goods assignment meaning

Assignment of Contract

Jump to section, what is an assignment of contract.

An assignment of contract is a legal term that describes the process that occurs when the original party (assignor) transfers their rights and obligations under their contract to a third party (assignee). When an assignment of contract happens, the original party is relieved of their contractual duties, and their role is replaced by the approved incoming party.

How Does Assignment of Contract Work?

An assignment of contract is simpler than you might think.

The process starts with an existing contract party who wishes to transfer their contractual obligations to a new party.

When this occurs, the existing contract party must first confirm that an assignment of contract is permissible under the legally binding agreement . Some contracts prohibit assignments of contract altogether, and some require the other parties of the agreement to agree to the transfer. However, the general rule is that contracts are freely assignable unless there is an explicit provision that says otherwise.

In other cases, some contracts allow an assignment of contract without any formal notification to other contract parties. If this is the case, once the existing contract party decides to reassign his duties, he must create a “Letter of Assignment ” to notify any other contract signers of the change.

The Letter of Assignment must include details about who is to take over the contractual obligations of the exiting party and when the transfer will take place. If the assignment is valid, the assignor is not required to obtain the consent or signature of the other parties to the original contract for the valid assignment to take place.

Check out this article to learn more about how assigning a contract works.

Contract Assignment Examples

Contract assignments are great tools for contract parties to use when they wish to transfer their commitments to a third party. Here are some examples of contract assignments to help you better understand them:

Anna signs a contract with a local trash company that entitles her to have her trash picked up twice a week. A year later, the trash company transferred her contract to a new trash service provider. This contract assignment effectively makes Anna’s contract now with the new service provider.

Hasina enters a contract with a national phone company for cell phone service. The company goes into bankruptcy and needs to close its doors but decides to transfer all current contracts to another provider who agrees to honor the same rates and level of service. The contract assignment is completed, and Hasina now has a contract with the new phone company as a result.

Here is an article where you can find out more about contract assignments.

Nicholas M.

Assignment of Contract in Real Estate

Assignment of contract is also used in real estate to make money without going the well-known routes of buying and flipping houses. When real estate LLC investors use an assignment of contract, they can make money off properties without ever actually buying them by instead opting to transfer real estate contracts .

This process is called real estate wholesaling.

Real Estate Wholesaling

Real estate wholesaling consists of locating deals on houses that you don’t plan to buy but instead plan to enter a contract to reassign the house to another buyer and pocket the profit.

The process is simple: real estate wholesalers negotiate purchase contracts with sellers. Then, they present these contracts to buyers who pay them an assignment fee for transferring the contract.

This process works because a real estate purchase agreement does not come with the obligation to buy a property. Instead, it sets forth certain purchasing parameters that must be fulfilled by the buyer of the property. In a nutshell, whoever signs the purchase contract has the right to buy the property, but those rights can usually be transferred by means of an assignment of contract.

This means that as long as the buyer who’s involved in the assignment of contract agrees with the purchasing terms, they can legally take over the contract.

But how do real estate wholesalers find these properties?

It is easier than you might think. Here are a few examples of ways that wholesalers find cheap houses to turn a profit on:

• Direct mailers
• Place newspaper ads
• Make posts in online forums
• Social media posts

The key to finding the perfect home for an assignment of contract is to locate sellers that are looking to get rid of their properties quickly. This might be a family who is looking to relocate for a job opportunity or someone who needs to make repairs on a home but can’t afford it. Either way, the quicker the wholesaler can close the deal, the better.

Once a property is located, wholesalers immediately go to work getting the details ironed out about how the sale will work. Transparency is key when it comes to wholesaling. This means that when a wholesaler intends to use an assignment of contract to transfer the rights to another person, they are always upfront about during the preliminary phases of the sale.

In addition to this practice just being good business, it makes sure the process goes as smoothly as possible later down the line. Wholesalers are clear in their intent and make sure buyers know that the contract could be transferred to another buyer before the closing date arrives.

After their offer is accepted and warranties are determined, wholesalers move to complete a title search . Title searches ensure that sellers have the right to enter into a purchase agreement on the property. They do this by searching for any outstanding tax payments, liens , or other roadblocks that could prevent the sale from going through.

Wholesalers also often work with experienced real estate lawyers who ensure that all of the legal paperwork is forthcoming and will stand up in court. Lawyers can also assist in the contract negotiation process if needed but often don’t come in until the final stages.

If the title search comes back clear and the real estate lawyer gives the green light, the wholesaler will immediately move to locate an entity to transfer the rights to buy.

One of the most attractive advantages of real estate wholesaling is that very little money is needed to get started. The process of finding a seller, negotiating a price, and performing a title search is an extremely cheap process that almost anyone can do.

On the other hand, it is not always a positive experience. It can be hard for wholesalers to find sellers who will agree to sell their homes for less than the market value. Even when they do, there is always a chance that the transferred buyer will back out of the sale, which leaves wholesalers obligated to either purchase the property themselves or scramble to find a new person to complete an assignment of contract with.

Learn more about assignment of contract in real estate by checking out this article .

Who Handles Assignment of Contract?

The best person to handle an assignment of contract is an attorney. Since these are detailed legal documents that deal with thousands of dollars, it is never a bad idea to have a professional on your side. If you need help with an assignment of contract or signing a business contract , post a project on ContractsCounsel. There, you can connect with attorneys who know everything there is to know about assignment of contract amendment and can walk you through the whole process.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

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14.1: Assignment of Contract Rights

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LEARNING OBJECTIVES

• Understand what an assignment is and how it is made.
• Recognize the effect of the assignment.
• Know when assignments are not allowed.
• Understand the concept of assignor’s warranties.

The Concept of a Contract Assignment

Contracts create rights and duties. By an assignment , an obligee (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor (the one who has a duty to perform) to a third person ( assignee ); the obligee then becomes an assignor (one who makes an assignment).

The Restatement (Second) of Contracts defines an assignment of a right as “a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires the right to such performance.”Restatement (Second) of Contracts, Section 317(1). The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring. A factor is one who purchases the right to receive income from another.

Figure 14.1 Assignment of Rights

Method of Assignment

Manifesting assent.

To effect an assignment, the assignor must make known his intention to transfer the rights to the third person. The assignor’s intention must be that the assignment is effective without need of any further action or any further manifestation of intention to make the assignment. In other words, the assignor must intend and understand himself to be making the assignment then and there; he is not promising to make the assignment sometime in the future.

Under the UCC, any assignments of rights in excess of $5,000 must be in writing, but otherwise, assignments can be oral and consideration is not required: the assignor could assign the right to the assignee for nothing (not likely in commercial transactions, of course). Mrs. Franklin has the right to receive $750 a month from the sale of a house she formerly owned; she assigns the right to receive the money to her son Jason, as a gift. The assignment is good, though such a gratuitous assignment is usually revocable, which is not the case where consideration has been paid for an assignment.

Acceptance and Revocation

For the assignment to become effective, the assignee must manifest his acceptance under most circumstances. This is done automatically when, as is usually the case, the assignee has given consideration for the assignment (i.e., there is a contract between the assignor and the assignee in which the assignment is the assignor’s consideration), and then the assignment is not revocable without the assignee’s consent. Problems of acceptance normally arise only when the assignor intends the assignment as a gift. Then, for the assignment to be irrevocable, either the assignee must manifest his acceptance or the assignor must notify the assignee in writing of the assignment.

Notice to the obligor is not required, but an obligor who renders performance to the assignor without notice of the assignment (that performance of the contract is to be rendered now to the assignee) is discharged. Obviously, the assignor cannot then keep the consideration he has received; he owes it to the assignee. But if notice is given to the obligor and she performs to the assignor anyway, the assignee can recover from either the obligor or the assignee, so the obligor could have to perform twice, as in Exercise 2 at the chapter’s end, Aldana v. Colonial Palms Plaza . Of course, an obligor who receives notice of the assignment from the assignee will want to be sure the assignment has really occurred. After all, anybody could waltz up to the obligor and say, “I’m the assignee of your contract with the bank. From now on, pay me the $500 a month, not the bank.” The obligor is entitled to verification of the assignment.

Effect of Assignment

General rule.

An assignment of rights effectively makes the assignee stand in the shoes of the assignor. He gains all the rights against the obligor that the assignor had, but no more. An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee. Likewise, under UCC Section 9-318(1), the assignee of an account is subject to all terms of the contract between the debtor and the creditor-assignor. Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 per month and the car is warranted for 50,000 miles. If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, $250 and deduct that $250 from the amount owed Dealer on the next installment (called a setoff). Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments. First, it is inapplicable to the sale of a negotiable instrument to a holder in due course. Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor.Uniform Commercial Code, Section 9-206. While a waiver of defenses makes the assignment more marketable from the assignee’s point of view, it is a situation fraught with peril to an obligor, who may sign a contract without understanding the full import of the waiver. Under the waiver rule, for example, a farmer who buys a tractor on credit and discovers later that it does not work would still be required to pay a credit company that purchased the contract; his defense that the merchandise was shoddy would be unavailing (he would, as used to be said, be “having to pay on a dead horse”).

For that reason, there are various rules that limit both the holder in due course and the waiver rule. Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted. Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective. Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such consumer transactions . Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them. Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.

When Assignments Are Not Allowed

The general rule—as previously noted—is that most contract rights are assignable. But there are exceptions. Five of them are noted here.

Material Change in Duties of the Obligor

When an assignment has the effect of materially changing the duties that the obligor must perform, it is ineffective. Changing the party to whom the obligor must make a payment is not a material change of duty that will defeat an assignment, since that, of course, is the purpose behind most assignments. Nor will a minor change in the duties the obligor must perform defeat the assignment.

Several residents in the town of Centerville sign up on an annual basis with the Centerville Times to receive their morning paper. A customer who is moving out of town may assign his right to receive the paper to someone else within the delivery route. As long as the assignee pays for the paper, the assignment is effective; the only relationship the obligor has to the assignee is a routine delivery in exchange for payment. Obligors can consent in the original contract, however, to a subsequent assignment of duties. Here is a clause from the World Team Tennis League contract: “It is mutually agreed that the Club shall have the right to sell, assign, trade and transfer this contract to another Club in the League, and the Player agrees to accept and be bound by such sale, exchange, assignment or transfer and to faithfully perform and carry out his or her obligations under this contract as if it had been entered into by the Player and such other Club.” Consent is not necessary when the contract does not involve a personal relationship.

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right that cannot be assigned. For example, a student seeking to earn pocket money during the school year signs up to do research work for a professor she admires and with whom she is friendly. The professor assigns the contract to one of his colleagues with whom the student does not get along. The assignment is ineffective because it matters to the student (the obligor) who the person of the assignee is. An insurance company provides auto insurance covering Mohammed Kareem, a sixty-five-year-old man who drives very carefully. Kareem cannot assign the contract to his seventeen-year-old grandson because it matters to the insurance company who the person of its insured is. Tenants usually cannot assign (sublet) their tenancies without the landlord’s permission because it matters to the landlord who the person of their tenant is. Section 14.4.1 "Nonassignable Rights" , Nassau Hotel Co. v. Barnett & Barse Corp. , is an example of the nonassignability of a personal right.

Assignment Forbidden by Statute or Public Policy

Various federal and state laws prohibit or regulate some contract assignment. The assignment of future wages is regulated by state and federal law to protect people from improvidently denying themselves future income because of immediate present financial difficulties. And even in the absence of statute, public policy might prohibit some assignments.

Contracts That Prohibit Assignment

Assignability of contract rights is useful, and prohibitions against it are not generally favored. Many contracts contain general language that prohibits assignment of rights or of “the contract.” Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning “the contract” bars “only the delegation to the assignee of the assignor’s performance.”Restatement (Second) of Contracts, Section 322. In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties.

Even if a contractual provision explicitly prohibits it, a right to damages for breach of the whole contract is assignable under UCC Section 2-210(2) in contracts for goods. Likewise, UCC Section 9-318(4) invalidates any contract provision that prohibits assigning sums already due or to become due. Indeed, in some states, at common law, a clause specifically prohibiting assignment will fail. For example, the buyer and the seller agree to the sale of land and to a provision barring assignment of the rights under the contract. The buyer pays the full price, but the seller refuses to convey. The buyer then assigns to her friend the right to obtain title to the land from the seller. The latter’s objection that the contract precludes such an assignment will fall on deaf ears in some states; the assignment is effective, and the friend may sue for the title.

Future Contracts

The law distinguishes between assigning future rights under an existing contract and assigning rights that will arise from a future contract. Rights contingent on a future event can be assigned in exactly the same manner as existing rights, as long as the contingent rights are already incorporated in a contract. Ben has a long-standing deal with his neighbor, Mrs. Robinson, to keep the latter’s walk clear of snow at twenty dollars a snowfall. Ben is saving his money for a new printer, but when he is eighty dollars shy of the purchase price, he becomes impatient and cajoles a friend into loaning him the balance. In return, Ben assigns his friend the earnings from the next four snowfalls. The assignment is effective. However, a right that will arise from a future contract cannot be the subject of a present assignment.

Partial Assignments

An assignor may assign part of a contractual right, but only if the obligor can perform that part of his contractual obligation separately from the remainder of his obligation. Assignment of part of a payment due is always enforceable. However, if the obligor objects, neither the assignor nor the assignee may sue him unless both are party to the suit. Mrs. Robinson owes Ben one hundred dollars. Ben assigns fifty dollars of that sum to his friend. Mrs. Robinson is perplexed by this assignment and refuses to pay until the situation is explained to her satisfaction. The friend brings suit against Mrs. Robinson. The court cannot hear the case unless Ben is also a party to the suit. This ensures all parties to the dispute are present at once and avoids multiple lawsuits.

