Also known as: assignments for security · assign for security · assigned for security · security assignment
Written by attorneys · grounded in primary & secondary sources — see below
An assignment of contract rights made to secure repayment of a loan or other obligation. The assignee receives only the right to collect payments or proceeds while the assignor retains the duty to perform unless the parties expressly agree otherwise.
Orion LLC borrowed funds from Lark Finance and executed a written assignment of all rights to future proceeds under its Harbor Insurance policy as collateral. Lark accepted the assignment solely to secure repayment. When a covered judgment later arose, Harbor refused Lark's demand for payment because the policy barred assignment without consent. The assignment operated only as a security interest, so no performance duties passed to Lark.
Falco assigned its rights to payment under supply agreements to BAII Banking as collateral for financing the underlying transactions. BAII accepted the assignment only to secure the loan and did not undertake any delivery or performance obligations. When the buyer later sought assurances, Falco remained responsible for performance. The security nature of the assignment prevented any delegation of duties to BAII.
Select any source to read its text and confirm it supports the definition.
An assignment for security transfers only the assignor's rights to payment or proceeds as collateral. It does not carry a presumption that the assignee assumes the assignor's performance duties. A general assignment of the contract or all rights under it normally includes both an assignment of rights and a delegation of duties unless the security context or other circumstances indicate otherwise.
Supporting sources
No. Acceptance of an assignment for security does not create a promise by the assignee to perform the assignor's duties. The security context supplies the contrary indication that prevents the usual presumption of delegation from arising under UCC § 2-210(5).
Supporting sources
The nonassigning party may still treat an assignment that delegates performance as grounds for insecurity. Because an assignment for security normally does not delegate performance, the nonassigning party ordinarily has no basis to demand assurances from the assignee on that ground.
Supporting sources