The short version
- A share sale transfers no contracts. The company that signed is the same legal person afterwards, so a clause aimed only at assignment has nothing to bite on — which is why change of control exists as a separate trigger.
- Delaware's Court of Chancery held in Meso Scale Diagnostics v. Roche (2013) that a reverse triangular merger is not an assignment by operation of law, even under a clause covering assignment "by operation of law or otherwise".
- In most US jurisdictions an anti-assignment clause limits the right to assign but not the power. Unless it says an assignment "shall be void", the transfer stands and you are left with a damages claim.
- "Such consent not to be unreasonably withheld, conditioned or delayed" turns an absolute veto into a standard a court can test. It is one line, and it is the cheapest thing in the clause to ask for.
The clause normally reads: neither party may assign this Agreement without the prior written consent of the other. Sometimes it adds "by operation of law". Whether it catches the deal you are worried about turns on one question that has nothing to do with commercial reality — has the legal person you contracted with changed?
A share sale assigns nothing
Buy the shares of a company and the company carries on existing. Its contracts, licences, leases, employees and debts stay where they are, because they belong to the company and not to its shareholders. The certificates change hands one level up; the contracting party at the bottom is untouched.
Delaware's Court of Chancery made the point squarely in Meso Scale Diagnostics v. Roche Diagnostics (2013). Roche had acquired BioVeris by reverse triangular merger — a buyer's shell merges into the target, the target survives — and a counterparty argued this breached a clause barring assignment "by operation of law or otherwise". The court held it did not: stock acquisitions do not in themselves constitute an assignment by operation of law, and a reverse triangular merger works like one. Parties who want a say in that situation, the court suggested, should negotiate a change-of-control provision rather than rely on the assignment clause.
Which trigger fires, and on what kind of deal
What your clause covers
What the deal moves
Shares
Assets
Assignment only
Nothing fires
The entity that signed is unchanged. Its new owner — possibly your competitor — inherits the deal and never has to ask you.
Consent needed
The contract has to be assigned to the buyer individually. This is the leverage point in every asset deal.
Plus change of control
Change of control fires
The trigger people think they already have. Check the threshold, and whether a sale of the parent counts.
Both fire
Belt and braces. Normal in a negotiated agreement, rare in a supplier's standard form.
Asset sales are the opposite, and slower for it
In an asset sale the buyer lifts named assets out of the seller and leaves the entity behind. Contracts are assets. Each one has to be assigned individually, so every anti-assignment clause in the seller's filing cabinet becomes a line on a checklist: find it, ask, wait. It is a large part of why asset deals take longer, and why buyers prefer share deals when they can get them.
A straight statutory merger sits between the two and is the genuinely contested case. Where the company you contracted with disappears into the survivor, the merger statute moves its rights across automatically — under Delaware's section 259, all property, rights, privileges and interests become "as effectually the property of the surviving or resulting corporation" as they were of the constituent companies. Some courts treat that as an assignment by operation of law and some do not, and the outcome often turns on whether the clause also refers to successors, which pulls the other way. If mergers matter to you, name them in the clause rather than hoping "operation of law" is read your way. The other side of that question lives in the merger agreement, where obtaining the consents is normally a condition to closing.
"Shall be void" and "shall not assign" end in different places
This is the part of the clause that decides what you can actually do about a transfer, and it is settled almost everywhere in the US against the reader's intuition. In Bel-Ray Co. v. Chemrite (3d Cir. 1999) the court set out the general rule that assignment restrictions "operate only to limit a parties' right to assign the contract, but not their power to do so, unless the parties manifest an intent to the contrary with specificity". To remove the power, the clause must say that a non-conforming assignment is void or invalid.
They assigned it anyway. What you have
The other side assigned the contract without your consent
Clause says the assignment "shall be void"
Nothing moved. Your counterparty is still the company that signed, and the assignee has no rights to enforce against you.
Clause only says they "shall not assign"
The transfer stands. You have a claim for breach of covenant, and typically no provable loss to put into it.
For sales of goods, UCC section 2-210 goes further: a prohibition on assigning "the contract" is construed as barring only the delegation of the assignor's performance, not the assignment of its rights. A supplier bound by that wording can still assign its right to be paid. Rights and duties are separable, and a standard form rarely makes clear which of the two it meant.
See the clause in a full agreement
The service agreement template carries assignment, successors and notices in the positions they normally occupy, so you can hold it against the version you have been sent and see what is missing.
The licence that does not travel with the company
Corporate law is not the last word. Where the contract is an intellectual property licence, federal law can block a transfer that state merger law would otherwise wave through. In Cincom Systems v. Novelis (6th Cir. 2009) a software licence granted to an Ohio company was non-exclusive and non-transferable without consent. The licensee went through a chain of internal mergers and reorganisations, ending up as a differently named entity, and never asked. The court held that federal common law presumes a non-exclusive copyright licence is not transferable without express authorisation, and that state merger law cannot override it. The result was copyright infringement and stipulated damages of $459,530, the amount of the original licence fee.
This is the trap in group restructurings, where nobody thinks a consent is needed because "it is all the same company". It is not the same company. If your business runs on licensed software, check the transfer wording in each software licence before you move the operating entity, not after. Sibling reading: software licence agreements on how the grant itself is built.
