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  • Created by: Nikki
  • Created on: 15-04-16 11:15


Someone who has incurrred oblgiation to obligee --> obligee in turns assigns right to TP assignee

Transfer of right, not transfer of liabilities

Important in corporate finance deals and syndicated lending as well as securitisation 

Obligee --> person to whom obligation owed

Obligor --> person who owed obligation

Assignee --> person to whom right is assigned

Assignor --> person assigning the right

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Equitable assignment (1)

Basic rule = obligee can assign its contract rights to TP assignee which is typically done by a contract with assignee

Words and formalities

  • any words, so long as they are words of present trasnfer will suffice --> William v Brance
  • assignor can effect an assignment whether by sayign so to assignee or by utterance of words to obligor 

Distinction between actual assignment and promise to assign --> promises to assign require consideration to be enforced

Notice to obligor

  • obligor doesn't need to give consent for assignment to be effective
  • Gorringe v Irwell --> CA - don't need to notify obligor for there to be a completed assignment
  • in principle when it comes to intangible property the assignee doesn't need to consent to being assigned rights (Standing v Dowring)
  • assignor or assignee may give notice, but if it is assignee obligor is allowed to demand verification fo assignment 
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Equitable assignment (2)

Future property and consideration

  • cannot assign somethign that doesn't yet exist
  • but some situationsin which future property can be assigned e.g. book debts 
  • if there is a promsie to make an assignment, consideration must be provided 
  • purported present assignment recharacterised as a promise --> provided value has already been given for this promise --> a court of equity will give automatic effect to that promise as and when each future book debt becomes a present book debt
  • sometimes by careful draftiing assign what is a future asset as a present asset 

Enforcement by assignee

  • assignee remains stranger to contract
  • no direct contratual relationship between obligor and assignee without obligor consent 
  • in order for equitable assignee to force an obligor to be compliant and conform, an assignee in a general case would have to join assignor as a party to the action 
  • if assignor is unwilling, can be joined as a co-defendant
  • exceptions?

Rules against maintenance and chavity?

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Statutory assignment (1)

Legal/common law assignment 

Law of Property Act 1925, s 136
- applicable when...
- absolute assignment, in writing, under the hand of the ssignor, not purporting to be by way of charge only, material be assigned to any debt or any other legal thing in action, express notice in writing to debtor
- streamline proceedings --> dispenses with need for joiner --> allows assignee to go directly into bilateral litigation against obligor 
- assignee gets legal right to the thing in action, not just equitable 
- since legal right is subject to equities, quite plain that we don't treat assigneea s bona fide purchaser of legal estate

Types of chose (or thing) in action that may be assigned
- 'legal thing in action' --> debt or other legal ting in action
- Torkington v Magee --> legal thing in action could be an equitable thing in action --> legal meaning lawful

Absolute assignment
- not by way of charge
- obligor needs to know where he stands - charge is somewhat conditional in character
- mortgage can be s136 assignment - still something slightly odd as treating a mortgage as absolute when this is subject to an equity of redemption

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Statutory assignment (2)

Writing requirement 
- need to be clear --> identify assignor, assignee, what is being assigned --> specifically identified debt or a broader description of genus or cateogry that leaves no doubt

Under the hand of the assignor
- if the assignor is a person then the indivdiual only may sign for the purpose of possession, cannot be done by an agent
- where companies involved --> common seal or any two authorised signatories can sign on behalf of company 

Notice to obligor
- doesn't say who must give notice
- can be given by either party --> assignor or assignee --> but oblgior can ask for verification for notice give by assignee 
- as long as precise thing is identified, it doesn't mattter if there is some inaccuracy in the description

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Rights of assignee against obligor (1)

Set-off and defences

  • Set off --> essentially a process by which one claim and a cross-claim are takentogether so as to produce a balance 
    • no reason why cross-claim cannot be bigger than the claim 
    • only goes as far as actual claim itself --> any balance in favour of D can be actioned by way of counter claim
  • Common law set-off
    • must be a claim and cross claim for debts or liquidated sums --> no need for judicial enquiry to discover amount of claim or cross claim --> matter of accounting --> in order for there to be this type the sum being claimed by D must have become due and payable by the date of the action but the actual set off wil take place on the date that judgement is rendered by court --> does not need to be any transactional link between the claims
    • D may raise any debt or liquidated claim by way of defence against C
  • Equitable set-off
    • both claim and cross claim could be claims for unliquidated damages --> more than matter of accounting --> concerned with justice of the case --> essential idea = equitable right of D in ascerting equitable set off would make it unconscientious for judgement to be entered on the claim then leaving D to enter proceedings for cross claim
    • normally claima nd cross claim arise in same contract or trasnaction 
    • besides a debt or liqudated claim, D may raise an unliquidated claim by way of defence against C, but that unliquidated claim must be so closely connected to C's claim that it would be inequitable to prevent it from being raised in present proceedings
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Rights of assignee against obligor (2)


  • much better from obligor's point of view to have legal relations with an assignee instead of the holder in due course of a negotiable instrument
  • holder of pormissor note gets full legal entitlemnt to debt
  • might have a bill of exchange instead --> same legal effect --> whereas promissor note generated by obligor, BoE generated by obligee
  • unconditional order in writing to pay a sum to a specific person at a specific time --> only binding on obligor (drawee) as and when they sign and accept it 

Measuring assignee's claim against assignor's claim

  • Assignor cannot make oblgiation of obligor bigger than it already was 
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Non-assignable rights (1)

Personal obligations

  • personal rights cannot be assigned

Champerty and maintenance

  • maintenance = providing funds for someone else to sue
  • champerty = someone else takes share of outcome
  • remains against public policy to assign bar causes of action
  • but such an assignment is permissible if the assignee has a genuine commerical interest in the litigation
  • also permissible in particular cases where this is alllowed by legislation, e.g. insolvency legislation which allows insolvency officers to maximise the estate available for distribution to creditors
  • increasing signs of more relaxed attitude taking hold
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Non-assignable rights (2)

No-assignment clauses

  • parties to a contract may put a bar on assignment of claims arising under that contract
  • may be an absolute bar or may be a procedural bar in sense that it requires assignor to first obtain the consent of obligor before assigning claims agaisnt obligor
  • reasons for an obligor, with bargaining power to do so, to insist upon a no-assignment clause
    • may be concerned that, notwithstanding notice of an assignment, its finance office will pay the wrong person - effect of this being that assignor cannot give the obligor a good discharge from its indebtedness
    • obligor may prefer to rest upon an established personal realtionship with assignor --> e.g. more flexiiblity
    • defences of an oblgiro with notice of an assignemnt are affected by that notice --> thereafter new defences taht obligor might acquire against assignor cannot be opposed to an assignee
  • policy conflict
    • freedom of contract in favour of enforcing clauses
    • importance of account receivable as a source of finance --> ability to assign debts alleviates short term difficulties 
      • hence the recent statutroy intervention that allows an override of no-assignment clauses
  • in considering effectiveness of no-assignment clauses, a further matter is whether a distinction should be drawn between their effect on relations between oblgiro and assignee and their effect on relations between assignor and assignee 
  • arguable that, if a creditor in breach of contract assigns a debt, then refusing to allow the assignee to enforce the debt against obligor amount to subjecting that assignee toa  burden in teh obligor-assignor and thus infringes the privity rule?
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Novation involves transfer of obligations as well as rights 

Appears in practice quite regularly in field of syndicated bank lending and in shipbuilding contracts

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