Successive Assignments

It may happen that an assignor assigns the same interest twice (see Figure 14.2 "Successive Assignments" ). With certain exceptions, the first assignee takes precedence over any subsequent assignee. One obvious exception is when the first assignment is ineffective or revocable. A subsequent assignment has the effect of revoking a prior assignment that is ineffective or revocable. Another exception: if in good faith the subsequent assignee gives consideration for the assignment and has no knowledge of the prior assignment, he takes precedence whenever he obtains payment from, performance from, or a judgment against the obligor, or whenever he receives some tangible evidence from the assignor that the right has been assigned (e.g., a bank deposit book or an insurance policy).

Some states follow the different English rule: the first assignee to give notice to the obligor has priority, regardless of the order in which the assignments were made. Furthermore, if the assignment falls within the filing requirements of UCC Article 9 (see Chapter 22 "Secured Transactions and Suretyship" ), the first assignee to file will prevail.

Figure 14.2 Successive Assignments

Assignor’s Warranties

An assignor has legal responsibilities in making assignments. He cannot blithely assign the same interests pell-mell and escape liability. Unless the contract explicitly states to the contrary, a person who assigns a right for value makes certain assignor’s warranties to the assignee: that he will not upset the assignment, that he has the right to make it, and that there are no defenses that will defeat it. However, the assignor does not guarantee payment; assignment does not by itself amount to a warranty that the obligor is solvent or will perform as agreed in the original contract. Mrs. Robinson owes Ben fifty dollars. Ben assigns this sum to his friend. Before the friend collects, Ben releases Mrs. Robinson from her obligation. The friend may sue Ben for the fifty dollars. Or again, if Ben represents to his friend that Mrs. Robinson owes him (Ben) fifty dollars and assigns his friend that amount, but in fact Mrs. Robinson does not owe Ben that much, then Ben has breached his assignor’s warranty. The assignor’s warranties may be express or implied.

KEY TAKEAWAY

Generally, it is OK for an obligee to assign the right to receive contractual performance from the obligor to a third party. The effect of the assignment is to make the assignee stand in the shoes of the assignor, taking all the latter’s rights and all the defenses against nonperformance that the obligor might raise against the assignor. But the obligor may agree in advance to waive defenses against the assignee, unless such waiver is prohibited by law.

There are some exceptions to the rule that contract rights are assignable. Some, such as personal rights, are not circumstances where the obligor’s duties would materially change, cases where assignability is forbidden by statute or public policy, or, with some limits, cases where the contract itself prohibits assignment. Partial assignments and successive assignments can happen, and rules govern the resolution of problems arising from them.

When the assignor makes the assignment, that person makes certain warranties, express or implied, to the assignee, basically to the effect that the assignment is good and the assignor knows of no reason why the assignee will not get performance from the obligor.

• If Able makes a valid assignment to Baker of his contract to receive monthly rental payments from Tenant, how is Baker’s right different from what Able’s was?
• Able made a valid assignment to Baker of his contract to receive monthly purchase payments from Carr, who bought an automobile from Able. The car had a 180-day warranty, but the car malfunctioned within that time. Able had quit the auto business entirely. May Carr withhold payments from Baker to offset the cost of needed repairs?
• Assume in the case in Exercise 2 that Baker knew Able was selling defective cars just before his (Able’s) withdrawal from the auto business. How, if at all, does that change Baker’s rights?
• Why are leases generally not assignable? Why are insurance contracts not assignable?

Understanding an assignment and assumption agreement

Need to assign your rights and duties under a contract? Learn more about the basics of an assignment and assumption agreement.

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by   Belle Wong, J.D.

Belle Wong, is a freelance writer specializing in small business, personal finance, banking, and tech/SAAS. She ...

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Updated on: November 24, 2023 · 3 min read

The assignment and assumption agreement

The basics of assignment and assumption, filling in the assignment and assumption agreement.

While every business should try its best to meet its contractual obligations, changes in circumstance can happen that could necessitate transferring your rights and duties under a contract to another party who would be better able to meet those obligations.

If you find yourself in such a situation, and your contract provides for the possibility of assignment, an assignment and assumption agreement can be a good option for preserving your relationship with the party you initially contracted with, while at the same time enabling you to pass on your contractual rights and duties to a third party.

An assignment and assumption agreement is used after a contract is signed, in order to transfer one of the contracting party's rights and obligations to a third party who was not originally a party to the contract. The party making the assignment is called the assignor, while the third party accepting the assignment is known as the assignee.

In order for an assignment and assumption agreement to be valid, the following criteria need to be met:

• The initial contract must provide for the possibility of assignment by one of the initial contracting parties.
• The assignor must agree to assign their rights and duties under the contract to the assignee.
• The assignee must agree to accept, or "assume," those contractual rights and duties.
• The other party to the initial contract must consent to the transfer of rights and obligations to the assignee.

A standard assignment and assumption contract is often a good starting point if you need to enter into an assignment and assumption agreement. However, for more complex situations, such as an assignment and amendment agreement in which several of the initial contract terms will be modified, or where only some, but not all, rights and duties will be assigned, it's a good idea to retain the services of an attorney who can help you draft an agreement that will meet all your needs.

When you're ready to enter into an assignment and assumption agreement, it's a good idea to have a firm grasp of the basics of assignment:

• First, carefully read and understand the assignment and assumption provision in the initial contract. Contracts vary widely in their language on this topic, and each contract will have specific criteria that must be met in order for a valid assignment of rights to take place.
• All parties to the agreement should carefully review the document to make sure they each know what they're agreeing to, and to help ensure that all important terms and conditions have been addressed in the agreement.
• Until the agreement is signed by all the parties involved, the assignor will still be obligated for all responsibilities stated in the initial contract. If you are the assignor, you need to ensure that you continue with business as usual until the assignment and assumption agreement has been properly executed.

Unless you're dealing with a complex assignment situation, working with a template often is a good way to begin drafting an assignment and assumption agreement that will meet your needs. Generally speaking, your agreement should include the following information:

• Identification of the existing agreement, including details such as the date it was signed and the parties involved, and the parties' rights to assign under this initial agreement
• The effective date of the assignment and assumption agreement
• Identification of the party making the assignment (the assignor), and a statement of their desire to assign their rights under the initial contract
• Identification of the third party accepting the assignment (the assignee), and a statement of their acceptance of the assignment
• Identification of the other initial party to the contract, and a statement of their consent to the assignment and assumption agreement
• A section stating that the initial contract is continued; meaning, that, other than the change to the parties involved, all terms and conditions in the original contract stay the same

In addition to these sections that are specific to an assignment and assumption agreement, your contract should also include standard contract language, such as clauses about indemnification, future amendments, and governing law.

Sometimes circumstances change, and as a business owner you may find yourself needing to assign your rights and duties under a contract to another party. A properly drafted assignment and assumption agreement can help you make the transfer smoothly while, at the same time, preserving the cordiality of your initial business relationship under the original contract.

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• assignments basic law

Assignments: The Basic Law

The assignment of a right or obligation is a common contractual event under the law and the right to assign (or prohibition against assignments) is found in the majority of agreements, leases and business structural documents created in the United States.

As with many terms commonly used, people are familiar with the term but often are not aware or fully aware of what the terms entail. The concept of assignment of rights and obligations is one of those simple concepts with wide ranging ramifications in the contractual and business context and the law imposes severe restrictions on the validity and effect of assignment in many instances. Clear contractual provisions concerning assignments and rights should be in every document and structure created and this article will outline why such drafting is essential for the creation of appropriate and effective contracts and structures.

The reader should first read the article on Limited Liability Entities in the United States and Contracts since the information in those articles will be assumed in this article.

Basic Definitions and Concepts:

An assignment is the transfer of rights held by one party called the “assignor” to another party called the “assignee.” The legal nature of the assignment and the contractual terms of the agreement between the parties determines some additional rights and liabilities that accompany the assignment. The assignment of rights under a contract usually completely transfers the rights to the assignee to receive the benefits accruing under the contract. Ordinarily, the term assignment is limited to the transfer of rights that are intangible, like contractual rights and rights connected with property. Merchants Service Co. v. Small Claims Court , 35 Cal. 2d 109, 113-114 (Cal. 1950).

An assignment will generally be permitted under the law unless there is an express prohibition against assignment in the underlying contract or lease. Where assignments are permitted, the assignor need not consult the other party to the contract but may merely assign the rights at that time. However, an assignment cannot have any adverse effect on the duties of the other party to the contract, nor can it diminish the chance of the other party receiving complete performance. The assignor normally remains liable unless there is an agreement to the contrary by the other party to the contract.

The effect of a valid assignment is to remove privity between the assignor and the obligor and create privity between the obligor and the assignee. Privity is usually defined as a direct and immediate contractual relationship. See Merchants case above.

Further, for the assignment to be effective in most jurisdictions, it must occur in the present. One does not normally assign a future right; the assignment vests immediate rights and obligations.

No specific language is required to create an assignment so long as the assignor makes clear his/her intent to assign identified contractual rights to the assignee. Since expensive litigation can erupt from ambiguous or vague language, obtaining the correct verbiage is vital. An agreement must manifest the intent to transfer rights and can either be oral or in writing and the rights assigned must be certain.

Note that an assignment of an interest is the transfer of some identifiable property, claim, or right from the assignor to the assignee. The assignment operates to transfer to the assignee all of the rights, title, or interest of the assignor in the thing assigned. A transfer of all rights, title, and interests conveys everything that the assignor owned in the thing assigned and the assignee stands in the shoes of the assignor. Knott v. McDonald’s Corp ., 985 F. Supp. 1222 (N.D. Cal. 1997)

The parties must intend to effectuate an assignment at the time of the transfer, although no particular language or procedure is necessary. As long ago as the case of National Reserve Co. v. Metropolitan Trust Co ., 17 Cal. 2d 827 (Cal. 1941), the court held that in determining what rights or interests pass under an assignment, the intention of the parties as manifested in the instrument is controlling.

The intent of the parties to an assignment is a question of fact to be derived not only from the instrument executed by the parties but also from the surrounding circumstances. When there is no writing to evidence the intention to transfer some identifiable property, claim, or right, it is necessary to scrutinize the surrounding circumstances and parties’ acts to ascertain their intentions. Strosberg v. Brauvin Realty Servs., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998)

The general rule applicable to assignments of choses in action is that an assignment, unless there is a contract to the contrary, carries with it all securities held by the assignor as collateral to the claim and all rights incidental thereto and vests in the assignee the equitable title to such collateral securities and incidental rights. An unqualified assignment of a contract or chose in action, however, with no indication of the intent of the parties, vests in the assignee the assigned contract or chose and all rights and remedies incidental thereto.

More examples: In Strosberg v. Brauvin Realty Servs ., 295 Ill. App. 3d 17 (Ill. App. Ct. 1st Dist. 1998), the court held that the assignee of a party to a subordination agreement is entitled to the benefits and is subject to the burdens of the agreement. In Florida E. C. R. Co. v. Eno , 99 Fla. 887 (Fla. 1930), the court held that the mere assignment of all sums due in and of itself creates no different or other liability of the owner to the assignee than that which existed from the owner to the assignor.

And note that even though an assignment vests in the assignee all rights, remedies, and contingent benefits which are incidental to the thing assigned, those which are personal to the assignor and for his sole benefit are not assigned. Rasp v. Hidden Valley Lake, Inc ., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988). Thus, if the underlying agreement provides that a service can only be provided to X, X cannot assign that right to Y.

Novation Compared to Assignment:

Although the difference between a novation and an assignment may appear narrow, it is an essential one. “Novation is a act whereby one party transfers all its obligations and benefits under a contract to a third party.” In a novation, a third party successfully substitutes the original party as a party to the contract. “When a contract is novated, the other contracting party must be left in the same position he was in prior to the novation being made.”

A sublease is the transfer when a tenant retains some right of reentry onto the leased premises. However, if the tenant transfers the entire leasehold estate, retaining no right of reentry or other reversionary interest, then the transfer is an assignment. The assignor is normally also removed from liability to the landlord only if the landlord consents or allowed that right in the lease. In a sublease, the original tenant is not released from the obligations of the original lease.

Equitable Assignments:

An equitable assignment is one in which one has a future interest and is not valid at law but valid in a court of equity. In National Bank of Republic v. United Sec. Life Ins. & Trust Co. , 17 App. D.C. 112 (D.C. Cir. 1900), the court held that to constitute an equitable assignment of a chose in action, the following has to occur generally: anything said written or done, in pursuance of an agreement and for valuable consideration, or in consideration of an antecedent debt, to place a chose in action or fund out of the control of the owner, and appropriate it to or in favor of another person, amounts to an equitable assignment. Thus, an agreement, between a debtor and a creditor, that the debt shall be paid out of a specific fund going to the debtor may operate as an equitable assignment.

In Egyptian Navigation Co. v. Baker Invs. Corp. , 2008 U.S. Dist. LEXIS 30804 (S.D.N.Y. Apr. 14, 2008), the court stated that an equitable assignment occurs under English law when an assignor, with an intent to transfer his/her right to a chose in action, informs the assignee about the right so transferred.

An executory agreement or a declaration of trust are also equitable assignments if unenforceable as assignments by a court of law but enforceable by a court of equity exercising sound discretion according to the circumstances of the case. Since California combines courts of equity and courts of law, the same court would hear arguments as to whether an equitable assignment had occurred. Quite often, such relief is granted to avoid fraud or unjust enrichment.

Note that obtaining an assignment through fraudulent means invalidates the assignment. Fraud destroys the validity of everything into which it enters. It vitiates the most solemn contracts, documents, and even judgments. Walker v. Rich , 79 Cal. App. 139 (Cal. App. 1926). If an assignment is made with the fraudulent intent to delay, hinder, and defraud creditors, then it is void as fraudulent in fact. See our article on Transfers to Defraud Creditors .

