An assignor is a person or entity that transfers its rights, interests, or obligations under a contract, agreement, or property to another party, known as the assignee. The process of transferring these rights, interests, or obligations is called assignment.
In the context of business and finance, assignors often assign their rights to receive payments or benefits under a contract. For example, a company (the assignor) may assign its rights to receive payment for outstanding accounts receivable to a financial institution (the assignee) in exchange for immediate cash.
It is important to note that the specific terms and conditions of the assignment, such as the rights and obligations of each party involved, are generally governed by the terms of the assignment agreement or the underlying contract being assigned.
Example of an Assignor
Let’s consider a company called ABC Corp. that provides consulting services. ABC Corp. has completed a project for one of its clients, XYZ Inc. Per the terms of the consulting agreement, XYZ Inc. owes ABC Corp. $10,000 in payment, which is due in 60 days.
ABC Corp. needs immediate cash for its operational expenses and decides to assign its accounts receivable to a financial institution called QuickCash Bank. In this case, ABC Corp. is the assignor, and QuickCash Bank is the assignee.
ABC Corp. and QuickCash Bank enter into an assignment agreement, in which ABC Corp. transfers its rights to receive the $10,000 payment from XYZ Inc. to QuickCash Bank. In exchange, QuickCash Bank provides ABC Corp. with an immediate cash payment of $9,000, reflecting a discount for the time value of money and the risk of non-payment by XYZ Inc.
In this example, ABC Corp. (the assignor) has assigned its rights to receive payment from XYZ Inc. to QuickCash Bank (the assignee). As a result, QuickCash Bank now has the legal right to collect the $10,000 payment from XYZ Inc., and ABC Corp. has received the immediate cash it needed for its operational expenses.