Controls whether parties can transfer their rights and obligations under the NDA to third parties, including in mergers, acquisitions, and corporate reorganizations.
An assignment clause determines whether and how you can transfer your rights and obligations under the NDA to someone else. This matters particularly in business transactions like mergers, acquisitions, and corporate restructurings.
There are two things that can be assigned:
Rights: Your ability to enforce the NDA, receive confidential information, and pursue remedies if the other party breaches.
Obligations: Your duties to keep information confidential, protect it appropriately, return materials, and follow the other NDA requirements.
Most NDAs restrict assignment to ensure that confidential information isn't shared with unknown third parties. However, restrictions that are too tight can create significant problems when companies undergo legitimate business changes. For example, if you acquire a company that has an NDA with a vendor, you'll want that NDA to transfer to you automatically - not terminate and leave the confidential information unprotected.
The key is finding the right balance between protecting against unwanted transfers and allowing normal business operations to continue.
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Why This Clause Matters
M&A Transactions: When companies are acquired, their contracts typically transfer to the buyer. If assignment is prohibited without carve-outs, the NDA may terminate upon acquisition, leaving confidential information without protection.
Corporate Reorganizations: Even internal restructuring (creating new subsidiaries, merging business units, spinning off divisions) can trigger assignment restrictions and require consent.
Who Has Your Secrets: You signed an NDA with a specific company you vetted. Without proper assignment restrictions, your information could end up with any third party the other side chooses.
Competitor Risk: You might share sensitive information with a startup partner. If that startup is later acquired by your competitor, do your secrets go with it?
Successor Liability: An assignee typically "steps into the shoes" of the assignor, assuming both rights and liabilities, including liability for pre-assignment breaches.
Continuity of Protection: Proper assignment provisions ensure that confidentiality obligations survive corporate changes and continue to protect the disclosed information.
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Key Risk Factors
Blanket Prohibition: Prohibiting all assignment without exception can interfere with legitimate business transactions and may even be considered unreasonable by courts in some contexts.
Change of Control Definition: Does a change in controlling ownership trigger the assignment restrictions? This is important for understanding when consent is needed.
M&A Carve-Outs: Does the clause permit assignment in connection with mergers, acquisitions, or asset sales? This is critical for business flexibility.
Affiliate Transfers: Can information or obligations be transferred to subsidiaries or parent companies? Affiliate access is common but creates more potential leak points.
Consent Standards: If consent is required, is it "not to be unreasonably withheld"? Without this language, the other party can block any assignment for any reason.
Competitor Restrictions: Should assignment to competitors require special consent, even if other assignments are allowed?
Notice Requirements: Must the non-assigning party be notified of an assignment? How much advance notice is required?
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Clause Versions
ASSIGNMENT
1. General Restriction. Neither party may assign, transfer, or delegate this Agreement or any of its rights or obligations hereunder, whether by operation of law or otherwise, without the prior written consent of the other party, which consent shall not be unreasonably withheld, conditioned, or delayed.
2. Permitted Assignments. Notwithstanding Section 1, either party may, without the other party's consent, assign this Agreement:
(a) To an Affiliate of such party, provided that the assigning party shall remain primarily liable for the Affiliate's performance of all obligations under this Agreement and shall guarantee such performance;
(b) In connection with a merger, acquisition, consolidation, or corporate reorganization involving the assigning party, provided that the assignee or surviving entity agrees in writing to be bound by the terms of this Agreement; or
(c) In connection with the sale or transfer of all or substantially all of the assets or business of the assigning party to which this Agreement relates, provided that the assignee agrees in writing to assume all obligations under this Agreement.
3. Notice Requirement. For any permitted assignment under Section 2(b) or 2(c), the assigning party shall provide written notice to the other party within thirty (30) days following the effective date of such assignment, identifying the assignee and confirming the assignee's assumption of obligations.
4. Definitions. For purposes of this Section, "Affiliate" means any entity that directly or indirectly controls, is controlled by, or is under common control with a party, where "control" means ownership of more than fifty percent (50%) of the voting securities or equivalent voting interest.
5. Void Assignments. Any attempted assignment in violation of this Section shall be null and void and of no force or effect.