But note that the motives that prompted an assignor to make the transfer will be considered as immaterial and will constitute no defense to an action by the assignee, if an assignment is considered as valid in all other respects.

Enforceability of Assignments:

Whether a right under a contract is capable of being transferred is determined by the law of the place where the contract was entered into. The validity and effect of an assignment is determined by the law of the place of assignment. The validity of an assignment of a contractual right is governed by the law of the state with the most significant relationship to the assignment and the parties.

In some jurisdictions, the traditional conflict of laws rules governing assignments has been rejected and the law of the place having the most significant contacts with the assignment applies. In Downs v. American Mut. Liability Ins. Co ., 14 N.Y.2d 266 (N.Y. 1964), a wife and her husband separated and the wife obtained a judgment of separation from the husband in New York. The judgment required the husband to pay a certain yearly sum to the wife. The husband assigned 50 percent of his future salary, wages, and earnings to the wife. The agreement authorized the employer to make such payments to the wife.

After the husband moved from New York, the wife learned that he was employed by an employer in Massachusetts. She sent the proper notice and demanded payment under the agreement. The employer refused and the wife brought an action for enforcement. The court observed that Massachusetts did not prohibit assignment of the husband’s wages. Moreover, Massachusetts law was not controlling because New York had the most significant relationship with the assignment. Therefore, the court ruled in favor of the wife.

Therefore, the validity of an assignment is determined by looking to the law of the forum with the most significant relationship to the assignment itself. To determine the applicable law of assignments, the court must look to the law of the state which is most significantly related to the principal issue before it.

Assignment of Contractual Rights:

Generally, the law allows the assignment of a contractual right unless the substitution of rights would materially change the duty of the obligor, materially increase the burden or risk imposed on the obligor by the contract, materially impair the chance of obtaining return performance, or materially reduce the value of the performance to the obligor. Restat 2d of Contracts, § 317(2)(a). This presumes that the underlying agreement is silent on the right to assign.

If the contract specifically precludes assignment, the contractual right is not assignable. Whether a contract is assignable is a matter of contractual intent and one must look to the language used by the parties to discern that intent.

In the absence of an express provision to the contrary, the rights and duties under a bilateral executory contract that does not involve personal skill, trust, or confidence may be assigned without the consent of the other party. But note that an assignment is invalid if it would materially alter the other party’s duties and responsibilities. Once an assignment is effective, the assignee stands in the shoes of the assignor and assumes all of assignor’s rights. Hence, after a valid assignment, the assignor’s right to performance is extinguished, transferred to assignee, and the assignee possesses the same rights, benefits, and remedies assignor once possessed. Robert Lamb Hart Planners & Architects v. Evergreen, Ltd. , 787 F. Supp. 753 (S.D. Ohio 1992).

On the other hand, an assignee’s right against the obligor is subject to “all of the limitations of the assignor’s right, all defenses thereto, and all set-offs and counterclaims which would have been available against the assignor had there been no assignment, provided that these defenses and set-offs are based on facts existing at the time of the assignment.” See Robert Lamb , case, above.

The power of the contract to restrict assignment is broad. Usually, contractual provisions that restrict assignment of the contract without the consent of the obligor are valid and enforceable, even when there is statutory authorization for the assignment. The restriction of the power to assign is often ineffective unless the restriction is expressly and precisely stated. Anti-assignment clauses are effective only if they contain clear, unambiguous language of prohibition. Anti-assignment clauses protect only the obligor and do not affect the transaction between the assignee and assignor.

Usually, a prohibition against the assignment of a contract does not prevent an assignment of the right to receive payments due, unless circumstances indicate the contrary. Moreover, the contracting parties cannot, by a mere non-assignment provision, prevent the effectual alienation of the right to money which becomes due under the contract.

A contract provision prohibiting or restricting an assignment may be waived, or a party may so act as to be estopped from objecting to the assignment, such as by effectively ratifying the assignment. The power to void an assignment made in violation of an anti-assignment clause may be waived either before or after the assignment. See our article on Contracts.

Noncompete Clauses and Assignments:

Of critical import to most buyers of businesses is the ability to ensure that key employees of the business being purchased cannot start a competing company. Some states strictly limit such clauses, some do allow them. California does restrict noncompete clauses, only allowing them under certain circumstances. A common question in those states that do allow them is whether such rights can be assigned to a new party, such as the buyer of the buyer.

A covenant not to compete, also called a non-competitive clause, is a formal agreement prohibiting one party from performing similar work or business within a designated area for a specified amount of time. This type of clause is generally included in contracts between employer and employee and contracts between buyer and seller of a business.

Many workers sign a covenant not to compete as part of the paperwork required for employment. It may be a separate document similar to a non-disclosure agreement, or buried within a number of other clauses in a contract. A covenant not to compete is generally legal and enforceable, although there are some exceptions and restrictions.

Whenever a company recruits skilled employees, it invests a significant amount of time and training. For example, it often takes years before a research chemist or a design engineer develops a workable knowledge of a company’s product line, including trade secrets and highly sensitive information. Once an employee gains this knowledge and experience, however, all sorts of things can happen. The employee could work for the company until retirement, accept a better offer from a competing company or start up his or her own business.

A covenant not to compete may cover a number of potential issues between employers and former employees. Many companies spend years developing a local base of customers or clients. It is important that this customer base not fall into the hands of local competitors. When an employee signs a covenant not to compete, he or she usually agrees not to use insider knowledge of the company’s customer base to disadvantage the company. The covenant not to compete often defines a broad geographical area considered off-limits to former employees, possibly tens or hundreds of miles.

Another area of concern covered by a covenant not to compete is a potential ‘brain drain’. Some high-level former employees may seek to recruit others from the same company to create new competition. Retention of employees, especially those with unique skills or proprietary knowledge, is vital for most companies, so a covenant not to compete may spell out definite restrictions on the hiring or recruiting of employees.

A covenant not to compete may also define a specific amount of time before a former employee can seek employment in a similar field. Many companies offer a substantial severance package to make sure former employees are financially solvent until the terms of the covenant not to compete have been met.

Because the use of a covenant not to compete can be controversial, a handful of states, including California, have largely banned this type of contractual language. The legal enforcement of these agreements falls on individual states, and many have sided with the employee during arbitration or litigation. A covenant not to compete must be reasonable and specific, with defined time periods and coverage areas. If the agreement gives the company too much power over former employees or is ambiguous, state courts may declare it to be overbroad and therefore unenforceable. In such case, the employee would be free to pursue any employment opportunity, including working for a direct competitor or starting up a new company of his or her own.

It has been held that an employee’s covenant not to compete is assignable where one business is transferred to another, that a merger does not constitute an assignment of a covenant not to compete, and that a covenant not to compete is enforceable by a successor to the employer where the assignment does not create an added burden of employment or other disadvantage to the employee. However, in some states such as Hawaii, it has also been held that a covenant not to compete is not assignable and under various statutes for various reasons that such covenants are not enforceable against an employee by a successor to the employer. Hawaii v. Gannett Pac. Corp. , 99 F. Supp. 2d 1241 (D. Haw. 1999)

It is vital to obtain the relevant law of the applicable state before drafting or attempting to enforce assignment rights in this particular area.

Conclusion:

In the current business world of fast changing structures, agreements, employees and projects, the ability to assign rights and obligations is essential to allow flexibility and adjustment to new situations. Conversely, the ability to hold a contracting party into the deal may be essential for the future of a party. Thus, the law of assignments and the restriction on same is a critical aspect of every agreement and every structure. This basic provision is often glanced at by the contracting parties, or scribbled into the deal at the last minute but can easily become the most vital part of the transaction.

As an example, one client of ours came into the office outraged that his co venturer on a sizable exporting agreement, who had excellent connections in Brazil, had elected to pursue another venture instead and assigned the agreement to a party unknown to our client and without the business contacts our client considered vital. When we examined the handwritten agreement our client had drafted in a restaurant in Sao Paolo, we discovered there was no restriction on assignment whatsoever…our client had not even considered that right when drafting the agreement after a full day of work.

One choses who one does business with carefully…to ensure that one’s choice remains the party on the other side of the contract, one must master the ability to negotiate proper assignment provisions.

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Assignments: why you need to serve a notice of assignment

It's the day of completion; security is taken, assignments are completed and funds move. Everyone breathes a sigh of relief. At this point, no-one wants to create unnecessary paperwork - not even the lawyers! Notices of assignment are, in some circumstances, optional. However, in other transactions they could be crucial to a lender's enforcement strategy. In the article below, we have given you the facts you need to consider when deciding whether or not you need to serve notice of assignment.

What issues are there with serving notice of assignment?

Assignments are useful tools for adding flexibility to banking transactions. They enable the transfer of one party's rights under a contract to a new party (for example, the right to receive an income stream or a debt) and allow security to be taken over intangible assets which might be unsuitable targets for a fixed charge. A lender's security net will often include assignments over contracts (such as insurance or material contracts), intellectual property rights, investments or receivables.

An assignment can be a legal assignment or an equitable assignment. If a legal assignment is required, the assignment must comply with a set of formalities set out in s136 of the Law of Property Act 1925, which include the requirement to give notice to the contract counterparty.

The main difference between legal and equitable assignments (other than the formalities required to create them) is that with a legal assignment, the assignee can usually bring an action against the contract counterparty in its own name following assignment. However, with an equitable assignment, the assignee will usually be required to join in proceedings with the assignor (unless the assignee has been granted specific powers to circumvent that). That may be problematic if the assignor is no longer available or interested in participating.

Why should we serve a notice of assignment?

The legal status of the assignment may affect the credit scoring that can be given to a particular class of assets. It may also affect a lender's ability to effect part of its exit strategy if that strategy requires the lender to be able to deal directly with the contract counterparty.

The case of General Nutrition Investment Company (GNIC) v Holland and Barrett International Ltd and another (H&B) provides an example of an equitable assignee being unable to deal directly with a contract counterparty as a result of a failure to provide a notice of assignment.

The case concerned the assignment of a trade mark licence to GNIC . The other party to the licence agreement was H&B. H&B had not received notice of the assignment. GNIC tried to terminate the licence agreement for breach by serving a notice of termination. H&B disputed the termination. By this point in time the original licensor had been dissolved and so was unable to assist.

At a hearing of preliminary issues, the High Court held that the notices of termination served by GNIC , as an equitable assignee, were invalid, because no notice of the assignment had been given to the licensee. Although only a High Court decision, this follows a Court of Appeal decision in the Warner Bros Records Inc v Rollgreen Ltd case, which was decided in the context of the attempt to exercise an option.

In both cases, an equitable assignee attempted to exercise a contractual right that would change the contractual relationship between the parties (i.e. by terminating the contractual relationship or exercising an option to extend the term of a licence). The judge in GNIC felt that "in each case, the counterparty (the recipient of the relevant notice) is entitled to see that the potential change in his contractual position is brought about by a person who is entitled, and whom he can see to be entitled, to bring about that change".

In a security context, this could hamper the ability of a lender to maximise the value of the secured assets but yet is a constraint that, in most transactions, could be easily avoided.

Why not serve notice?

Sometimes it's just not necessary or desirable. For example:

• If security is being taken over a large number of low value receivables or contracts, the time and cost involved in giving notice may be disproportionate to the additional value gained by obtaining a legal rather than an equitable assignment.
• If enforcement action were required, the equitable assignee typically has the option to join in the assignor to any proceedings (if it could not be waived by the court) and provision could be made in the assignment deed for the assignor to assist in such situations. Powers of attorney are also typically granted so that a lender can bring an action in the assignor's name.
• Enforcement is often not considered to be a significant issue given that the vast majority of assignees will never need to bring claims against the contract counterparty.

Care should however, be taken in all circumstances where the underlying contract contains a ban on assignment, as the contract counterparty would not have to recognise an assignment that is made in contravention of that ban. Furthermore, that contravention in itself may trigger termination and/or other rights in the assigned contract, that could affect the value of any underlying security.

What about acknowledgements of notices?

A simple acknowledgement of service of notice is simply evidence of the notice having been received. However, these documents often contain commitments or assurances by the contract counterparty which increase their value to the assignee.

Best practice for serving notice of assignment

Each transaction is different and the weighting given to each element of the security package will depend upon the nature of the debt and the borrower's business. The service of a notice of assignment may be a necessity or an optional extra. In each case, the question of whether to serve notice is best considered with your advisers at the start of a transaction to allow time for the lender's priorities to be highlighted to the borrowers and captured within the documents.

For further advice on serving notice of assignment please contact Kirsty Barnes or Catherine Phillips  from our Banking & Finance team.

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The cargo could be transferred to another consignee or shipping company by assignment in overseas shipments. Mostly it's seen at ocean freight. Assignment (shipping assignment) enables the transfer of a shipment's rights and ownership of the goods to any other consignee. The assignment term is used in connection with a B/L. The assignment involves the transfer of rights, title, and interest in order to assign goods by endorsing the bill of lading.

What is assignment in shipping terms?

In shipping terms, an assignment refers to the transfer of rights, ownership, or control of goods or a shipment from one party to another. It can also refer to the allocation of tasks or responsibilities to individuals or entities involved in the shipping process.

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Assignment of Rights Agreement: Everything You Need to Know

An assignment of rights agreement refers to a situation in which one party, known as the assignor, shifts contract rights to another party, known as assignee. 3 min read updated on February 01, 2023

An assignment of rights agreement refers to a situation in which one party, known as the assignor, shifts contract rights to another party. The party taking on the rights is known as the assignee.

