Assignment Of Contracts In New Zealand: What NZ Businesses Need To Know

If you’re running a business, contracts are probably everywhere - supplier agreements, customer terms, software subscriptions, leases, distribution deals, and more.

But what happens when your business changes? Maybe you’re selling part of the business, restructuring, bringing in a new entity, or simply wanting a different company to step into an existing deal.

That’s where assigning a contract can come in.

In this guide, we’ll walk you through what assigning a contract means in New Zealand, when it’s used, how it’s different from novation, what to check before you sign anything, and the practical steps to get it done properly (without accidentally breaching the agreement you’re trying to transfer).

What Is An Assignment Of Contracts (In Plain English)?

An assignment of a contract is when one party to a contract (the assignor) transfers certain rights under that contract to someone else (the assignee).

Put simply: you’re transferring the benefit of the contract.

What Typically Gets Assigned?

Most commonly, what gets assigned is a right to receive something, for example:

• the right to receive payment from a customer
• the right to receive goods or services from a supplier
• the benefit of warranties, indemnities, or guarantees in the contract
• the benefit of a licence (if the contract allows it)

What Usually Doesn’t Get Assigned Automatically?

This is where businesses can get caught out: an assignment typically transfers rights, not obligations.

For example, if you have an obligation to deliver services, maintain insurance, or meet minimum purchase targets, those duties generally stay with the original party unless there’s a separate arrangement (often via novation - we’ll explain this below) or the other party otherwise agrees.

Do You Need Consent For Contract Assignment In NZ?

Sometimes yes, sometimes no - it depends on the contract and the nature of what’s being assigned.

Many commercial agreements include an anti-assignment clause (e.g. “You must not assign without the other party’s prior written consent”). Others allow assignment to a related company, or allow it provided you give notice.

Even where consent isn’t required, there are usually still practical steps you should take to reduce disputes later (like giving written notice and keeping clear records). As with any legal issue, your specific contract (and the facts) matter, so consider getting advice if the agreement is important or high-value.

When Do NZ Businesses Use Assignment Of Contracts?

Contract assignment often comes up during “change moments” in a business - when you’re growing, restructuring, or transferring assets.

Here are some common scenarios where assignment of contracts matters.

1) Selling A Business (Or Part Of It)

If you’re selling your business, the buyer often wants to take over key contracts that make the business valuable - like supplier arrangements, customer contracts, and service agreements.

Depending on the structure of the sale (asset sale vs share sale), assignment may be essential. In an asset sale, contracts usually don’t automatically transfer with the assets - you typically need formal assignment/novation for each relevant contract. This is often coordinated alongside an Asset Sale Agreement so the legal paperwork matches the commercial deal.

In a share sale, the company doesn’t change - the shareholders do - so contracts held by the company may continue without needing assignment (although change-of-control clauses can still be an issue).

2) Restructuring Your Business (New Company, Same Operations)

A very common small business story is: you started as a sole trader, then later set up a company for liability and growth reasons.

If the sole trader signed the original contracts, those contracts don’t automatically “move” to the new company. Assignment (or novation) can be part of cleaning up your legal foundations so the right entity is actually operating the business.

3) Group Structures (Parent/Subsidiary Changes)

If you’re creating a group structure, moving assets between entities, or consolidating operations, you may need to assign contracts so the correct entity holds the commercial rights.

4) Financing And Lending Arrangements

Sometimes assignment is used in funding contexts - for example, assigning receivables (amounts owed to you by customers) as part of financing. These arrangements can get technical quickly, so it’s important to get advice that matches your exact structure and risk profile.

5) Commercial Leases (Where Assignment Has Its Own Rules)

If you’re transferring a lease to another party (e.g. selling a business that operates from leased premises), that process is usually handled via a lease-specific document such as a Deed of Assignment of Lease, and the landlord’s consent is typically required.

Lease assignments also come with practical issues like security bonds, bank guarantees, reinstatement obligations, and what happens if the new tenant defaults - so it’s worth treating leases as their own category, not “just another contract.”

