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Tuesday, May 24th 2022

The ACP Legal Association

  • OHADAC and ACP Legal

    The partisans of this project, called OHADAC (Organisation for the Harmonisation of Business Law in the Caribbean), decided to meet within the framework of the association ACP Legal, to help interested Caribbean States to implement the project.

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  • OHADAC in brief

    This brochure has been published by the ACP Legal Association.

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OHADAC PRINCIPLES ON INTERNATIONAL COMMERCIAL CONTRACTS

Article 8.1.1

Scope of application

1. By the assignment of rights, the obligee, called the “assignor”, transfers or provides as security to another person, called the “assignee”, its rights in a contract.

2. This Section does not apply to:

  1. assignments of rights governed by special rules on transfer of a business;
  2. assignments of negotiable or financial instruments and documents of title.

1. Proposal for a functional regulation

The OHADAC Principles govern the assignment of contractual rights, since in international business, it constitutes a significant means of financing of the obligee who receives the payment in advance, with the deduction of a portion which becomes the benefit of the assignee. The assignment may also play an important role as a guarantee of the obligee's performance in another contract.

In this context, the Principles are based on two standards: firstly, the need to find a minimum consensus among the laws of the OHADAC member States, and secondly, maximum observance of the freedom of the parties. The Principles therefore propose a functional regulation through seven articles, compared with the fifteen articles of the UNIDROIT Principles, the seventeen articles in PECL and the twenty articles in DCFR. The OHADAC Principles provide greater flexibility for the parties at this point in contrast with the rigidity of other international texts, more influenced by the idea of codification. They also try to provide a clear systematisation of easy handling which is based on the aspects of particular interest to practitioners: conditions of assignments (Article 8.1.1: scope; Article 8.1.2: objective conditions; and Article 8.1.3: subjective conditions) and effectiveness of such assignment, in general (Article 8.1.4) and in relation to each part (Article 8.1.5, concerning the obligor; Article 8.1.6., concerning the transferor, and Article 8.1.7, concerning the assignee). At any event, it should be noted that the full application of these principles requires that they are chosen in two contracts: in the original contract, primarily to determine the position of the obligor, and then in the assignment agreement proper, which deals with the assignor-assignee relationship.

2. Definition and scope

The Principles propose a definition of minimum and of consensus in the legal systems of the OHADAC, explaining the functioning of transfers of rights. The obligee transfers a right to a third party, the assignee, so that this right is excluded from the assets of the obligee in order to include in the assets of the assignee (Article 1690 Colombian Civil Code). Likewise, the obligee can offer its right as a guarantee to a third party.

The assignment shall meet two conditions. Firstly, the obligation, the right to performance of which is assigned, shall necessarily derive from a contract. Consequently, assignments of obligations under the law are excluded, as for instance, monetary rights in favour of a person injured by a non-contractual prejudice. Note that the systematisation of this chapter of the Principles is designed for the transfer of the contract as a whole, of any of its rights or its obligations. The obligation may be a monetary claim or other type of non-financial right, including an obligation to do or not do. As it will be analysed more in detail, to give maximum latitude to the will of the parties, the Principles remind that assignment may be total or partial as the transferor and transferee parties may wish, and grant a right to one or more third parties.

3. Assignments exclusions of the Section

As a starting point, the Principles only govern contractual assignments, i.e. those produced by an agreement between the obligee and the third party to whom the right is transferred. In the same line of the UP (section 9.1.1), legal assignments imposed by a legal system without the parties' participation are excluded. Transfers resulting from a unilateral act of the obligee are also excluded, such as a donation, in cases in which a bilateral act is not required, and in particular, the acceptance of the donor.

But, the Section lays down two exclusions even if the assignment is of contractual rights. First, the Section does not apply to transfers of rights arising from the transfer of business as a whole (in the same sense as Article 9.1.2 UP). Since it is a complete assignment, there are special rules that override the rules on contractual assignments, which have a different legal rationale. This does not prevent that the fact that, as a result of a transfer of business, an individual transfer of rights to a third party occurs alongside this transfer. This individual legal transfer shall be governed by these Principles.

Example: Company A has several claims against firms B, C and D. When company A is absorbed by company E, all the claims are transferred to E. This assignment is excluded from these Principles.

A second exclusion by reason of the subject must be stressed, insofar as the section does not apply to transfers of securities or of negotiable or financial instruments and documents of title (Article 1966 Colombian Civil Code; and among international texts, Art 9.1.2. UP; Article 11:101 PECL; Article III-5.101 DCFR). This is due to the special rules governing these instruments. Regarding the titles, they are often justified because the endorsement and the transfer of title automatically involve transferring the underlying right, regardless of this one. To this is added that, in relation to financial instruments, these are negotiated and transferred in financial markets, also independently of the underlying obligation. The above mentioned does not exclude that these underlying rights can be object of a legal transfer, regardless of such securities or instruments, which would be governed by the Principles.

Finally, it should be noted that the transfer of rights in a contract may be influenced by the existence of a dispute between the original parties. The rules of private international law will determine how the controversial or litigious nature of a right affects or not their possible assignment (Article 1107 Costa Rican Civil Code, Article 1.472 Haitian Civil Code).