An Assignment of Rights Agreement

The following is an example of an assignment of rights agreement. Dave decides to buy a bicycle from John for $100 and after agreeing on the price, Dave and John draw up a written agreement. Let's suppose that there will be a one week wait before the bicycle is ready for delivery to Dave and before anything is passed between them.

Meanwhile, John accepts that he will transfer his right to be paid $100 from Dave to Rob, in exchange for Rob paying John $90 immediately. Let's assume that John's motivation is an immediate need for cash. In this context, John is regarded as the assignor and Rob is the assignee.

John is the assignor as he is giving the assignment to Rob and Rob is the assignee because he is acquiring the assignment from John. To put it simply, the assignee is the party who gets something. In this case, Rob will receive $100.

Rules of Assignments

Assignments frequently occur in contracts. It's important to note the following points:

• The assignor (e.g. John) is accountable according to the contract unless the parties make an agreement that states otherwise.
• This means that if Dave does not receive the bicycle, he can sue John for it.
• Assignments are allowed in almost every type of agreement unless the contract includes an explicit ban on assignments or unless a specific exception is applicable.
• The assignor does not need to speak to the other contract party in order to create the assignment. For example, John would not need to ask Dave if John can transfer his right to be paid to Rob.

Exceptions Where a Contract Cannot be Assigned

• Some exceptions dictate that a contract cannot be assigned .
• Unenforceable assignments include the following: a personal services agreement, changing the contract duties, changing the material provisions of the agreement (e.g. time, amount, location, etc.).
• An example of a personal services agreement, which cannot be assigned, would be if you decided to employ a particular professional writer to write a book for you.
• That writer would not be allowed to take your payment and then give the work to another writer because you employed that particular writer to write the book, rather than someone else.
• Some kinds of assignments have to be in writing in order to be enforceable such as assignments of actual property (e.g. selling your house), loans, or debts.
• It's best to look at the statute of frauds for more information on the kinds of agreements that must be in writing.

Delegations and Novations

A delegation is very similar to an assignment in terms of what it involves. A delegation takes place when a party moves his or her obligations (or liabilities) under an agreement to a different party. Assignments, on the other hand, involve the transfer of rights.

If the parties in our previous example had created a novation , Rob would be entirely accountable to Dave and John would be clear of responsibility. A novation replaces the earliest party with a new party.

Contract Assignment

An Assignment Agreement can also be called a Contract Assignment. Another example of this would be if you're a contractor who needs assistance finishing a job. You could give those tasks and rights to a subcontractor, but only if the original agreement does not prohibit the assignment of these rights and responsibilities.

Creating an Assignment Agreement

In an Assignment Agreement, it is important to include details such as:

• The name of the person assigning the responsibilities (known as the assignor)
• The name of the of the party who is taking the rights and responsibilities (the assignee)
• The other party to the first agreement (known as the obligor)
• The name of the agreement and its expiration date
• Whether the first contract necessitates the obligor's approval before assigning rights
• The date of the obligor's consent
• When the contract will be put into effect
• Which state's laws will regulate the contract

If you need help with an assignment of rights agreement, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

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• Assignment of Rights Example
• Assignment of Contract Rights
• Assignment of Rights and Obligations Under a Contract
• Partial Assignment of Contract
• Assignment Contract Law
• What Is the Definition of Assigns
• Assignment Law
• Assignment Of Contracts
• Legal Assignment
• Delegation vs Assignment

§ 2-210. Delegation of Performance; Assignment of Rights.

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(1) A party may perform his duty through a delegate unless otherwise agreed or unless the other party has a substantial interest in having his original promisor perform or control the acts required by the contract . No delegation of performance relieves the party delegating of any duty to perform or any liability for breach.

(2) Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract , or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreement otherwise.

(3)Unless the circumstances indicate the contrary a prohibition of assignment of "the contract" is to be construed as barring only the delegation to the assignee of the assignor's performance.

(4) An assignment of "the contract" or of "all my rights under the contract" or an assignment in similar general terms is an assignment of rights and unless the language or the circumstances (as in an assignment for security) indicate the contrary, it is a delegation of performance of the duties of the assignor and its acceptance by the assignee constitutes a promise by him to perform those duties. This promise is enforceable by either the assignor or the other party to the original contract .

(5) The other party may treat any assignment which delegates performance as creating reasonable grounds for insecurity and may without prejudice to his rights against the assignor demand assurances from the assignee (Section 2-609 ).

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Definition of assignment

task , duty , job , chore , stint , assignment mean a piece of work to be done.

task implies work imposed by a person in authority or an employer or by circumstance.

duty implies an obligation to perform or responsibility for performance.

job applies to a piece of work voluntarily performed; it may sometimes suggest difficulty or importance.

chore implies a minor routine activity necessary for maintaining a household or farm.

stint implies a carefully allotted or measured quantity of assigned work or service.

assignment implies a definite limited task assigned by one in authority.

Examples of assignment in a Sentence

These examples are programmatically compiled from various online sources to illustrate current usage of the word 'assignment.' Any opinions expressed in the examples do not represent those of Merriam-Webster or its editors. Send us feedback about these examples.

Word History

see assign entry 1

14th century, in the meaning defined at sense 1

Phrases Containing assignment

• self - assignment

Dictionary Entries Near assignment

Cite this entry.

“Assignment.” Merriam-Webster.com Dictionary , Merriam-Webster, https://www.merriam-webster.com/dictionary/assignment. Accessed 17 May. 2024.

Legal Definition

Legal definition of assignment, more from merriam-webster on assignment.

Nglish: Translation of assignment for Spanish Speakers

Britannica English: Translation of assignment for Arabic Speakers

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Goods & Services Tax (GST) What is GST in India? Indirect Tax Law Explained

Updated on : Mar 21st, 2023

22 min read

1. What is GST in India?

GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017.

In other words, Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.

Before the Goods and Services Tax could be introduced, the structure of indirect tax levy in India was as follows:

Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales, Central GST and State GST are charged. All the inter-state sales are chargeable to the Integrated GST.

Now, let us understand the definition of Goods and Service Tax, as mentioned above, in detail.

Multi-stage

An item goes through multiple change-of-hands along its supply chain: Starting from manufacture until the final sale to the consumer.

Let us consider the following stages:

• Purchase of raw materials
• Production or manufacture
• Warehousing of finished goods
• Selling to wholesalers
• Sale of the product to the retailers
• Selling to the end consumers

The Goods and Services Tax is levied on each of these stages making it a multi-stage tax.

Value Addition

A manufacturer who makes biscuits buys flour, sugar and other material. The value of the inputs increases when the sugar and flour are mixed and baked into biscuits.

The manufacturer then sells these biscuits to the warehousing agent who packs large quantities of biscuits in cartons and labels it. This is another addition of value to the biscuits. After this, the warehousing agent sells it to the retailer.

The retailer packages the biscuits in smaller quantities and invests in the marketing of the biscuits, thus increasing its value. GST is levied on these value additions, i.e. the monetary value added at each stage to achieve the final sale to the end customer.

Destination-Based

Consider goods manufactured in Maharashtra and sold to the final consumer in Karnataka. Since the Goods and Service Tax is levied at the point of consumption, the entire tax revenue will go to Karnataka and not Maharashtra.

2. The Journey of GST in India

The GST journey began in the year 2000 when a committee was set up to draft law. It took 17 years from then for the Law to evolve. In 2017, the GST Bill was passed in the Lok Sabha and Rajya Sabha. On 1st July 2017, the GST Law came into force.

3. Objectives Of GST

• To achieve the ideology of ‘One Nation, One Tax’      

GST has replaced multiple indirect taxes, which were existing under the previous tax regime. The advantage of having one single tax means every state follows the same rate for a particular product or service. Tax administration is easier with the Central Government deciding the rates and policies. Common laws can be introduced, such as e-way bills for goods transport and e-invoicing for transaction reporting. Tax compliance is also better as taxpayers are not bogged down with multiple return forms and deadlines. Overall, it’s a unified system of indirect tax compliance.

• To subsume a majority of the indirect taxes in India      

India had several erstwhile indirect taxes such as service tax, Value Added Tax (VAT), Central Excise, etc., which used to be levied at multiple supply chain stages. Some taxes were governed by the states and some by the Centre. There was no unified and centralised tax on both goods and services. Hence, GST was introduced. Under GST, all the major indirect taxes were subsumed into one. It has greatly reduced the compliance burden on taxpayers and eased tax administration for the government.

• To eliminate the cascading effect of taxes      

One of the primary objectives of GST was to remove the cascading effect of taxes. Previously, due to different indirect tax laws, taxpayers could not set off the tax credits of one tax against the other. For example, the excise duties paid during manufacture could not be set off against the VAT payable during the sale. This led to a cascading effect of taxes. Under GST, the tax levy is only on the net value added at each stage of the supply chain. This has helped eliminate the cascading effect of taxes and contributed to the seamless flow of input tax credits across both goods and services.

• To curb tax evasion      

GST laws in India are far more stringent compared to any of the erstwhile indirect tax laws. Under GST, taxpayers can claim an input tax credit only on invoices uploaded by their respective suppliers. This way, the chances of claiming input tax credits on fake invoices are minimal. The introduction of e-invoicing has further reinforced this objective. Also, due to GST being a nationwide tax and having a centralised surveillance system, the clampdown on defaulters is quicker and far more efficient. Hence, GST has curbed tax evasion and minimised tax fraud from taking place to a large extent.

• To increase the taxpayer base      

GST has helped in widening the tax base in India. Previously, each of the tax laws had a different threshold limit for registration based on turnover. As GST is a consolidated tax levied on both goods and services both, it has increased tax-registered businesses. Besides, the stricter laws surrounding input tax credits have helped bring certain unorganised sectors under the tax net. For example, the construction industry in India.

• Online procedures for ease of doing business      

Previously, taxpayers faced a lot of hardships dealing with different tax authorities under each tax law. Besides, while return filing was online, most of the assessment and refund procedures took place offline. Now, GST procedures are carried out almost entirely online. Everything is done with a click of a button, from registration to return filing to refunds to e-way bill generation. It has contributed to the overall ease of doing business in India and simplified taxpayer compliance to a massive extent. The government also plans to introduce a centralised portal soon for all indirect tax compliance such as e-invoicing, e-way bills and GST return filing.

• An improved logistics and distribution system      

A single indirect tax system reduces the need for multiple documentation for the supply of goods. GST minimises transportation cycle times, improves supply chain and turnaround time, and leads to warehouse consolidation, among other benefits. With the e-way bill system under GST, the removal of interstate checkpoints is most beneficial to the sector in improving transit and destination efficiency. Ultimately, it helps in cutting down the high logistics and warehousing costs.

• To promote competitive pricing and increase consumption      

Introducing GST has also led to an increase in consumption and indirect tax revenues. Due to the cascading effect of taxes under the previous regime, the prices of goods in India were higher than in global markets. Even between states, the lower VAT rates in certain states led to an imbalance of purchases in these states. Having uniform GST rates have contributed to overall competitive pricing across India and on the global front. This has hence increased consumption and led to higher revenues, which has been another important objective achieved.

4. Advantages Of GST

GST has mainly removed the cascading effect on the sale of goods and services. Removal of the cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax, the cost of goods decreases.

Also, GST is mainly technologically driven. All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

5. What are the components of GST?

There are three taxes applicable under this system: CGST, SGST & IGST .

• CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
• SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
• IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

In most cases, the tax structure under the new regime will be as follows:

Illustration:

• Let us assume that a dealer in Gujarat had sold the goods to a dealer in Punjab worth Rs. 50,000. The tax rate is 18% comprising of only IGST.

In such a case, the dealer has to charge IGST of Rs.9,000. This revenue will go to Central Government.

• The same dealer sells goods to a consumer in Gujarat worth Rs. 50,000. The GST rate on goods is 12%. This rate comprises CGST at 6% and SGST at 6%.

The dealer has to collect Rs.6,000 as Goods and Service Tax, Rs.3,000 will go to the Central Government and Rs.3,000 will go to the Gujarat government since the sale is within the state.

6. Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both the state and the centre. States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different set of rules and regulations.

Inter-state sale of goods was taxed by the centre. CST (Central State Tax) was applicable in case of inter-state sale of goods. The indirect taxes such as the entertainment tax, octroi and local tax were levied together by state and centre. These led to a lot of overlapping of taxes levied by both the state and the centre.

For example, when goods were manufactured and sold, excise duty was charged by the centre. Over and above the excise duty, VAT was also charged by the state. It led to a tax on tax effect, also known as the cascading effect of taxes.

The following is the list of indirect taxes in the pre-GST regime:

• Central Excise Duty
• Duties of Excise
• Additional Duties of Excise
• Additional Duties of Customs
• Special Additional Duty of Customs
• Central Sales Tax
• Purchase Tax
• Entertainment Tax
• Taxes on advertisements
• Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST have replaced all the above taxes.

However, certain taxes such as the GST levied for the inter-state purchase at a concessional rate of 2% by the issue and utilisation of ‘Form C’ is still prevalent.

It applies to certain non-GST goods such as:

• Petroleum crude;
• High-speed diesel
• Motor spirit (commonly known as petrol);
• Natural gas;
• Aviation turbine fuel; and
• Alcoholic liquor for human consumption.

It applies to the following transactions only:

• Use in manufacturing or processing
• Use in certain sectors such as the telecommunication network, mining, the generation or distribution of electricity or any other power sector

7. How Has GST Helped in Price Reduction?

During the pre-GST regime, every purchaser, including the final consumer paid tax on tax. This condition of tax on tax is known as the cascading effect of taxes.

GST has removed the cascading effect. Tax is calculated only on the value-addition at each stage of the transfer of ownership. Understand what the cascading effect is and how GST helps by watching this simple video:

The indirect tax system under GST will integrate the country with a uniform tax rate. It will improve the collection of taxes as well as boost the development of the Indian economy by removing the indirect tax barriers between states.