6. Binding Effect. Subject to the foregoing restrictions, this Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.
Note: This balanced version requires consent for general assignments (not to be unreasonably withheld) but includes practical carve-outs for affiliates, M&A, and asset sales. The assigning party remains responsible for affiliate performance, and notice is required for corporate transactions.
ASSIGNMENT
1. Free Assignability. Either party may freely assign, transfer, or delegate this Agreement, including all rights and obligations hereunder, without the consent of the other party and without prior notice, in any of the following circumstances:
(a) To any Affiliate, parent company, or subsidiary of the assigning party;
(b) In connection with any merger, acquisition, consolidation, reorganization, or change of control of the assigning party, regardless of whether the assigning party is the surviving entity;
(c) In connection with the sale, transfer, or disposition of all or any portion of the assets or business of the assigning party;
(d) To any third party as part of a financing, securitization, or similar transaction; or
(e) To any successor entity by operation of law.
2. General Assignments. For assignments not covered by Section 1, either party may assign this Agreement with written notice to the other party, which notice may be provided concurrently with or after the assignment.
3. Assumption of Obligations. Upon any assignment, the assignee shall automatically assume all rights and obligations of the assignor under this Agreement from and after the effective date of assignment.
4. Release of Assignor. Upon any assignment where the assignee expressly assumes the assignor's obligations in writing, the assignor shall be released from all future obligations under this Agreement arising after the effective date of assignment, though the assignor shall remain liable for any breaches occurring prior to assignment.
5. No Restrictions. The other party shall not impose any conditions on, or require any consent, approval, fees, or consideration in connection with, any assignment permitted under this Section.
6. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the parties, their successors, and assigns.
Why this provides maximum flexibility: Broad assignment rights without consent, covers all typical corporate transactions, allows release of the assigning party, no prior notice required for most situations, and explicitly prohibits conditions or fees. Ideal for companies anticipating potential sale or restructuring.
ASSIGNMENT RESTRICTIONS
1. Absolute Prohibition. The Receiving Party may not assign, transfer, sublicense, delegate, or otherwise dispose of this Agreement or any of its rights, interests, or obligations hereunder, in whole or in part, without the prior written consent of the Disclosing Party, which consent may be withheld in the Disclosing Party's sole and absolute discretion for any reason or no reason.
2. Scope of Restriction. Without limiting the generality of Section 1, the following shall each constitute an "assignment" requiring consent:
(a) Any merger, acquisition, consolidation, or other change of control of the Receiving Party, whether by stock sale, asset sale, or otherwise;
(b) Any transfer of rights or obligations to any Affiliate, parent company, or subsidiary of the Receiving Party;
(c) Any reorganization, restructuring, recapitalization, or change in the corporate form or ownership structure of the Receiving Party;
(d) Any delegation of duties, responsibilities, or performance obligations to contractors, subcontractors, agents, or other third parties; and
(e) Any transfer by operation of law, including by reason of bankruptcy, insolvency, or similar proceedings.
3. Conditions on Consent. The Disclosing Party may condition its consent to any assignment on any terms or conditions the Disclosing Party deems appropriate, including without limitation:
(a) Modification of confidentiality terms or extension of the confidentiality period;
(b) Payment of an assignment fee or other consideration;
(c) Execution of a new or amended agreement by the proposed assignee;
(d) Provision of additional security or guarantees; or
(e) Termination of this Agreement.
4. Material Breach. Any attempted assignment without the Disclosing Party's prior written consent shall be null and void, shall constitute a material breach of this Agreement, and shall entitle the Disclosing Party to immediately terminate this Agreement and pursue all available remedies.
5. Disclosing Party Rights. Notwithstanding the foregoing, the Disclosing Party may freely assign this Agreement, in whole or in part, to any third party without consent from or notice to the Receiving Party.
6. No Waiver. No failure by the Disclosing Party to exercise its rights under this Section shall constitute a waiver of such rights with respect to any subsequent assignment or attempted assignment.
Warning - Highly restrictive and one-sided: Complete discretion to deny consent, covers all corporate changes including change of control, can impose any conditions including fees or termination, one-sided (disclosing party can freely assign), violation is material breach. This severely restricts the receiving party's business flexibility and should be carefully negotiated.