Government contracts write the rule down
Federal contracting is the one place where the whole structure is written down in public, which is useful confirmation that the share-sale point is structural rather than a Delaware quirk. The Anti-Assignment Act at 41 U.S.C. § 6305 bars the holder of a government contract from transferring it to anyone else, subject to a narrow exception for assigning payments to a financing institution. The way round it is the novation in FAR subpart 42.12 — a three-way agreement between the government, the old contractor and the new one.
FAR 42.1204 then draws exactly the line above: a novation is required where a contractor transfers the assets used to perform the contract, and is not required where ownership changes through a stock purchase with no legal change in the contracting party. So an asset sale needs the government to agree, and it is not obliged to.
What to ask for, cheapest first
This is one of the easiest clauses in a standard form to improve. Ask in this order.
Four asks, in increasing order of resistance
- One line
Add "not to be unreasonably withheld"
Turns an absolute veto into a standard someone can be held to. Add "conditioned or delayed" — delay is how consent rights are actually abused.
- One line
Add a deemed-consent clock
Silence for a stated number of business days counts as consent. Removes the tactic of simply never replying to the request.
- Free
Name change of control separately
The only wording that reaches a share sale. Define it by voting power, and say whether a sale of the parent counts.
- Moderate
Take a termination right instead
A right to walk on a change of control, rather than a veto over it. It gives you a way out without giving you a veto over their deal, which is a materially easier thing to agree.
Where nothing moves, price it: assume the counterparty could be owned by a competitor next year and keep the term short.
Two smaller points belong in the same email. Ask for an affiliate carve-out, but require the assignor to stay liable — that is what stops a solvent counterparty parking the contract in an empty subsidiary. And insist the change-of-control definition uses a percentage of voting power rather than a phrase like "effective control", which is the version that gets argued about.
A four-minute read of the clause
What to look for, in order
- Does the clause mention change of control at all, or only assignment? If only assignment, a share sale is outside it — and does it name mergers expressly?
- Does it say a non-conforming assignment is "void" or "invalid"? If not, you have a damages claim rather than a block.
- Is consent qualified by "not to be unreasonably withheld, conditioned or delayed", and is there a deadline for replying?
- Is there an affiliate carve-out, and does the original party remain liable after transferring?
- Is there a successors-and-assigns sentence elsewhere that contradicts the restriction? Two clauses pointing different ways is what makes these disputes expensive.
This clause is worth four minutes because it is the only one that decides who you will be dealing with in two years. Every other term assumes the counterparty stays who they are. On anything long — a SaaS agreement, a distribution appointment, a multi-year master services arrangement — the identity of the other side is a term, and this is the only place it is written down.
Sources
- Meso Scale Diagnostics v. Roche Diagnostics, C.A. No. 5589-VCP (Del. Ch. 2013)
- Bel-Ray Co. v. Chemrite (Pty) Ltd., 181 F.3d 435 (3d Cir. 1999) — FindLaw
- Cincom Systems v. Novelis Corp., 581 F.3d 431 (6th Cir. 2009) — FindLaw
- UCC § 2-210 (delegation and assignment) — Cornell LII
- UCC § 9-406 (restrictions on assignment ineffective) — Cornell LII
- 8 Del. C. § 259 (effect of merger) — Delaware Code Online
- FAR Subpart 42.12 — novation and change-of-name agreements
General information, not legal advice. This guide explains how these documents and rules generally work. Law varies by jurisdiction and changes, and none of it is applied to your circumstances here. For anything consequential, consult a licensed attorney where you are.
Frequently asked
Can a contract be transferred to another company without my consent?
It depends on how the transfer happens. If the other company is bought by way of a share purchase, no transfer occurs at all — the contracting entity is unchanged, so your consent is not needed and an assignment clause does not apply. If the business is sold as assets, the contract has to be assigned to the buyer, and a consent requirement genuinely bites.
What happens to contracts when a company is acquired?
In a share acquisition they stay with the company and continue on the same terms, with a new set of owners above them. In an asset acquisition each contract must be assigned individually, and any that require consent stay behind until it is given. In a merger where the company disappears, its rights pass to the surviving entity by statute, which some anti-assignment clauses catch and some do not.
What is a change of control clause?
It is a separate trigger from assignment. Rather than asking whether the contract moved, it asks whether ownership of the contracting party moved — usually defined as one person or group acquiring more than a stated percentage of voting power. It exists precisely because a share sale involves no assignment, so an anti-assignment clause on its own would never notice it.
Is an assignment made without the required consent still valid?
In most US jurisdictions, yes. The default rule is that a restriction limits the right to assign but not the power to do so, so the transfer takes effect and the assigning party is in breach. To make it ineffective the clause must state that a non-conforming assignment is void or invalid. Other legal systems take the opposite view, so the governing law matters.
Does a "consent not to be unreasonably withheld" wording actually help?
Yes, because it converts an unreviewable veto into a standard. The party refusing has to point to a commercially reasonable objection rather than simply declining. Add "conditioned or delayed" as well: without it, consent can be granted subject to terms you would never accept, or held indefinitely, which produces the same result as refusal without ever looking like one.