In Texas, the assignment of a contract is generally permitted without the other party’s consent, provided the contract itself doesn’t prohibit it and the transfer doesn’t materially change the deal for the party on the other side. That default rule covers commercial agreements, real estate purchase contracts, and most everyday deals. The catches are real, though: anti-assignment clauses, personal-service contracts, real estate disclosure rules that changed in 2024, and the fact that assigning a contract usually doesn’t release you from it.
The Default Rule in Texas
If a contract says nothing about assignment, you can assign it. For sale-of-goods contracts, the Texas Business and Commerce Code makes this explicit: all rights of either the seller or buyer can be assigned unless doing so would materially change the other party’s duties, significantly increase their burden or risk, or substantially reduce the chance they’ll get the performance they bargained for.1State of Texas. Texas Business and Commerce Code Section 2-210 – Delegation of Performance; Assignment of Rights Texas common law applies the same principle to contracts outside the UCC. Courts generally favor free transferability.
One distinction shapes everything that follows. Assigning a contract usually means transferring your right to receive something: payment, delivery, or performance. Delegating means handing off your duty to do something. Rights are easier to move. Duties get more scrutiny because the person on the other side may care a great deal about who actually performs the work.
When a Contract Cannot Be Assigned
Anti-Assignment Clauses
Many commercial contracts prohibit assignment without consent. Texas courts enforce these clauses, but not uniformly. Some Texas courts have held that an assignment made in violation of a no-assignment clause is a breach of the contract but still valid as a transfer, meaning the non-assigning party can sue for damages but can’t undo the transfer. Other Texas courts treat a non-conforming assignment as void outright. The outcome turns on the specific language and which appellate district hears the dispute, so the safe assumption is that an anti-assignment clause blocks the transfer entirely.
Personal Service Contracts
Contracts built around a specific person’s skill, judgment, or identity cannot be assigned without the other party’s consent. If someone hired a particular architect to design a home, that architect cannot substitute a stranger and call the job done. The rule comes from common law and applies whenever the performing party’s identity was a material reason the other side signed.
Assignments That Change the Deal
Even without an anti-assignment clause, an assignment fails if it materially alters what the other side agreed to. A supplier who agreed to deliver goods to a warehouse across town cannot be forced to ship cross-country because the buyer assigned the contract to someone in another state. Courts look at whether the assignment changes the cost, difficulty, or risk of performance for the remaining party.1State of Texas. Texas Business and Commerce Code Section 2-210 – Delegation of Performance; Assignment of Rights
Real Estate Assignments and the SB 1577 Disclosure Rules
Real estate is where most Texans run into contract assignment, particularly through wholesaling: putting a property under contract at one price, assigning that contract to another buyer at a higher price, and keeping the difference as an assignment fee. Texas still allows this. But SB 1577, effective January 1, 2024, added disclosure requirements that carry serious consequences if you skip them.
Under Texas Property Code § 5.0205, anyone assigning a purchase contract or selling an option on real property must provide written disclosure to two parties before entering into the assignment agreement. The potential buyer must be told that the assignor holds only an equitable interest and does not have legal title. The property owner must be told that the assignor intends to assign the contract.2State of Texas. Texas Property Code Section 5.0205 – Equitable Interest Disclosure
The teeth are in the Occupations Code. SB 1577 added Section 1101.0045, which says a person can assign a purchase contract without a real estate license only if they make the required disclosures and don’t use the contract to engage in brokerage activity.3Texas Legislature. SB 1577 – 88th Legislature Bill Text Skip the disclosures, and you’re legally deemed to be engaging in unlicensed real estate brokerage. That can trigger enforcement action by the Texas Real Estate Commission, and compensation you received may be unrecoverable. This is where most wholesalers get caught, often because they didn’t know the rule existed.
Due-on-Sale Clauses When There’s a Mortgage
If the property under contract has an existing mortgage, the lender’s due-on-sale clause can complicate things. A due-on-sale clause lets a lender demand full repayment whenever the borrower transfers an interest in the property. A contract assignment transfers equitable interest rather than legal title, and not every lender treats that as triggering the clause, but some do.