Based on the above example of the biscuit manufacturer, let’s take some actual figures to see what happens to the cost of goods and the taxes, by comparing the earlier GST regimes.

Tax calculations in earlier regime:

The tax liability was passed on at every stage of the transaction, and the final liability comes to a rest with the customer. This condition is known as the cascading effect of taxes, and the value of the item keeps increasing every time this happens.

Tax calculations in current regime:

In the case of Goods and Services Tax, there is a way to claim the credit for tax paid in acquiring input. The individual who has already paid a tax can claim credit for this tax when he submits his GST returns.

In the end, every time an individual is able to claims the input tax credit , the sale price is reduced and the cost price for the buyer is reduced because of lower tax liability. The final value of the biscuits is therefore reduced from Rs.2,244 to Rs.1,980, thus reducing the tax burden on the final customer.

8. What are the New Compliances Under GST?

Apart from online filing of the GST returns, the GST regime has introduced several new systems along with it.

e-Way Bills

GST introduced a centralised system of waybills by the introduction of “ E-way bills” . This system was launched on 1st April 2018 for inter-state movement of goods and on 15th April 2018 for intra-state movement of goods in a staggered manner.

Under the e-way bill system, manufacturers, traders and transporters can generate e-way bills for the goods transported from the place of its origin to its destination on a common portal with ease. Tax authorities are also benefited as this system has reduced time at check -posts and helps reduce tax evasion.

E-invoicing

The e-invoicing system was made applicable from 1st October 2020 for businesses with an annual aggregate turnover of more than Rs.500 crore in any preceding financial years (from 2017-18). Further, from 1st January 2021, this system was extended to those with an annual aggregate turnover of more than Rs.100 crore.

These businesses must obtain a unique invoice reference number for every business-to-business invoice by uploading on the GSTN’s invoice registration portal. The portal verifies the correctness and genuineness of the invoice. Thereafter, it authorises using the digital signature along with a QR code.

e-Invoicing allows interoperability of invoices and helps reduce data entry errors. It is designed to pass the invoice information directly from the IRP to the GST portal and the e-way bill portal. It will, therefore, eliminate the requirement for manual data entry while filing GSTR-1 and helps in the generation of e-way bills too.

For further reading and understanding, check out our articles:

• Know about gst.gov.in
• GST Council
• EWay Bill Guide for rules
• Guide on How to login to GSTN
• GST registration
• Best GST Software in India
• New GST returns
• e-Invoicing

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Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

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What's the best state for you », what do biden’s new tariffs on chinese goods mean for consumers.

Experts are divided on what, if any, impact the new tariffs will have on most Americans.

New China Tariffs: What to Know

Susan Walsh | AP

President Joe Biden speaks in the Rose Garden of the White House on May 14, 2024, announcing plans for new tariffs.

The new tariffs on Chinese electric vehicles, semiconductors and medical supplies announced by the Biden administration on Tuesday raised questions for U.S. consumers and prompted a call from China for the U.S. to “immediately” cancel the steps.

The Biden administration said the new tariffs “will make sure that historic investments in jobs spurred by President Biden's actions are not undercut by a flood of unfairly underpriced exports from China in areas like EVs, batteries, vital medical equipment, steel and aluminum, semiconductors, and solar.”

The timing of the increases range from this year to 2026. Tariffs on imported Chinese electric vehicles will quadruple from 25% to 100%. Some tariffs on Chinese steel and aluminum will jump from 7.5% to 25%. Imported Chinese semiconductor tariffs will increase from 25% to 50%.

“China heavily subsidized all these products, pushing Chinese companies to produce far more than the rest of the world can absorb. And then dumping the excess products onto the market at unfairly low prices, driving other manufacturers around the world out of business,” President Joe Biden said in the White House Rose Garden on Tuesday.

Policy or Political Points?

The overarching context for the decision is that Election Day is less than six months away. Of course, global trade is a major driver of the decision. But politics aren’t far behind.

Photos: China's Largest Detention Center

A group of Democratic senators recently called on Biden to keep current tariffs on China and increase them “where necessary” to maintain a “critical piece of a pro-worker trade agenda.”

Biden showed in his announcement on Tuesday that he’s been listening, giving a nod to lawmakers from Michigan and workers in Pennsylvania and Wisconsin – all battleground states.

“It’s an opportunity to score some political points,” says George Calhoun, the quantitative finance program director at Stevens Institute of Technology.

China, for its part, promised a response to the tariffs and called on the U.S. to cancel them.

“China will take resolute measures to safeguard its own rights and interests,” the country’s Ministry of Commerce said in a statement . “The U.S. should immediately correct its wrong actions and cancel the additional tariff measures against China.”

What Do the New Tariffs Mean for Americans?

Maybe something, maybe nothing – depends who you ask.

A senior administration official told reporters on a Monday call that the new steps have “no inflationary impact.”

Best Cartoons on the 2024 Election

“They're mainly targeting strategic sectors where we are ramping up domestic investment,” the Biden administration official said. “I think what would be inflationary is more, you know, across-the-board, 10% type of tariff that would pose a real risk to consumers, which we're not doing here. There are a very targeted set of tariffs on specific sectors.”

But experts say there are standard concerns that always come with implementing tariffs.

“Tariffs do create deadweight loss, so we can expect them to exact some costs on the US economy,” Sarah Bauerle Danzman of the Atlantic Council said in a statement . “The Biden administration has insisted that this approach to tariffs is more targeted and less inflationary than the across-the-board tariffs that former President Donald Trump has proposed. The tariffs have a couple of years to set in, which may help with adjustment.”

Calhoun says the Biden administration is involved in a “complicated chess board” when it comes to inflation but notes that on its face, the decision “runs against the desire of the Biden administration to show real progress on the inflation front.”

“On a pure mechanical basis, if you add a tariff to imported goods, and people are trying to buy those imported goods, it’s going to raise the price,” Calhoun says. “So it definitely has, conceptually, a potential inflationary impact. They want to tiptoe around that and make the argument that they’re trying to be very surgical and it won’t have a significant inflationary impact.”

But Calhoun adds that the Biden administration’s assessment is “probably right” for the time being given the limited scope of the tariffs.

Companies, Trump React to New China Tariffs

The U.S.-China Business Council, a group of 270 American companies that do business in China, said the were disappointed in the Biden administration’s decision, adding that the tariffs would “ultimately make it harder for American companies to compete in the US and abroad, cost American jobs, and increase prices for US manufacturers and consumers during a time of ongoing inflation.”

“USCBC understands that [the Office of the United States Trade Representative] is seeking to be more strategic with the new tariffs, but given that the prior tariffs have not sufficiently addressed US government and USCBC concerns about China’s unfair market practices, it is unclear how continuing those and piling more tariffs on will be any more effective,” USCBC President Craig Allen said in a statement .

GOP Gears Up for White House Fight

Aneeta Mathur-Ashton May 13, 2024

The Biden administration in a report acknowledged that China “has not eliminated many of its technology transfer-related acts, policies, and practices, which continue to impose a burden or restriction on U.S. commerce.” But it said that actions have encouraged China to eliminate “some” of those acts.

Trump, however, said the tariffs don’t go far enough.

"They've also got to do it on other vehicles and they have to do it on a lot of other products," he told reporters as he entered court for his hush money trial in New York. "Because China's eating our lunch right now. ... They have to do it on much more than electric vehicles."

Biden on Tuesday responded to the quip: “He’s been feeding them a long time.”

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Tags: Joe Biden , tariffs , China

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May 14, 2024

WASHINGTON – U.S. Trade Representative Katherine Tai today released the following statement concerning the statutory review of the tariff actions in the Section 301 investigation of China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation: “After thorough review of the statutory report on Section 301 tariffs, and having considered my advice, President Biden is directing me to take further action to encourage the elimination of the People’s Republic of China’s unfair technology transfer-related policies and practices that continue to burden U.S. commerce and harm American workers and businesses,” said Ambassador Katherine Tai.    “As the President recognizes in his memorandum, while the tariffs have been effective in encouraging the PRC to take some steps to address the issues identified in the Section 301 investigation, further action is required.   “In light of President Biden’s direction, I will be proposing modifications to the China tariffs under Section 301 to confront the PRC’s unfair policies and practices. From the beginning of the Biden-Harris Administration, I have been committed to using every lever of my office to promote American jobs and investments, and these recommendations are no different. Today, we serve our statutory goal to stop the PRC’s harmful technology transfer-related acts, policies, and practices, including its cyber intrusions and cyber theft. I take this charge seriously, and I will continue to work with my partners across sectors to ensure any action complements the Biden-Harris Administration’s efforts to expand opportunities for American workers and manufacturers.”   The Section 301 statute directs that the four-year review includes a consideration of: the effectiveness of the tariff actions in achieving the objective of the investigation; other actions that could be taken; and the overall effects of the tariff actions on the U.S. economy. The Office of the U.S. Trade Representative’s (USTR) Report  addresses the statutory elements of the review, suggests modifications to strengthen the actions, and makes certain recommendations.   To encourage further elimination of the PRC’s technology transfer-related acts, policies, and practices, Ambassador Tai has recommended that products from the PRC currently subject to Section 301 tariffs should remain. Additionally, in light of the increased burden on U.S. commerce, President Biden is directing Ambassador Tai to take action to add or increase tariffs for certain products. As the Report details, Ambassador Tai will propose the following modifications in strategic sectors:

The Report also makes recommendations for: (1) establishing an exclusion process targeting machinery used in domestic manufacturing, including proposals for 19 exclusions for certain solar manufacturing equipment; (2) allocating additional funds to United States Customs and Border Protection for greater enforcement of Section 301 actions; (3) greater collaboration and cooperation between private companies and government authorities to combat state-sponsored technology theft; and (4) continuing to assess approaches to support diversification of supply chains to enhance our own supply chain resilience.   President Biden is also directing Ambassador Tai to establish an exclusion process for machinery used in domestic manufacturing and to prioritize, in particular, exclusions for certain solar manufacturing equipment.   Next week, USTR will issue a Federal Register notice announcing procedures for interested persons to comment on the proposed modifications and information concerning an exclusion process for machinery used in domestic manufacturing.    Background     In May 2022, USTR commenced the statutory four-year review process by notifying representatives of domestic industries that benefit from the tariff actions of the possible termination of those actions and of the opportunity for the representatives to request continuation.  In September 2022, USTR announced that because requests for continuation were received, the tariff actions had not terminated and USTR would conduct a review of the tariff actions.  USTR opened a docket on November 15, 2022, for interested persons to submit comments with respect to a number of considerations concerning the review.  USTR received nearly 1,500 comments.   As part of the statutory review process, throughout 2023 and early 2024, USTR and the Section 301 Committee (a staff-level body of the USTR-led, interagency Trade Policy Staff Committee) held numerous meetings with agency experts concerning the review and the comments received.    Specifically, the Report concludes: 

• The Section 301 actions have been effective in encouraging the PRC to take steps toward eliminating some of its technology transfer-related acts, policies, and practices and have reduced some of the exposure of U.S. persons and businesses to these technology transfer-related acts, policies, and practices.  
• The PRC has not eliminated many of its technology transfer-related acts, policies, and practices, which continue to impose a burden or restriction on U.S. commerce. Instead of pursuing fundamental reform, the PRC has persisted, and in some cases become aggressive, including through cyber intrusions and cybertheft, in its attempts to acquire and absorb foreign technology, which further burden or restrict U.S. commerce.  
• Economic analyses generally find that tariffs (particularly PRC retaliation) have had small negative effects on U.S. aggregate economic welfare, positive impacts on U.S. production in the 10 sectors most directly affected by the tariffs, and minimal impacts on economy-wide prices and employment.  
• Negative effects on the United States are particularly associated with retaliatory tariffs that the PRC has applied to U.S. exports.  
• Critically, these analyses examine the tariff actions as isolated policy measures without reference to the policy landscape that may be reinforcing or undermining the effects of the tariffs.  
• Economic analyses, including the principal U.S. Government analysis published by the U.S. International Trade Commission, generally find that the Section 301 tariffs have contributed to reducing U.S. imports of goods from the PRC and increasing imports from alternate sources, including U.S. allies and partners, thereby potentially supporting U.S. supply chain diversification and resilience. 

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14.1 Assignment of Contract Rights

Learning objectives.

• Understand what an assignment is and how it is made.
• Recognize the effect of the assignment.
• Know when assignments are not allowed.
• Understand the concept of assignor’s warranties.

The Concept of a Contract Assignment

Contracts create rights and duties. By an assignment The passing or delivering by one person to another of the right to a contract benefit. , an obligee One to whom an obligation is owed. (one who has the right to receive a contract benefit) transfers a right to receive a contract benefit owed by the obligor One who owes an obligation. (the one who has a duty to perform) to a third person ( assignee One to whom the right to receive benefit of a contract is passed or delivered. ); the obligee then becomes an assignor One who agrees to allow another to receive the benefit of a contract. (one who makes an assignment).

The Restatement (Second) of Contracts defines an assignment of a right as “a manifestation of the assignor’s intention to transfer it by virtue of which the assignor’s right to performance by the obligor is extinguished in whole or in part and the assignee acquires the right to such performance.” Restatement (Second) of Contracts, Section 317(1). The one who makes the assignment is both an obligee and a transferor. The assignee acquires the right to receive the contractual obligations of the promisor, who is referred to as the obligor (see Figure 14.1 "Assignment of Rights" ). The assignor may assign any right unless (1) doing so would materially change the obligation of the obligor, materially burden him, increase his risk, or otherwise diminish the value to him of the original contract; (2) statute or public policy forbids the assignment; or (3) the contract itself precludes assignment. The common law of contracts and Articles 2 and 9 of the Uniform Commercial Code (UCC) govern assignments. Assignments are an important part of business financing, such as factoring. A factor A person who pays money to receive another’s executory contractual benefits. is one who purchases the right to receive income from another.