Commentary

Article 8.1.2

Conditions relating to the assigned rights

1. Rights, either to payment of a monetary sum or to performance of non-pecuniary obligation, may be assigned if they satisfy the following conditions:

  1. the rights exist at the time of the assignment or are future and recognizable rights; and
  2. the rights are individually identified or are recognisable.

2. A right may be totally or partially assigned, and in favour of one or several assignees. The partial assignment or in favour of several assignees is valid only if the assigned right is severable.

1. Rights eligible for assignment

The Principles follow the contractual practice in international trade, regulated for instance by the UNIDROIT Principles (Sections 9.1.1., 9.1.3. and 9.1.5), according to which monetary rights or rights of performance of a non-pecuniary obligation may be transferred. Existing rights or future rights may also be assigned, as well as rights identified individually or mentioned in a generic manner. In the second case and in the case of future rights, the rights must be able to be identified in the provisions mentioned in the assignment agreement [Article. 9.1.5 and 9.1.6 UP; Article 11:102 PECL; Article III-5:106 DCFR; Article 235 Proposal for the reform of the French law on Obligations of 2013; Groveholt Ltd v Hughes (2005) EWCA Civ 897, in reference to “equitable assignment” of future rights].

Example: A supplier sells a piece of high technology to a manufacturer that will be incorporated in a machine. As security for the payment as far as the due amount, the manufacturer assigns the future credit to be generated at the time that it sells the equipment to a third party (signer of a pre-contract). In accordance with the Principles, the assignment of future receivables is valid provided that they are properly identified in the assignment agreement.

2. Divisibility of the assignment

The Principles allow full or partial transfer of a right provided that the division is and does not impair or impede the obligor's performance [e.g. Article 1.116 of the Costa Rican Civil Code; Article 235 of the Proposals for the Reform of French Law of Obligations (Article 1.692 of the French Civil Code); the English “equitable assignment”, in contrast with the “statutory assignment” in Section 136 (1) Property Law Act: Holt v Heatherfield Trust Ltd. (1942), 2 KB; Crosstown v Rive Droite Music Company Ltd & Ors Music (2010 ) EWCA Civ 1222; Article 9.1.4 UP; Article 11:103 PECL; Articles III-5:102 and III-5:107 DCFR]. Thus, there will be no objection to a partial assignment of monetary rights (Articles 1.444 and 1.447 of the Guatemalan Civil Code), but the partial assignment of obligations will not be possible if they are indivisible, pursuant to the provisions of these Principles. As will be seen later (Article 8.1.3), if partial assignment makes the obligation more onerous, the obligor's consent will be required. At any event, it is up to the applicable law to determine whether or not an obligation is divisible for its transfer. This achieves a minimum consensus among the OHADAC legal systems, particularly, those less favourable to the partial assignment [e.g. “absolute legal assignment of legal things in action” in Section 136 (1) of the English Property Law Act, unlike the “equitable assignment” already mentioned: Holt v Heatherfield Trust Ltd. (1942) 2 KB; Crosstown v Rive Droite Music Company Ltd & Ors Music (2010) EWCA Civ 1222].

Example 1: Company A buys a high-tech machine from manufacturer B, paying in monthly instalments over ten years. After three years of regular payments, and in order to obtain liquidity, the manufacturer assigned the remaining amount of the credit to a financial institution C, after deducting a significant amount. Under the Principles, this assignment is completely legal since pecuniary obligations are essentially divisible.

If the right is divisible the assignment can also be made in favour of one or more assignees, whose internal relations will be governed by the rules set out by the Principles concerning the plurality of obligees. The rights of transferees can be separate, if each assignee can only claim its own portion; the rights can be joint and several, if each transferee may require the entire obligation; and the rights can be pooled if all transferee jointly require the obligation at the same time.

Example 2: In the same case as above, manufacturer B assigns its credit to financial institutions C, D and E, and the assignment contract includes a clause on active solidarity. Each of the financial institutions may ask the obligor to pay up the entire debt.

Commentary

Article 8.1.3

Conditions relating to the parties

1. The assignment requires agreement between assignor and assignee.

2. Furthermore, the consent of the obligor shall be required if:

  1. its obligation is personal; or
  2. its obligation is more burdensome as a consequence of the assignment; or
  3. assignor and obligor had agreed such consent or the prohibition of the assignment of rights.

3. The consent of the obligor may be given expressly or tacitly, simultaneously or subsequently to the conclusion of the assignment agreement.