Federal law under the Garn-St. Germain Act preempts state restrictions and allows lenders to enforce these clauses, with specific exemptions where a lender cannot accelerate. For residential properties with fewer than five units, the exempt transfers include those to a spouse or child, transfers resulting from the borrower’s death, transfers due to divorce, and transfers into a living trust where the borrower stays the beneficiary.4Office of the Law Revision Counsel. 12 US Code 1701j-3 – Preemption of Due-on-Sale Prohibitions A standard wholesale assignment to an unrelated third party does not fit any of those categories. Many lenders don’t enforce the clause on contract assignments because no deed has changed hands, but that’s inaction, not a rule you can rely on.
What the Assignment Agreement Should Contain
The document doesn’t need to be long. It needs to be precise. Before drafting, pull the original contract and confirm every name, date, and description.
- Party identification. Full legal names and addresses of the assignor, the assignee, and the obligor (the party who owes performance under the original contract).
- Original contract details. The effective date and enough identifying information to remove any doubt about which contract is being assigned.
- Property description. For real estate, copy the legal description from the original contract verbatim: a Lot and Block description from a recorded plat, or a Metes and Bounds survey. Not a street address.
- Scope of assignment. State clearly whether you’re transferring all rights and obligations or only specific ones.
- Assignment fee. The amount the assignee pays, when it’s due, and when it becomes non-refundable. In real estate wholesaling, fees commonly run from a few thousand dollars up to $20,000 or more depending on the deal.
- Indemnification. Language requiring the assignee to hold the assignor harmless for losses caused by the assignee’s failure to perform after the transfer.
If the original contract sets a method for amendments or notices, your assignment should follow those procedures. For real estate wholesaling, the § 5.0205 disclosures must be delivered before signing.2State of Texas. Texas Property Code Section 5.0205 – Equitable Interest Disclosure The Texas Real Estate Commission publishes promulgated forms for licensed agents but does not offer a standalone assignment form,5Texas Real Estate Commission. Texas Real Estate Commission – Contracts so read the original TREC contract to see what it says about assignability before you draft.
Signing, Recording, and Notifying the Other Side
Both parties sign. For real estate assignments, get the signatures notarized if you plan to record the document in county land records. Texas Property Code § 12.001 requires that instruments concerning real property be acknowledged before an authorized officer, usually a notary, or sworn to before two credible subscribing witnesses, before they can be recorded.6State of Texas. Texas Property Code Section 12.001 – Instruments Concerning Property Texas caps notary fees by statute at $10 for the first signature and $1 for each additional signature.7Texas Secretary of State. Notary Public Educational Information
Recording puts the assignment in the public record and protects the assignee against later third-party claims. Not every assignment must be recorded, but skipping the step in a real estate deal leaves the assignee exposed. Recording fees run a few dollars per page and vary by county.
After signing, the assignee should send written notice to the obligor by certified mail with return receipt. Until the obligor knows about the transfer, any payments they make to the original assignor are legally effective, and the assignee has to chase the assignor rather than the obligor for the money.
Assigning Doesn’t Release You
This is the point that surprises people. Assigning your contract rights does not automatically release you from your obligations. If the assignee fails to perform, the other party can come after you. The assignor stays on the hook as a backstop unless the obligor explicitly agrees to release them.
The way to fully sever your liability is a novation: a new agreement among all three parties that extinguishes the original contract and replaces it. In Texas, a valid novation requires four elements: a previously valid obligation, agreement by everyone to a new contract, extinguishment of the old contract, and a valid replacement contract. Without a novation, the assignment shifts who performs day to day, but the original obligation follows the assignor. If the contract carries significant ongoing duties, pushing for a novation rather than a plain assignment is worth the extra effort.
Federal Government Contracts Are Different
If the contract involves a payment claim against the federal government, the state rules above are not the whole story. The federal Assignment of Claims Act generally allows assignment of a claim against the United States only after the claim has been allowed, the amount decided, and a warrant for payment issued. The assignment must be freely made, specify the warrant, be attested by two witnesses, and be acknowledged before an authorized official. An exception exists for assignments to a financing institution where contract payments total at least $1,000 and the contract doesn’t expressly forbid assignment; even then, written notice of the assignment must go to the contracting official, the agency head, and any surety on the contract bond.8Office of the Law Revision Counsel. 31 US Code 3727 – Assignments of Claims These requirements apply in addition to whatever the contract itself says.