Assignment Vs Novation: Which One Do You Actually Need?

One of the most common pain points for business owners is mixing up assignment and novation. They can look similar on paper, but they do different jobs.

Assignment: Transfers Rights (Benefits)

As a general rule, assignment:

• transfers the benefit of the contract (rights)
• does not, by itself, transfer the burden (obligations)
• often requires notice to the other party (and sometimes consent)

So, if you assign a contract but still have obligations under it, you may still be on the hook if something goes wrong.

Novation: Replaces A Party Entirely

Novation is generally used where you want to fully substitute one party for another - meaning the incoming party takes over both rights and obligations, and the outgoing party is released (subject to the terms of the novation and any remaining liabilities carved out).

This is typically documented in a Deed of Novation.

A Quick Practical Example

• Assignment scenario: Your business assigns the right to receive payment under a customer contract to another entity (e.g. during a restructure), but you remain responsible for delivering the services.
• Novation scenario: You want the new company to deliver the services and receive payment, and you want the customer to deal with the new company going forward (and ideally release you from future responsibility).

If you’re not sure which applies, that’s normal - and it’s worth clarifying early, because using the wrong mechanism can create awkward gaps (like getting the benefit but not being able to perform, or still being liable after you thought you’d transferred everything).

What Should You Check Before You Assign A Contract?

Before you sign an assignment document (or agree to someone else’s), it’s worth doing a quick legal “health check” on the contract. This is where many disputes start - not because assignment is impossible, but because the contract had conditions you didn’t notice.

1) Is There An Anti-Assignment Clause?

Look for clauses that say things like:

• “A party must not assign without the other party’s prior written consent.”
• “Consent may be withheld in the other party’s absolute discretion.”
• “Consent must not be unreasonably withheld or delayed.”
• “A party may assign to a related body corporate without consent.”

These clauses drive what you can and can’t do - and the difference between “consent required” and “consent not to be unreasonably withheld” can be huge in practice.

2) Are You Actually Assigning The Right Thing?

Be specific about what’s being transferred. Are you assigning:

• all rights under the contract?
• rights arising from a specific invoice or project?
• rights from a certain date onwards (but not past claims)?

If the scope is vague, you can end up with disputes about whether liabilities, refunds, credits, or warranty claims sit with the old party or the new one.

3) Do You Need A Deed, Or Is A Simple Agreement Enough?

Some assignments are done by a standard written agreement. Others are done by deed (often called a “Deed of Assignment”).

In commercial practice, deeds are common because they can provide additional formality (and can avoid some issues that arise with consideration), but the right approach depends on the contract and what you’re trying to achieve. If you’re documenting a broader commercial arrangement, it may be worth having it drafted or reviewed as part of a wider contract review rather than treating the assignment as a standalone admin task.

4) Are There Any Personal Or “Non-Transferable” Elements?

Some contracts are personal in nature - for example, a contract that was signed because of a particular person’s expertise, reputation, licence, or relationship. Even if the document is silent on assignment, the other party may argue the agreement wasn’t intended to be transferable.

This is particularly relevant for professional services, creative services, and some exclusive supply/distribution arrangements.

5) Are There Compliance Or Regulatory Issues?

Assignment can also create flow-on legal obligations. For example:

• Privacy Act 2020: if contracts involve customer data, you’ll want to think carefully about whether data can be transferred and what notices/consents you need.
• Fair Trading Act 1986: if customers are being told “nothing will change”, make sure that’s true (especially around who is supplying goods/services and who handles refunds or complaints).
• Consumer Guarantees Act 1993: if you sell to consumers, you can’t contract out in most cases - so if the business is changing hands, you need to be clear who is responsible for consumer remedies.

The legal document is one piece, but the operational reality needs to match what customers, suppliers, and regulators expect.

