READI

(Rights for Electronic Access to and Delivery of Information)

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ASSIGNMENTS

Definition

Assignments generally occur when a contractor firm (or supplier of information) is acquired (or divests) and certain interests, responsibilities, and obligations are assumed by another party. An assignment clause may or may not be a part of an agreement.

Discussion

From the seller's point of view, assignment may be more important in electronic licenses than in many other types of agreement. In the electronic world, the buyer is often a defined entity, normally composed of a set of "authorized users." If the contract defines the user community (as the employees of a corporation, for example) and if that corporation merges with a larger entity--which wishes to assign the existing contract to the new or wider organization--the impact of that assignment could mean a significant increase in the user base (which the seller may or may not have envisaged at first).

If the seller assigns its contracts to some other party, what assurance does the buyer have that service will be maintained on a par with previous levels? For this reason, many sellers do not permit buyer assignments without permission.

From the buyer's perspective, a decision to enter a contract with a seller is made, in part, upon the seller's reputation especially if quality support services are required. Buyers are usually concerned that, upon assignment, they will continue to receive the same level of service as was provided under the terms of the original agreement.

For this reason, many buyers do not allow contracts to be assigned to another party, without first granting written consent. In negotiating re-assignment, some buyers withhold consent until assurances are made that the performance stipulated originally will be upheld. Should the assignee agree to fulfill all of its responsibilities and obligations under the initial agreement and accept the terms and conditions of the existing contract, then the buyer usually does not object to the assignment of the contract to a third party.

Benefits

The ability to assign contracts, is an obvious benefit to the seller because it allows great flexibility and does not require renewed contract negotiations in the event the seller wishes to transfer its obligations to a third party.

For the buyer, "pre-approval of assignment" is a benefit since the buyer is notified beforehand of any assignment of its agreement and is given the opportunity to review and reject the transaction, if necessary.

Risks

One risk to both buyers and sellers is that changes in assignments can affect the underlying premises upon which, for example, pricing is based. Transfer to others may also affect comfort levels with respect to the quality of service.

In many instances, buyers may not be left with a great deal of choice. Should a buyer choose to reject a transfer, the only option left open may be to discontinue the service. This is especially true where the information database or service provided is of a proprietary nature or unique. If the original contractor's choice of assignment is rejected, an alternative source may not be available.

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