without consent while permitting the counterparty to assign freely to affiliates or successors. That is a defensible drafting choice in some deals (large vendors often insist on it) but it should be a conscious negotiation, not an oversight.
Look for the consent standard. “Prior written consent” alone gives the counterparty a discretionary veto. “Prior written consent, not to be unreasonably withheld, conditioned, or delayed” creates a reasonableness review and a much shorter argument if the counterparty refuses without basis.
Look for the scope. Does the clause reach delegation as well as assignment? Does it reach change of control? Does it reach assignment by operation of law (mergers, sales of substantially all assets, foreclosures)? Each of those is a separate drafting decision; a clause silent on any of them creates uncertainty.
Look for the consequence. Is a violation a breach, a termination right, or a nullification of the transfer? The drafting choice should match the risk you are trying to manage.
And finally, look for interaction with Minn. Stat. § 336.9-406. If the contract involves recurring payments, the receivables override may render large parts of the anti-assignment clause unenforceable as to those receivables, regardless of how aggressively the language is drafted.
Can the other side assign our contract to a competitor without telling me?
Often yes, unless your contract says otherwise. Minnesota’s default rule, codified for sales contracts at Minn. Stat. § 336.2-210 and applied at common law to most other contracts, allows assignment of contract rights without consent. The exceptions are narrow: assignment that materially changes the other party’s duty, increases their burden or risk, or impairs their chance of return performance. If you want notice or a veto on a competitor takeover, you have to write that into the contract; silence defaults to assignability.
Does an 'absolute prohibition on assignment' actually stop a transfer?
It depends on what is being transferred and how the clause is read. Under Minn. Stat. § 336.2-210(4), a prohibition on assigning ’the contract’ bars only the delegation of performance, not the assignment of money already earned. And under § 336.9-406 and § 336.9-408, anti-assignment language is ineffective against the transfer of accounts, payment intangibles, promissory notes, and security interests in those receivables. The clause may still bind transfers of the underlying performance obligations.
Will a change-of-control clause trigger on a stock sale or only an asset sale?
Whichever the contract says. A standard anti-assignment clause typically does not reach a stock sale; the contracting entity is the same legal person before and after, even if its owners change. To capture stock sales, mergers, or any change in voting control, the clause has to spell that out, usually as a ‘change of control’ or ‘deemed assignment’ provision. Without that language, a buyer can often acquire your counterparty’s parent without triggering anti-assignment protections at all.
Can I assign damages for a past breach even if the contract bars assignment?
Yes, under the UCC. Minn. Stat. § 336.2-210(2) provides that a right to damages for breach of the whole contract, or a right arising out of the assignor’s full performance, can be assigned despite an agreement otherwise. That carve-out matters in commercial collections and litigation finance: an accrued claim is assignable even when the live contract is not.
Do anti-assignment clauses survive bankruptcy?
Often not, but the answer is fact-specific and turns on federal bankruptcy law that should be reviewed with bankruptcy counsel. The intersection of the federal Bankruptcy Code and Minnesota contract law is not something to resolve from the four corners of your contract. If a counterparty files, do not assume your anti-assignment clause holds; the question moves to bankruptcy court.
Does the other party have to consent in writing, or is silence consent?
Read your clause. Many Minnesota contracts require ‘prior written consent, not to be unreasonably withheld.’ That phrase has bite: it converts a discretionary veto into a reasonableness review. Silence is not consent unless the contract says so. If your clause requires written consent and you proceed without it, you have likely created a breach even if no harm follows.
Should I draft an anti-assignment clause as 'shall not assign' or as 'any assignment shall be void'?
It can be the difference between a breach and a nullity. ‘Shall not assign’ usually creates a contractual duty whose violation gives rise to damages, but the assignment may still transfer the rights. ‘Any purported assignment shall be void’ attempts to nullify the transfer itself. The wording materially affects what the non-assigning party can do about a transfer it dislikes; nullification language faces an additional override under § 336.9-406 for receivables.
Closing thought
Assignment and delegation rules are one of those areas of contract law where the default cuts toward freedom and the drafting needs to do specific work to override it. The UCC overrides on receivables narrow what an anti-assignment clause can accomplish; the common-law personal-services bar is narrower than CEOs assume; and the original obligor’s continuing liability after delegation surprises sellers in asset deals.
The right time to think through these provisions is before the contract is signed, not when a counterparty’s acquirer arrives to take over performance. For broader context on the risks contract language can and cannot solve, see our contracts practice area overview. If you’d like a second set of eyes on the assignment language in a specific Minnesota contract, email [email protected].