Figure 14.1 Assignment of Rights

Method of Assignment

Manifesting assent.

To effect an assignment, the assignor must make known his intention to transfer the rights to the third person. The assignor’s intention must be that the assignment is effective without need of any further action or any further manifestation of intention to make the assignment. In other words, the assignor must intend and understand himself to be making the assignment then and there; he is not promising to make the assignment sometime in the future.

Under the UCC, any assignments of rights in excess of $5,000 must be in writing, but otherwise, assignments can be oral and consideration is not required: the assignor could assign the right to the assignee for nothing (not likely in commercial transactions, of course). Mrs. Franklin has the right to receive $750 a month from the sale of a house she formerly owned; she assigns the right to receive the money to her son Jason, as a gift. The assignment is good, though such a gratuitous assignment is usually revocable, which is not the case where consideration has been paid for an assignment.

Acceptance and Revocation

For the assignment to become effective, the assignee must manifest his acceptance under most circumstances. This is done automatically when, as is usually the case, the assignee has given consideration for the assignment (i.e., there is a contract between the assignor and the assignee in which the assignment is the assignor’s consideration), and then the assignment is not revocable without the assignee’s consent. Problems of acceptance normally arise only when the assignor intends the assignment as a gift. Then, for the assignment to be irrevocable, either the assignee must manifest his acceptance or the assignor must notify the assignee in writing of the assignment.

Notice to the obligor is not required, but an obligor who renders performance to the assignor without notice of the assignment (that performance of the contract is to be rendered now to the assignee) is discharged. Obviously, the assignor cannot then keep the consideration he has received; he owes it to the assignee. But if notice is given to the obligor and she performs to the assignor anyway, the assignee can recover from either the obligor or the assignee, so the obligor could have to perform twice, as in Exercise 2 at the chapter’s end, Aldana v. Colonial Palms Plaza . Of course, an obligor who receives notice of the assignment from the assignee will want to be sure the assignment has really occurred. After all, anybody could waltz up to the obligor and say, “I’m the assignee of your contract with the bank. From now on, pay me the $500 a month, not the bank.” The obligor is entitled to verification of the assignment.

Effect of Assignment

General rule.

An assignment of rights effectively makes the assignee stand in the shoes of An assignee takes no greater rights than his assignor had. the assignor. He gains all the rights against the obligor that the assignor had, but no more. An obligor who could avoid the assignor’s attempt to enforce the rights could avoid a similar attempt by the assignee. Likewise, under UCC Section 9-318(1), the assignee of an account is subject to all terms of the contract between the debtor and the creditor-assignor. Suppose Dealer sells a car to Buyer on a contract where Buyer is to pay $300 per month and the car is warranted for 50,000 miles. If the car goes on the fritz before then and Dealer won’t fix it, Buyer could fix it for, say, $250 and deduct that $250 from the amount owed Dealer on the next installment (called a setoff). Now, if Dealer assigns the contract to Assignee, Assignee stands in Dealer’s shoes, and Buyer could likewise deduct the $250 from payment to Assignee.

The “shoe rule” does not apply to two types of assignments. First, it is inapplicable to the sale of a negotiable instrument to a holder in due course. Second, the rule may be waived: under the UCC and at common law, the obligor may agree in the original contract not to raise defenses against the assignee that could have been raised against the assignor. Uniform Commercial Code, Section 9-206. While a waiver of defenses Surrender by a party of legal rights otherwise available to him or her. makes the assignment more marketable from the assignee’s point of view, it is a situation fraught with peril to an obligor, who may sign a contract without understanding the full import of the waiver. Under the waiver rule, for example, a farmer who buys a tractor on credit and discovers later that it does not work would still be required to pay a credit company that purchased the contract; his defense that the merchandise was shoddy would be unavailing (he would, as used to be said, be “having to pay on a dead horse”).

For that reason, there are various rules that limit both the holder in due course and the waiver rule. Certain defenses, the so-called real defenses (infancy, duress, and fraud in the execution, among others), may always be asserted. Also, the waiver clause in the contract must have been presented in good faith, and if the assignee has actual notice of a defense that the buyer or lessee could raise, then the waiver is ineffective. Moreover, in consumer transactions, the UCC’s rule is subject to state laws that protect consumers (people buying things used primarily for personal, family, or household purposes), and many states, by statute or court decision, have made waivers of defenses ineffective in such consumer transactions A contract for household or domestic purposes, not commercial purposes. . Federal Trade Commission regulations also affect the ability of many sellers to pass on rights to assignees free of defenses that buyers could raise against them. Because of these various limitations on the holder in due course and on waivers, the “shoe rule” will not govern in consumer transactions and, if there are real defenses or the assignee does not act in good faith, in business transactions as well.

When Assignments Are Not Allowed

The general rule—as previously noted—is that most contract rights are assignable. But there are exceptions. Five of them are noted here.

Material Change in Duties of the Obligor

When an assignment has the effect of materially changing the duties that the obligor must perform, it is ineffective. Changing the party to whom the obligor must make a payment is not a material change of duty that will defeat an assignment, since that, of course, is the purpose behind most assignments. Nor will a minor change in the duties the obligor must perform defeat the assignment.

Several residents in the town of Centerville sign up on an annual basis with the Centerville Times to receive their morning paper. A customer who is moving out of town may assign his right to receive the paper to someone else within the delivery route. As long as the assignee pays for the paper, the assignment is effective; the only relationship the obligor has to the assignee is a routine delivery in exchange for payment. Obligors can consent in the original contract, however, to a subsequent assignment of duties. Here is a clause from the World Team Tennis League contract: “It is mutually agreed that the Club shall have the right to sell, assign, trade and transfer this contract to another Club in the League, and the Player agrees to accept and be bound by such sale, exchange, assignment or transfer and to faithfully perform and carry out his or her obligations under this contract as if it had been entered into by the Player and such other Club.” Consent is not necessary when the contract does not involve a personal relationship.

Assignment of Personal Rights

When it matters to the obligor who receives the benefit of his duty to perform under the contract, then the receipt of the benefit is a personal right The right or duty of a particular person to perform or receive contract duties or benefits; cannot be assigned. that cannot be assigned. For example, a student seeking to earn pocket money during the school year signs up to do research work for a professor she admires and with whom she is friendly. The professor assigns the contract to one of his colleagues with whom the student does not get along. The assignment is ineffective because it matters to the student (the obligor) who the person of the assignee is. An insurance company provides auto insurance covering Mohammed Kareem, a sixty-five-year-old man who drives very carefully. Kareem cannot assign the contract to his seventeen-year-old grandson because it matters to the insurance company who the person of its insured is. Tenants usually cannot assign (sublet) their tenancies without the landlord’s permission because it matters to the landlord who the person of their tenant is. Section 14.4.1 "Nonassignable Rights" , Nassau Hotel Co. v. Barnett & Barse Corp. , is an example of the nonassignability of a personal right.

Assignment Forbidden by Statute or Public Policy

Various federal and state laws prohibit or regulate some contract assignment. The assignment of future wages is regulated by state and federal law to protect people from improvidently denying themselves future income because of immediate present financial difficulties. And even in the absence of statute, public policy might prohibit some assignments.

Contracts That Prohibit Assignment

Assignability of contract rights is useful, and prohibitions against it are not generally favored. Many contracts contain general language that prohibits assignment of rights or of “the contract.” Both the Restatement and UCC Section 2-210(3) declare that in the absence of any contrary circumstances, a provision in the agreement that prohibits assigning “the contract” bars “only the delegation to the assignee of the assignor’s performance.” Restatement (Second) of Contracts, Section 322. In other words, unless the contract specifically prohibits assignment of any of its terms, a party is free to assign anything except his or her own duties.

Even if a contractual provision explicitly prohibits it, a right to damages for breach of the whole contract is assignable under UCC Section 2-210(2) in contracts for goods. Likewise, UCC Section 9-318(4) invalidates any contract provision that prohibits assigning sums already due or to become due. Indeed, in some states, at common law, a clause specifically prohibiting assignment will fail. For example, the buyer and the seller agree to the sale of land and to a provision barring assignment of the rights under the contract. The buyer pays the full price, but the seller refuses to convey. The buyer then assigns to her friend the right to obtain title to the land from the seller. The latter’s objection that the contract precludes such an assignment will fall on deaf ears in some states; the assignment is effective, and the friend may sue for the title.

Future Contracts

The law distinguishes between assigning future rights under an existing contract and assigning rights that will arise from a future contract. Rights contingent on a future event can be assigned in exactly the same manner as existing rights, as long as the contingent rights are already incorporated in a contract. Ben has a long-standing deal with his neighbor, Mrs. Robinson, to keep the latter’s walk clear of snow at twenty dollars a snowfall. Ben is saving his money for a new printer, but when he is eighty dollars shy of the purchase price, he becomes impatient and cajoles a friend into loaning him the balance. In return, Ben assigns his friend the earnings from the next four snowfalls. The assignment is effective. However, a right that will arise from a future contract cannot be the subject of a present assignment.

Partial Assignments

An assignor may assign part of a contractual right, but only if the obligor can perform that part of his contractual obligation separately from the remainder of his obligation. Assignment of part of a payment due is always enforceable. However, if the obligor objects, neither the assignor nor the assignee may sue him unless both are party to the suit. Mrs. Robinson owes Ben one hundred dollars. Ben assigns fifty dollars of that sum to his friend. Mrs. Robinson is perplexed by this assignment and refuses to pay until the situation is explained to her satisfaction. The friend brings suit against Mrs. Robinson. The court cannot hear the case unless Ben is also a party to the suit. This ensures all parties to the dispute are present at once and avoids multiple lawsuits.

Successive Assignments

It may happen that an assignor assigns the same interest twice (see Figure 14.2 "Successive Assignments" ). With certain exceptions, the first assignee takes precedence over any subsequent assignee. One obvious exception is when the first assignment is ineffective or revocable. A subsequent assignment has the effect of revoking a prior assignment that is ineffective or revocable. Another exception: if in good faith the subsequent assignee gives consideration for the assignment and has no knowledge of the prior assignment, he takes precedence whenever he obtains payment from, performance from, or a judgment against the obligor, or whenever he receives some tangible evidence from the assignor that the right has been assigned (e.g., a bank deposit book or an insurance policy).

Some states follow the different English rule: the first assignee to give notice to the obligor has priority, regardless of the order in which the assignments were made. Furthermore, if the assignment falls within the filing requirements of UCC Article 9 (see Chapter 33 "Secured Transactions and Suretyship" ), the first assignee to file will prevail.

Figure 14.2 Successive Assignments

Assignor’s Warranties

An assignor has legal responsibilities in making assignments. He cannot blithely assign the same interests pell-mell and escape liability. Unless the contract explicitly states to the contrary, a person who assigns a right for value makes certain assignor’s warranties Promises, express or implied, made by an assignor to the assignee about the merits of the assignment. to the assignee: that he will not upset the assignment, that he has the right to make it, and that there are no defenses that will defeat it. However, the assignor does not guarantee payment; assignment does not by itself amount to a warranty that the obligor is solvent or will perform as agreed in the original contract. Mrs. Robinson owes Ben fifty dollars. Ben assigns this sum to his friend. Before the friend collects, Ben releases Mrs. Robinson from her obligation. The friend may sue Ben for the fifty dollars. Or again, if Ben represents to his friend that Mrs. Robinson owes him (Ben) fifty dollars and assigns his friend that amount, but in fact Mrs. Robinson does not owe Ben that much, then Ben has breached his assignor’s warranty. The assignor’s warranties may be express or implied.

Key Takeaway

Generally, it is OK for an obligee to assign the right to receive contractual performance from the obligor to a third party. The effect of the assignment is to make the assignee stand in the shoes of the assignor, taking all the latter’s rights and all the defenses against nonperformance that the obligor might raise against the assignor. But the obligor may agree in advance to waive defenses against the assignee, unless such waiver is prohibited by law.

There are some exceptions to the rule that contract rights are assignable. Some, such as personal rights, are not circumstances where the obligor’s duties would materially change, cases where assignability is forbidden by statute or public policy, or, with some limits, cases where the contract itself prohibits assignment. Partial assignments and successive assignments can happen, and rules govern the resolution of problems arising from them.

When the assignor makes the assignment, that person makes certain warranties, express or implied, to the assignee, basically to the effect that the assignment is good and the assignor knows of no reason why the assignee will not get performance from the obligor.

• If Able makes a valid assignment to Baker of his contract to receive monthly rental payments from Tenant, how is Baker’s right different from what Able’s was?
• Able made a valid assignment to Baker of his contract to receive monthly purchase payments from Carr, who bought an automobile from Able. The car had a 180-day warranty, but the car malfunctioned within that time. Able had quit the auto business entirely. May Carr withhold payments from Baker to offset the cost of needed repairs?
• Assume in the case in Exercise 2 that Baker knew Able was selling defective cars just before his (Able’s) withdrawal from the auto business. How, if at all, does that change Baker’s rights?
• Why are leases generally not assignable? Why are insurance contracts not assignable?

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• Public Health Infrastructure Grant
• Frequently Asked Questions
• Health Department Profiles
• CDC's Public Health Infrastructure Grant (PHIG) is a groundbreaking investment supporting critical public health infrastructure.
• The goal is to support health departments across the United States.
• One hundred and seven health departments and three national public health partners received funding through this 5-year grant (12/1/2022 - 11/30/2027)
• The purpose is to implement activities that strengthen public health outcomes.
• PHIG is a funding model that gives health departments the flexibility to direct funds towards specific organizational and community needs.

