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lilly white · April 1, 2009

This may help somthing we are working on any input welcome

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

is obtained.

· 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.

· The burden of a contract cannot be assigned. It is therefore necessary to novate, rather

than assign, certain contracts. Novation is, in effect, the rescission of one contract and the

substitution of a new contract in which the same acts are to be performed but by different parties.

· On the sale of a business, the asset purchase agreement may specifically assign the

benefit of the seller's contracts to the purchaser. Assuming that there is no restriction on

assignment, this amounts to a statutory assignment, provided that notice is also given to the

other contracting party. If assignment is not possible, or only possible with consent, the asset

purchase agreement may provide that such contracts are held on trust pending the obtaining of

formal consent to assign or novate.

Trade debts often remain with the seller on the sale of a business because giving written notice

of the assignment of the debt to each debtor can, depending on the number of debtors, be time

consuming and expensive. Where the trade debts remain with the seller, the seller may continue to

collect the debts, or else the buyer may collect the debts as agent for the seller.

As the burden of a contract may not be assigned, liability for breach of contract stays with the

seller, who will therefore seek an indemnity from the buyer in relation to any breach occurring

after completion.

Izaz Ali

lilly white · April 1, 2009

lily white,

I see this mentioned quite often but it's not actually true in all cases, particularly in relation to the CCA.

If you see the cases of Halsall v Brizell [1957] Ch 169 and Rhone v Stephens [1994] UKHL 3 you will see that a burden can be assigned if it is relevant to the exercise of the right. And, of course, there is the nemo dat rule.

http://www.consumeractiongroup.co.uk/forum/debt-collection-industry/190881-assignments-could-useful-2.html#post2067462

regards

nicklea

Hi Nicklea i hope you are well

Where there is no restriction on assignment, the usual way of assigning the benefit of