Have you entered into a distribution agreement for your product and/or service with an individual that decides to assign that agreement to someone else? If so, you may be wondering if that individual has the right to do that.
The short answer is yes. The general rule is that all commercial agreements are assignable unless stated otherwise in the agreement.
A properly worded commercial contract can ensure that you don’t wake up some morning and find someone different on the pillow next to you… in a commercial sense, of course!
It is important to remember that in the event of a dispute, or even a simple difference of opinion, the terms of a contract are always considered to be questions of fact. But, what those terms mean is always a question of law.
Whether a contract is assignable will depend on the following factors: the wording of the contract; if the contract is in writing or if in orally; and whether the parties addressed their minds to that issue and made an agreement to allow or forbid assignments.
Consider the case of Artic Red Resources Corp. v. International Shasta Resources Ltd. This was a case where one party thought that they could assign the rights they were granted to some mineral rights to another company. The party granting the rights thought otherwise. In that case, there was no clause specifically addressing the matter in their agreement except for the oblique reference that the contract would be binding upon successors and “permitted assigns”.
In that case, the Court held that even in the absence of a specific paragraph regarding assignability, the reference to “permitted assigns” was enough to determine that the parties had addressed their mind to the issue. As well, the Court held that the contract could only be assigned as permitted by the parties.
So much fuss, bother, and cost can be expended over a poorly drafted contract. To ensure you know to whom and to what you’re dealing with in your next business transaction, consider paying for the ounce of prevention in having a lawyer draft/review your contracts. This will likely save you from paying the pound of cure to clarify the unclear later on.
Robert G. Bissett