In January 2024, CDC awarded $4.35 billion through the Public Health Infrastructure Grant ( OE22-2203: Strengthening U.S. Public Health Infrastructure, Workforce, and Data Systems ) to help U.S. health departments promote and protect health in their communities.

The total award includes $4.01 billion for health departments and $340 million for three national public health partners.

CDC expects to award more than $5 billion over the 5-year grant period. This includes $4.01 billion for health departments and $340 million for three national public health partners.

The purpose is to create a stronger, more resilient public health system that is ready to face future health threats.

Recipient Health Department Profiles‎

Funding recipients.

Funding was awarded to:

• One hundred seven (107) public health departments in all 50 states, Washington D.C., 8 territories/freely associated states, and 48 large localities (cities serving a population of 400,000 or more and counties serving a population of 2,000,000 or more based on the 2020 U.S. Census). Award amounts were based on a funding formula that included population size and community resilience. As of January 2024, a total of $4.01 billion for health departments [$3.685 billion in fiscal year (FY)23 and $325 million in FY24] has been awarded. Recipient-specific information is provided on the Health Department Profiles .
• Three national partners that support the work of the 107 funded health departments. The Association of State and Territorial Health Officials (ASTHO) , National Network of Public Health Institutes (NNPHI) , and Public Health Accreditation Board (PHAB) received a total of $340 million ($155 million in FY23 and $185 million in FY24) . These organizations provide training and technical assistance, evaluate the program, and facilitate coordination and communication across recipients and CDC.

Strategies and outcomes

The three strategies of this grant are Workforce, Foundational Capabilities, and Data Modernization. Recipients are expected to achieve several key outcomes by the end of the 5-year performance period (see image below). Ultimately, this grant will lead to accelerated prevention, preparedness, and response to emerging health threats. Improved outcomes in other public health areas are also anticipated.

All work done as part of this grant is grounded in three key principles:

• Data and evidence drive planning and implementation.
• Partnerships play a critical role in grant program success.
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Recipient resources

Technical assistance ‎, phig project officer assignments‎, fiscal year 2023 funding‎, fiscal year 2024 funding‎.

CDC's Public Health Infrastructure Grant (PHIG) is a significant investment in America's public health system, directly supporting infrastructure (i.e., people, services, and systems) improvements within health departments.

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President Biden's new tariffs on goods from China will affect EVs, semiconductors and more

WASHINGTON – President Joe Biden imposed sweeping tariff hikes Tuesday on electric vehicles, semiconductors and other goods imported from China, countering what the White House calls unfair trade practices by China that it says have put U.S. industries at a disadvantage.

The Biden administration has accused China of flooding the global markets with goods at artificially low prices, giving Chinese competitors an unfair advantage against their U.S. counterparts.

"Bottom line: I want fair competition with China, not conflict," Biden said at a White House Rose Garden ceremony before signing a memorandum ordering the tariff hikes.

White House officials say the tariff hikes are designed to create a "level playing field" for U.S. manufacturing in clean energy and microchips − areas the Biden administration have targeted with major government investments to try to catch up with China.

Other goods from China slapped with higher tariffs include solar cells, batteries, battery materials, cranes used at ports, and certain medical supplies, as well as steel and aluminum imported from China.

Prep for the polls: See who is running for president and compare where they stand on key issues in our Voter Guide

More: Biden sets huge new tariffs on electric vehicles, chips and other goods from China

Here's what to know about the tariff increases:

What is a tariff?

A tariff is a tax imposed by one country on goods and services imported from another country, according to Investopedia.

A tariff can have several purposes: to raise revenue in the country that imposes the tariff, to protect domestic industries against competition from abroad, or to leverage political influence in the country that pays the tariff, among others.

Bottom line: A tariff generally makes an imported product less appealing to domestic consumers.

Why is Biden doing this now?

The White House says the tariff increases are designed to protect American industries the administration has targeted with major investments to try to catch up with China. These sectors include manufacturing in clean energy, electric vehicles and microchips.

Biden has staked his economic agenda on reigniting a U.S. manufacturing boom centered on clean energy, but the White House has accused China of flooding the markets with cheaper products that put U.S. industries at a disadvantage.

How large are the tariff hikes?

Biden has levied substantial tariff hikes.

The tariff rate of electric vehicles imported from China will increase from 25% to 100% beginning this year, while tariffs on semiconductors from China will double from 25% to 50% by 2025.

Among other changes, the tariff rate on lithium-ion batteries from China used in electric vehicles will triple from 7.5% to 25%. The tariff on solar cells imported from China will double from 25% to 50%. And steel and aluminum products will triple this year to 25%.

How many electric vehicles does the U.S. import from China?

China is not a major player in the U.S. market for electric vehicles, at least not yet, according to an analysis by the Atlantic Council think tank. China shipped $368 million in electric vehicles to the U.S. in 2023. By contrast, the European Union exported nearly $7.4 billion in EVs to the U.S. last year.

EV imports from China are low largely because the U.S. already charged a relatively steep tariff on Chinese imports, 25%.

Biden accuses China of unfairly flooding the market. What does that mean?

White House officials say China wields unfair trade practices to deluge global markets with exports at artificially low prices.

What are the unfair practices? China subsidizes manufacturers with cheap land and easy credit, the Biden administration says, and affords few rights to workers, who often earn low wages and work long hours. In the automotive industry, components such as steel and electronics are relatively cheap in China, giving Chinese manufacturers another advantage.

Chinese factories are producing more products than its citizens can buy in a slowing economy. That surplus gives China another incentive to export underpriced items.

More: Biden sends message to China ― and working-class voters ― with tariff threat

What will it mean for consumers?

Analysts and automakers warn that a trade battle with China could raise costs for EVs, ultimately hurting consumers and impeding the Biden administration’s climate goals.

Higher tariffs on electric vehicles, solar cells, semiconductors and other items will potentially make those products more costly for American consumers.

To many economists, tariffs amount to an extra tax on consumers because they raise prices. Biden officials counter that they do not expect the new tariffs to significantly raise prices, because they affect a narrow range of items.

Will it worsen inflation?

Biden officials say the new tariffs are “carefully targeted” and unlikely to raise inflation, which has vexed the nation over the past few years.

An analysis by the Economic Policy Institute found no link between Trump-era tariffs, imposed during his presidency, and the subsequent run-up of inflation in 2021 and 2022.

However, economists and politicians have long recognized a connection between tariffs and higher prices. Tariffs effectively add an extra tax on what consumers already pay for imported goods.

Is Biden playing election politics?

White House officials insist the tariff hikes were not done for political reasons, but it's impossible to ignore that the 2024 election is now six months away.

Higher tariffs play into Biden's efforts to court the support of working-class voters in Midwest battleground states including Michigan, the center of the U.S. auto industry.

What does Donald Trump say about it?

Biden is borrowing the trade playbook of former President Donald Trump, the Republican presumptive nominee, who routinely raised tariffs on Chinese goods during his four years in office.

"Where have you been for the last three and a half years? They should have done it a long time ago," Trump said Tuesday of Biden's tariffs.

Yet Biden's moves are significantly more limited in scope than Trump's campaign proposals. While the Biden White House opted for targeted tariffs in certain industries, Trump has proposed a 60% or more tariff on all Chinese imports as well as imports from other countries. Biden has warned Trump's plan would result in higher consumer prices for Americans.

"They've also got to do it on other vehicles, and they have to do it on a lot of other products," Trump said. "Because China's eating our lunch right now."

Will this spark a trade war with China?

Potentially. Last week, as the likelihood of the tariffs was reported by several media outlets, a spokesman for the Chinese Foreign Ministry criticized the move. “China will take all necessary measures to defend its rights and interests," the spokesman said.

Stellantis plans to sell Chinese EVs in other parts of the world

Amsterdam-based Stellantis and Chinese EV startup Leapmotor have teamed up to sell Chinese-made electric vehicles in nine European countries and other parts of the world, starting this September. 

The Tuesday announcement did not include any plans for bringing Chinese EVs into the U.S. market.

“There is no real Chinese competition right now in the U.S. market,” said Stellantis CEO Carlos Tavares, noting that Europe is a different case. “It looks like the U.S. is going for a very strong protectionism whereas for the time being Europe is keeping the market reasonably open with a lower tariff of 10%.”

Whether Stellantis, which owns the Jeep, Ram, Chrysler, Dodge and Fiat brands, would consider bringing Leapmotor EVs to the United States in the future would depend on tariffs, Tavares said, also weighing in on the possibility of entry through Mexico. 

“I understand that, of course, if the Chinese would like to come to the U.S. they would eventually use Mexico as a sourcing base. I don’t know if this is something that would be acceptable for the U.S. administration,” Tavares said.

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• Fiscal Policy

Goods and Services Tax (GST): Definition, Types, and How It's Calculated

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

Investopedia / Nez Riaz

What Is the Goods and Services Tax (GST)?

The goods and services tax (GST) is a value-added tax (VAT) levied on most goods and services sold for domestic consumption . The GST is paid by consumers, but it is remitted to the government by the businesses selling the goods and services.

Critics point out, however, that the GST may disproportionately burden people whose self-reported income are in the lowest and middle income brackets, making it a regressive tax. These critics argue that GST can therefore exacerbate income inequality and contribute to social and economic disparities. In order to address these concerns, some countries have introduced GST exemptions or reduced GST rates on essential goods and services, such as food and healthcare. Others have implemented GST credits or rebates to help offset the impact of GST on lower income households.

Goods and services tax should not be confused with the generation-skipping trust , also abbreviated GST (and its related taxation, GSTT ).

Key Takeaways

• The goods and services tax (GST) is a tax on goods and services sold domestically for consumption.
• The tax is included in the final price and paid by consumers at point of sale and passed to the government by the seller.
• The GST is usually taxed as a single rate across a nation.
• Governments prefer GST as it simplifies the taxation system and reduces tax avoidance.
• Critics of GST say it burdens lower income earners more than higher income earners.

Understanding the Goods and Services Tax (GST)

The goods and services tax (GST) is an indirect federal sales tax that is applied to the cost of certain goods and services. The business adds the GST to the price of the product, and a customer who buys the product pays the sales price inclusive of the GST. The GST portion is collected by the business or seller and forwarded to the government. It is also referred to as Value-Added Tax (VAT) in some countries.

Most countries with a GST have a single unified GST system, which means that a single tax rate is applied throughout the country. A country with a unified GST platform merges central taxes (e.g., sales tax, excise duty tax, and service tax) with state-level taxes (e.g., entertainment tax, entry tax, transfer tax , sin tax , and luxury tax) and collects them as one single tax. These countries tax virtually everything at a single rate.

France was the first country to implement the GST in 1954; since then, an estimated 140 countries have adopted this tax system in some form or another. Some of the countries with a GST include Canada, Vietnam, Australia, Singapore, United Kingdom, Spain, Italy, Nigeria, Brazil, and India.

Dual Goods and Services Tax Structures

Only a handful of countries, such as Canada and Brazil, have a dual GST structure. Compared to a unified GST economy where tax is collected by the federal government and then distributed to the states, in a dual system, the federal GST is applied in addition to a local sales tax. In Canada, for example, the federal government levies a 5% tax and some provinces also levy a provincial sales tax (PST), which varies from 8% to 10%. In this case, a consumer's receipt will clearly have the GST and PST rate that was applied to their purchase value.

More recently, the GST and PST have been combined in some provinces into a single tax known as the Harmonized Sales Tax (HST). Prince Edward Island was the first to adopt the HST in 2013, combining its federal and provincial sales taxes into a single tax. Since then, several other provinces have followed suit, including New Brunswick, Newfoundland and Labrador, Nova Scotia, and Ontario.  

Critiques of the GST

GST is generally considered to be a regressive tax , meaning that it takes a relatively larger percentage of income from lower-income households compared to higher-income households. This is because GST is levied uniformly on the consumption of goods and services, rather than on income or wealth.

Lower income households tend to spend a larger proportion of their income on consumables, such as food and household goods, which are subject to GST. As a result, GST can disproportionately burden lower income households.

Because of this. some countries with GST have considered possible adjustments that could make the tax more progressive by taking a larger percentage from higher-income earners.    

Example: India's Adoption of the GST

India established a dual GST structure in 2017, which was the biggest reform in the country's tax structure in decades. The main objective of incorporating the GST was to eliminate tax on tax, or double taxation , which cascades from the manufacturing level to the consumption level.

For example, a manufacturer that makes notebooks obtains the raw materials for, say, Rs. 10, which includes a 10% tax. This means that they pay Rs. 1 in tax for Rs. 9 worth of materials. In the process of manufacturing the notebook, the manufacturer adds value to the original materials of Rs. 5, for a total value of Rs. 10 + Rs. 5 = Rs. 15. The 10% tax due on the finished good will be Rs. 1.50. Under a GST system, the previous tax paid can be applied against this additional tax to bring the effective tax rate to Rs. 1.50 – Rs. 1.00 = Rs. 0.50.

In turn, the wholesaler purchases the notebook for Rs. 15 and sells it to the retailer at a Rs. 2.50 markup value for Rs. 17.50. The 10% tax on the gross value of the good will be Rs. 1.75, which the wholesaler can apply against the tax on the original cost price from the manufacturer (i.e., Rs. 15). The wholesaler's effective tax rate will, thus, be Rs. 1.75 – Rs. 1.50 = Rs. 0.25.

Similarly, if the retailer's margin is Rs. 1.50, his effective tax rate will be (10% x Rs. 19) – Rs. 1.75 = Rs. 0.15. Total tax that cascades from manufacturer to retailer will be Rs. 1 + Rs. 0.50 + Rs. 0.25 + Rs. 0.15 = Rs. 1.90.

