Image of outside building. Side view.

Assignment

Published on 25 September 2017

Effective assignment and notice – General Nutrition Investment Company v Holland and Barrett International Ltd and another [2017] EWHC 746 (Ch)

The question

What is the effect of not giving notice of an assignment of contractual rights?

The facts

The original licensor, GNIC Arizona, assigned its rights under a trade mark licence to General Nutrition Investment Company (GNIC). GNIC Arizona was then dissolved as part of a group restructure.  The licensee and other contracting party was Holland and Barrett International Limited (H&B).  H&B was not given notice of this assignment to GNIC and so there was only an equitable assignment of rights, not a legal assignment.

The licence agreement provided the licensor with certain termination rights and so GNIC (as the new licensor) served a number of notices on H&B purporting to terminate the licence agreement for breach, which H&B contested.

The decision

The Court considered whether there had been a valid assignment of the licence agreement from GNIC Arizona to GNIC. The Court confirmed there had been no legal assignment because H&B had not been provided with notice. 

The Court held that the notices of termination served by GNIC, which was an equitable assignee only, were invalid because no notice of assignment had been given to H&B and so GNIC could not exercise those contractual rights in its own name. The key points were:

  • the Court followed Warner Bros Records v Rollgreen [1976] QB 430, in which the Court of Appeal held that an equitable assignee could not exercise an option in its own name.  The Court considered the same reasoning applied to the termination rights – these were substantive contractual rights, not merely procedural issues

  • GNIC was attempting to change the contractual relationship through the termination, and H&B was entitled to know whether GNIC was able to exercise those rights.  H&B did not know because no notice had been served

  • the notice could have been provided by either GNIC Arizona or GNIC (although it was of course in GNIC's interests to ensure notice was given).

Why is this important?

Whilst an equitable assignment is binding as between the assignor and assignee, this case is an important reminder that notice should be provided to the other contracting party so that there is a legal assignment and the assignee can exercise its contractual rights against that other party.

Any practical tips

If the benefit of an agreement is being assigned, check the assignment clause to confirm this is permitted and ensure that notice of assignment is given to the other contracting party.  Remember that an assignment will only transfer the benefit, not the obligations or burden, of the agreement.