Assigning A Debt Or Benefit Of Contract?
It is important to first provide the debtor with a notice of the assignment!
Other points and issues that should be borne in mind:
· In principle, the benefit of a contract can be legally assigned without consent,
provided there is no express prohibition on assignment or, for example, a requirement that consent
· Where there is no restriction on assignment, the usual way of assigning the benefit of
contractual rights is by statutory assignment. The assignment must be in writing, signed by the
assignor, absolute (not purporting to be by way of charge only) and notice in writing must be
given to the other contracting party (section 136, Law of Property Act 1925).
· If a contract is not effectively assigned under statute, it may still be assigned under
common law by an equitable assignment. An equitable assignment may exist where the requirements
for a statutory assignment are not satisfied. The main practical consequence of an equitable
assignment is that the assignee cannot bring an action in its own name against the third party,
but must fall back on the rules governing equitable assignments and join the assignor as a party
to the action.
It is, in any event, desirable for notice of an assignment to be given to the third party because
the third party will otherwise be entitled to continue to make payments to the assignor. Notice
will give the assignee priority over any other assignee that has failed to give notice, provided
there is no knowledge of such prior assignment.