India has, since launching the GST on July 1, 2017, implemented the following tax rates:  

• A 0% tax rate applied to certain foods, books, newspapers, homespun cotton cloth, and hotel services.
• A rate of 0.25% applied to cut and semi-polished stones.
• A 5% tax on household necessities such as sugar, spices, tea, and coffee.
• A 12% tax on computers and processed food.
• An 18% tax on hair oil, toothpaste, soap, and industrial intermediaries.
• The final bracket, taxing goods at 28%, applies to luxury products, including refrigerators, ceramic tiles, cigarettes, cars, and motorcycles.

The previous system, with no GST, implied that tax was paid on the value of goods and margin at every stage of the production process. This would translate to a higher amount of total taxes paid, which was then carried down to the end consumer in the form of higher costs for goods and services. The implementation of the GST system in India was, therefore, a measure that was used to reduce inflation in the long run.

Goods and Services Tax vs. Generation-Skipping Transfer Tax

GST should not be confused with the generation-skipping transfer tax (GSTT), and they are not at all related to one another.

The former is a sort of VAT tax added to the purchase of goods or serves. Meanwhile, GSTT is a flat 40% federal tax on the transfer of inheritances from one's estate to a beneficiary who is at least 37½ years younger than the donor. The GST Tax prevents wealthy individuals from avoiding estate taxes through naming younger beneficiaries, such as grandchildren.

Who Has to Pay GST?

In general, goods and services tax (GST) is paid by the consumers or buyers of goods or services. Some products, such as from the agricultural or healthcare sectors, may be exempt from GST depending on the jurisdiction.

How Is GST Calculated?

The goods and services tax (GST) is computed by simply multiplying the price of a good or service by the GST tax rate. For instance, if the GST is 5%, a $1.00 candy bar would cost $1.05.

What Are the Benefits of the GST?

The GST can be beneficial as it simplifies taxation, reducing several different taxes into one straightforward system. It also is thought to cut down on tax avoidance among businesses and reduces corruption.

Are VAT and GST the Same?

Value-added tax (VAT) and goods and services tax (GST) are similar taxes that are levied on the sale of goods and services. Both VAT and GST are also indirect taxes, which means that they are collected by businesses and then passed on to the government as part of the price of the goods or services.

However, there are some key differences between the two. VAT is primarily used in European countries and is collected at each stage of the production and distribution process, while GST is used in countries around the world and is collected only at the final point of sale to the consumer. VAT is generally applied to a wider range of goods and services than GST, and the rates of VAT and GST can vary depending on the type of goods or services being sold and the country in which they are sold.

The Bottom Line

The goods and services tax (GST) is a type of tax levied on most goods and services sold for domestic consumption in many countries. It is paid by consumers and remitted to the government by the businesses selling the goods and services. Some countries have introduced GST exemptions or reduced GST rates on essential goods and services or have implemented GST credits or rebates to help offset the impact of GST on lower-income households. The GST is often a single rate tax applied throughout a country and is preferred by governments because it simplifies the taxation system and reduces tax avoidance. In dual GST systems, such as those in Canada and Brazil, the federal GST is applied in addition to a local sales tax. The GST has been identified by critics as regressive and can potentially place a relatively higher burden on lower-income households.

Ernst & Young. " Worldwide VAT, GST and Sales Tax Guide 2022: France ," Download "Download This Tax Guide," Page 595.

Ernst & Young. " Worldwide VAT, GST and Sales Tax Guide 2022 ," Download "Download This Tax Guide," Page Preface.

Ernst & Young. " Worldwide VAT, GST and Sales Tax Guide 2022: Brazil ," Download "Download This Tax Guide," Pages 238-241.

Ernst & Young. " Worldwide VAT, GST and Sales Tax Guide 2022: Canada ," Download "Download This Tax Guide," Pages 296-298.

Government of Canada. " General Information for GST/HST Registrants ."

Prince Edward Island, Canada. " Backgrounder: Harmonized Sales Tax (HST) ."

Motherboard. " GST may be a regressive tax, but part of a progressive system: Shawn Huang & WP's Louis Chua clash over GST ."

Financial Review. " The GST can be progressive: here's how ."

Ernst & Young. " Worldwide VAT, GST and Sales Tax Guide 2022: India ," Download "Download This Tax Guide," Page 748.

Government of India: Press Information Bureau. " Frequently Asked Questions (FAQs) on Goods and Services Tax (GST). "

Ernst & Young. " Worldwide VAT, GST and Sales Tax Guide 2022: India ," Download "Download This Tax Guide," Pages 752-753.

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Biden Hits Chinese Electric Vehicles, Chips and Other Goods With Higher Tariffs

The president announced increased taxes on Chinese imports in strategic industries, building on former President Donald J. Trump’s tariffs.

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By Jim Tankersley and Alan Rappeport

Reporting from Washington

President Biden on Tuesday announced a sharp increase in tariffs on an array of Chinese imports, including electric vehicles, solar cells, semiconductors and advanced batteries, in an effort to protect strategic American industries from a new wave of competitors that he said were unfairly subsidized by Beijing.

The president also officially endorsed maintaining tariffs on more than $300 billion worth of Chinese goods that were put in place by President Donald J. Trump. Mr. Biden criticized those tariffs as taxes on American consumers during his 2020 run for the White House.

Mr. Biden’s moves were the latest trade-war escalation from a president who initially pledged to repeal at least some of the Trump tariffs but now has refused to cede any ground to his rival in a tough-on-China appeal to swing voters in the industrial Midwest and beyond.

They also reflect Mr. Biden’s efforts to build on Mr. Trump’s consensus-defying trade confrontation with China while focusing it on sectors of strategic importance to the United States, like clean energy and semiconductors.

In remarks at the White House, Mr. Biden said his administration was “combining investments in America with tariffs that are strategic and targeted.”

Standing before a crowd that included the leaders of several labor unions and representatives from steel, aluminum and other manufacturers, Mr. Biden contrasted his approach with that of Mr. Trump.

“My predecessor promised increased American exports and boosted manufacturing,” the president said. “But he did neither. He failed.”

Asked by a reporter after the speech about Mr. Trump’s claim that China is now “eating our lunch” economically, Mr. Biden shot back. “He’s been feeding them for a long time,” Mr. Biden said.

In a sign of the newly scrambled politics of trade, labor leaders, many Democratic lawmakers, some industry groups and even environmentalists praised Mr. Biden’s decision, while the Republican National Committee slammed it — complaining that Mr. Biden was not being tough enough on China.

The National Retail Federation, which represents many companies that source or sell Chinese products, called on Mr. Biden to reverse course and lift tariffs. “As consumers continue to battle inflation, the last thing the administration should be doing is placing additional taxes on imported products that will be paid by U.S. importers and eventually U.S. consumers,” David French, the group’s executive vice president for government relations, said in a news release.

Only a few politicians, including the Democratic governor of Colorado, Jared Polis, followed suit. “This is horrible news for American consumers and a major setback for clean energy,” Mr. Polis wrote in a social media post . “Tariffs are a direct, regressive tax on Americans and this tax increase will hit every family.”

The increased tariffs will apply to about $18 billion worth of annual imports from China, White House officials said. The biggest increase will be the quadrupling of tariffs on Chinese electric vehicles to 100 percent from 25 percent. That move is aimed at shielding a corner of the American automotive industry that is in line to receive hundreds of billions of dollars in federal subsidies to help the United States transition to a clean-energy future.

Mr. Biden is betting on his efforts to use government investments in heavy manufacturing, including electric vehicles and other green technologies, to create middle-class jobs and help win the swing states that are home to parts of those industries. Biden aides nodded to the politics of trade before the announcement, singling out states they expected to benefit from the tariffs.

“We know China’s unfair practices have harmed communities in Michigan and Pennsylvania and around the country that are now having the opportunity to come back due to President Biden’s investment agenda,” Lael Brainard, the director of the White House National Economic Council, told reporters.

Ms. Brainard also criticized the Trump administration for what she called a “failed” effort to force China to change unfair trade practices.

Treasury Secretary Janet L. Yellen, who previously criticized tariffs as taxes on consumers, said the new levies were justified because China’s excess industrial capacity posed a threat to the United States and its allies and to emerging markets. She said the Biden administration would not allow cheap Chinese exports to harm American workers.

“President Biden and I have seen firsthand the impacts of surges of certain artificially cheap Chinese imports on American communities in the past, and we will not tolerate that again,” Ms. Yellen said, explaining that the tariffs were not intended to be “anti-China.”

China’s Ministry of Commerce criticized the tariffs in a statement, saying that China “firmly opposes this.” The statement called the Biden administration’s decision “typical political manipulation” that would “seriously affect the atmosphere of bilateral cooperation.”

China called on the United States to rescind the decision, saying that Beijing “will take resolute measures to defend its rights and interests.”

A spokesman for the Chinese Embassy in Washington, Liu Pengyu, described the tariffs as a disappointing “political maneuver” that he said was in violation of World Trade Organization rules. He also argued that China’s production of green energy products were not out of line with growing global demand.

“We hope the U.S. can take a positive view of China’s development and stop using overcapacity as an excuse for trade protectionism,” Mr. Liu said.

Mr. Liu added that Beijing had not determined how it would respond, but noted that the United States exported large quantities of soybeans to China and that Tesla, the American electric car manufacturer, sold hundreds of thousands of cars that it made in China last year.

Administration officials had long debated reducing some of Mr. Trump’s tariffs — which applied to a large swath of products including apparel and home lighting — while raising levies in more strategic areas. But officials pointed to a long-awaited mandatory review by Mr. Biden’s trade representative, released on Tuesday, that concluded that China’s flouting of international trade rules necessitated keeping all the tariffs in place.

Mr. Biden wrote in a memorandum released on Tuesday that the tariffs had “been effective in encouraging China to take positive steps” on some trade practices Mr. Trump’s administration criticized, but that “China’s actions do not represent a systematic and sustained response to the issues.”

Officials said this week that they believed American companies that sourced products and components abroad had adjusted to those initial tariffs or made use of an official process to request tariff exclusions .

The relative value of the goods subjected to Mr. Trump’s original tariffs, compared with the much smaller value of the ones targeted by Mr. Biden, reflects a crucial difference in their competing approaches to trade with China .

Mr. Trump favored broad tariffs as a means of wielding leverage with China, given that its export economy remains highly dependent on the American consumer. While in office, he tried to use tariffs as a club to negotiate more favorable terms of trade between the countries and bring manufacturing jobs back to America, with little success.

Mr. Trump has promised to go even further if he wins in November — restricting investment between the two countries and banning some Chinese products from the United States entirely. He has also promised to apply that approach more broadly by subjecting all imports, regardless of their origin, to an additional 10 percent tariff.

Trade experts noted that the political calendar was most likely a consideration in the timing and scope of the tariffs.

“The zero-sum game of industrial policy that both countries are engaged in, coupled with the looming U.S. election season, has reached its inevitable culmination in the form of escalating tariffs on selected imports from China,” said Eswar Prasad, the former head of the International Monetary Fund’s China division.

Mr. Biden opted to increase Chinese tariffs in areas his administration has targeted for growth and where the United States has invested huge sums of money, including for clean energy technology and semiconductors.

The rate on Chinese solar cells will double to 50 percent. The rate on certain advanced batteries, along with critical minerals needed to build them, will rise to 25 percent. Semiconductor tariffs will double to 50 percent. Some of those increases will be delayed in an apparent effort to allow domestic companies time to ramp up their own production and find other sources outside China.

Other tariffs will affect industries in important swing states, including heavy metals. Rates for certain imported steel and aluminum products will triple to 25 percent.

The tariffs were praised by some of the industries that have been hit hardest by cheap Chinese imports.

“As America works to build out manufacturing in key clean energy supply chains to reduce the country’s reliance on China’s supply chains, we need to use every tool at our disposal to boost the U.S. solar manufacturing industry,” said Mike Carr, the executive director of the Solar Energy Manufacturers for America Coalition. “The administration made the right decision to strengthen protections for solar components we seek to build in the U.S.”

Mr. Biden will also increase tariffs on some medical equipment that officials call essential for pandemic response, including face masks and surgical gloves.

U.S. officials cast those increases as an appropriate counter to “unfair, nonmarket practices” by the Chinese government, including state subsidies of factories and what officials call theft of innovative ideas from foreign competitors.

“China’s forced technology transfers and intellectual property theft have contributed to its control of 70, 80 and even 90 percent of global production for the critical inputs necessary for our technologies, infrastructure, energy and health care — creating unacceptable risks to America’s supply chains and economic security,” U.S. officials said in a fact sheet distributed before the announcement.

Many economists oppose tariffs because they tend to act as an effective tax on domestic consumers, by raising prices . U.S. officials said this week that they did not expect the increased tariffs to add to price growth — which is already uncomfortably fast for many consumers — because they are narrowly targeted.

Union leaders and Democratic lawmakers were cheered the announcement, though some Democrats, like Senator Sherrod Brown of Ohio, have already urged Mr. Biden to go further and ban Chinese electric vehicles.

The embrace of tariffs, first by Mr. Trump and now by Mr. Biden, reflects a growing awareness — in and outside Washington — of Chinese trade practices that have cost American workers their jobs, said Adam Hodge, a managing director at the communications firm Bully Pulpit International in Washington and a former spokesman for Mr. Biden’s trade representative and National Security Council.

“We’ve gotten wise to it,” Mr. Hodge said. “It’s smart politics because it’s responsive to what Americans are seeing in communities across the country.”

Siyi Zhao contributed research from Seoul.

Jim Tankersley writes about economic policy at the White House and how it affects the country and the world. He has covered the topic for more than a dozen years in Washington, with a focus on the middle class. More about Jim Tankersley

Alan Rappeport is an economic policy reporter, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters. More about Alan Rappeport