How Do You Assign A Contract? A Step-By-Step Checklist

Assignment of contracts doesn’t have to be complicated, but it does need to be handled carefully. Here’s a practical process many NZ businesses follow.

Step 1: Identify Which Contracts Need To Move

Start with a list. For example:

• key customers and revenue contracts
• key suppliers
• software subscriptions and platforms
• marketing and referral agreements
• property arrangements (leases, licences to occupy)

If the assignment is part of a transaction, this list often becomes a schedule to a broader deal document like a Business Sale Agreement.

Step 2: Review The Assignment Clauses And Any Transfer Process

Check:

• whether consent is required
• how consent must be obtained (email vs formal letter, specific signatory, etc.)
• whether notice is required, and when it takes effect
• whether there are any conditions (e.g. the assignee must meet certain requirements)

If the contract is silent, you still want to document the assignment clearly so there’s no confusion later.

Step 3: Decide Whether You Need Assignment Or Novation

This is a commercial and legal decision. Ask:

• Does the incoming party need to perform obligations, or just receive benefits?
• Do you want the outgoing party to be released from future liability?
• Does the other party require a full substitution?

If obligations need to move, novation is often the cleaner option.

Step 4: Prepare The Right Paperwork

Most businesses document assignment using an assignment agreement or deed, signed by the assignor and assignee (and sometimes acknowledged or consented to by the other contracting party, depending on the contract terms).

If you’re assigning a contract (not a lease), the document might be structured as a Deed of Assignment so the scope and effective date are clear.

The document should clearly cover:

• who is assigning and who is receiving the rights
• which contract is being assigned (attach it if needed)
• what rights are assigned (all rights vs limited rights)
• the effective date
• any warranties (e.g. that the contract is still on foot and not already breached)
• who is responsible for any pre-assignment issues (if relevant)

Step 5: Obtain Consents (If Required) And Keep Records

If consent is required and you skip it, you risk:

• breaching the contract
• giving the other party termination rights
• ending up with a dispute about who can enforce the agreement

Keep the written consent with your contract records. If the contract requires consent “in writing”, make sure you have an email trail or signed consent that clearly references the assignment.

Step 6: Give Notice And Update Your Business Operations

Even where consent isn’t required, giving clear notice can prevent confusion - especially around invoices, support requests, and performance obligations.

Also update the practical pieces so the paperwork matches reality, such as:

• who issues invoices and where customers pay
• who is the primary contact for day-to-day performance
• direct debit or payment processor details
• insurance certificates (where required)
• any internal policies or customer-facing terms that name the contracting entity

Step 7: Don’t Rely On Templates For High-Stakes Assignments

It can be tempting to treat assignment as a “simple admin form”, but the risk is that a generic template won’t match:

• the underlying contract’s assignment clause
• what the parties actually intend to transfer
• the transaction structure (sale vs restructure vs financing)

If the contract is valuable (or the relationship is important), having a lawyer draft or review the assignment can save you from a messy situation later - like still being liable after you thought you’d exited, or discovering you can’t enforce the contract because the transfer wasn’t done correctly.

Key Takeaways

• An assignment of a contract usually transfers the rights/benefits of a contract, but doesn’t automatically transfer obligations - so you need to be clear about what is (and isn’t) moving.
• Always check the contract for anti-assignment clauses and requirements around consent and notice, because getting this wrong can put you in breach.
• Novation is often the better fit when you want to replace one party entirely and transfer both rights and obligations (and ideally release the outgoing party).
• Assignment commonly comes up during business sales, restructures, funding arrangements, and lease transfers - and the correct approach depends on the transaction structure.
• Make sure the assignment is properly documented (often via a deed) with a clear scope, effective date, and records of consent/notice where required.
• Because assignments can affect liability, enforceability, and customer/supplier relationships, it’s worth getting tailored advice before you sign.

If you’d like help with an assignment of contracts (or you’re not sure whether you need assignment or novation), you can reach us at 0800 002 184 or team@sprintlaw.co.nz for a free, no-obligations chat.