Prohibition versus nullity
The first distinction, from Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] 1 AC 85, is between a clause that prohibits assignment (so an assignment in breach is a breach of contract but may still be effective) and one that makes an attempted assignment void (so it has no legal effect at all). Standard shall not assign wording can render an assignment ineffective, but if you want a purported assignment to be a nullity, say so expressly - that any assignment in breach shall be void and of no effect.
Decide which you want, because the difference determines whether a wrongful assignment still passes the benefit to the assignee or simply fails.
Transfers by operation of law: Dassault
A prohibition on assignment by a party generally catches only voluntary acts. In Dassault Aviation SA v Mitsui Sumitomo Insurance Co Ltd [2024] EWCA Civ 5, a clause prohibiting assignment by any party and rendering it null and void did not capture a transfer by operation of law - there, insurance subrogation under Japanese law. Involuntary transfers - subrogation, statutory vesting on insolvency, certain regulatory transfers - fell outside it.
So if you intend a blanket prohibition, the clause must expressly extend to transfers by operation of law, subrogation, and statutory vesting - not just to what the parties do voluntarily.
The Don King trust workaround
A standard anti-assignment clause does not stop a party declaring itself trustee of its contractual rights for a third party. Don King Productions Inc v Warren [2000] Ch 291 established that a party can hold the benefit of a non-assignable contract on trust for another, achieving de facto transfer; Barbados Trust Company Ltd v Bank of Zambia [2007] EWCA Civ 148 confirmed that a declaration of trust is conceptually distinct from an equitable assignment (and a failed assignment may even take effect as a trust).
So a party prohibited from assigning can give a third party the economic benefit by declaring a trust, and the anti-assignment clause achieves nothing. To close this, expressly prohibit declarations of trust, sub-participations, charges, and any other dealing whatsoever, and provide that no trust shall arise.
Novation and subcontracting are not assignment
Two further gaps. An anti-assignment clause does not, by itself, prevent novation - which is a distinct legal concept, not a species of assignment - so a clause that does not mention novation may not stop it (see the novation guide). And it does not prevent subcontracting or delegation of performance, so a competitor's personnel could end up performing the work while the original party remains nominally liable.
If you want to control these, you need express, separate restrictions: reference novation in the transfer clause, and add a distinct subcontracting restriction.
The 2018 Receivables Regulations override
Finally, a statutory override. The Business Contract Terms (Assignment of Receivables) Regulations 2018 make unenforceable any term that prohibits or restricts the assignment of receivables (rights to payment) in most business-to-business contracts entered into on or after 31 December 2018. So for ordinary commercial contracts, anti-assignment clauses are now largely ineffective against assignment of payment rights - which matters greatly in receivables and invoice financing.
There are exemptions (including certain financial-services, energy, and special-purpose-vehicle arrangements), but they are narrower than commonly assumed. Any anti-assignment strategy for receivables must be stress-tested against these Regulations.
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Practical checklist
- Decide between prohibiting assignment and making it void, and draft accordingly (Linden Gardens [1994] 1 AC 85).
- Extend a blanket prohibition to transfers by operation of law and subrogation (Dassault Aviation [2024] EWCA Civ 5).
- Expressly prohibit declarations of trust, sub-participations, and 'any other dealing' to close the Don King workaround (Don King v Warren [2000] Ch 291).
- Reference novation and add a separate subcontracting restriction - the assignment clause does not cover them.
- Remember anti-assignment of receivables is largely unenforceable in B2B contracts (Receivables Regulations 2018).
- Check whether a narrow statutory exemption applies before relying on a receivables restriction.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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