1. Agreement between assignor and assignee

The Principles generally set forth that an agreement between the transferor and the transferee is sufficient for the assignment to take effect between the parties; the consent of the obligor is not, therefore, necessary. This rule is reflected in numerous provisions of the laws of the OHADAC [Article 1.104 of the Costa Rican Civil Code; Article 257.1 of the Cuban Civil Code; Article 1443 of the Guatemalan Civil Code; Article 2030 of the Mexican Civil Code; Article 2114 of the Nicaraguan Civil Code; Section 16 of Chapter 6:01 of the Guyana Civil Law Act 1953; Section 19 (d) of the Supreme Court Act 1905 of Bermuda; Article 1.434 of the Suriname Civil Code previous reform] and in texts such as Article 235 of the Proposals for the reform of the French law on obligations of 2013 (Article 1.692 of the French Civil Code) and Article 9.1.7 UP. No specific form is required for this assignment, except those that may result from mandatory rules, such as the requirement of a written document or even an authentic deed [Article 1.959 of the Colombian Civil Code; Article 256 of the Cuban Civil Code; Article 1.445 of the Guatemalan Civil Code; Article 2.033 of the Mexican Civil Code; Article 236 of the Proposals for the reform of French law on obligations of 2013 (Article 1690 of the French of the Civil Code)].

The mere agreement between the assignor and the assignee without notice or consent of the obligor is sufficient for two reasons. On the one hand, it is the greatest freedom possible to the parties, the transferor and transferee, in the agreements concluded between them. This corresponds to the philosophy of countries such as Belize and Trinidad and Tobago, who, in keeping with the common law tradition, have not codified this subject. On the other hand, it is a matter of maintaining the freedom of choice between the transferor and the transferee since it will not alter the position of the obligor, who continues to be bound to perform the same agreement that was agreed in the original contract.

2. Obligor's consent

There are however three exceptions that require the obligor's consent (e.g., Article 257.2 of the Cuban Civil Code; Art 2.030 of the Mexican Civil Code): when the obligor's obligation is personal; when this obligation is more burdensome as a result of the transfer; or when the obligee and obligor have agreed thus in the original contract.

Firstly, the obligor's obligation may be understood as a performance in favour of a specific obligee, depending on its personal conditions [Article 235 of the Proposals for the reform of French law on obligations of 2013 (Article 1.692 of the French Civil Code); Don King Productions Inc v Warren (1998) 2 All ER 608; Section 2-210 UCC; Article 11:302 PECL; Article III-5:109 DCFR]. In these circumstances, any transfer to a third party alters the obligation of the obligor [Stevens v Benning (1854), 1 K & J 168, 176, 69 ER 414].

Example 1: A supplier concludes a commercial distribution with a company B, who shall market the goods to third parties as an official distributor. Under the contract, the distributor has the right to use the supplier's distinctive emblems (trademarks and trade names) and he intends to transfer this right to the company C. The assignment is not valid or takes effect if the provider is not notified and does not consent to this. This is because A granted the distributor B the right to use its distinctive signs based on its personal qualities and economic and business reputation.

Secondly, the obligation may be more burdensome for the obligor due to the assignment. In these cases, the obligor's consent is necessary, because its obligation is adversely affected as a result of the transfer (e.g. Section 2-210 UCC). The principles present, in this point, two advantages over the UNIDROIT Principles, which distinguish between substantial or non-substantial increases of burdensomeness. Firstly, with respect to substantial increases of burdensomeness, the UNIDROIT Principles do not rely on the will of the parties and “prohibit” assignment (see, in respect of non-monetary credits Article 9.1.3 UP and, in particular with respect to partial assignments, Art 9.1.4 UP, and, along the same lines, Art III-5.107 DCFR). By contrast, the OHADAC Principles absolutely respect the will of all parties affected by the transfer, transferor, and transferee and, in this case, the obligor, who will be free to consent or not an assignment with substantial increases of burdensomeness. Secondly, with respect to non-substantial increases of burdensomeness, the UNIDROIT Principles provide that the obligor have to support the increases in exchange for a right to compensation for the additional costs caused by the assignment (Section 9.1.8). The OHADAC Principles fully comply with the principle of respect for the obligor's original position, so that any assignment that becomes more burdensome requires consent, regardless of whether the obligor may be compensated by the additional costs.

Example 2: A manufacturer A has signed a supply contract with a supplier B, who undertakes to promptly supply the number of parts required. Manufacturer A assigns its right to a company C, whose production is three times more than the transferor. Under these conditions, the assignment requires notification and consent of the obligor, according to these Principles, since the performance of its obligation to supply the required amount and in the agreed time becomes more burdensome.

Thirdly, the assignor-obligee and the obligor might agree in the contract the obligation of notification and consent for any transfer of rights. This clause is observed by the Principles as an expression of the free will of the parties [Article 1.443 of the Guatemalan Civil Code; Article 2.030 of the Mexican Civil Code; and it is also the main source of regulation in States such as Belize or Trinidad and Tobago, due to their common law tradition; Article 235 of the Proposals for the reform of French law on obligations (Article 1.692 of the French Civil Code)]. This is a common and relatively standard clause that the parties use to maintain control over the contract during the total performance and to generate greater legal certainty and less conflict about the meaning given to personal obligation or more burdensome obligation, both of which require the obligor's notification and consent. This provision also includes clauses that refer to a obligor's right to object, during a specified period where the obligor's silence means consent positive and is sufficient to validate the assignment. The UP and the UCC state the same (Section 9-406).

Example 3: if obligee and obligor agree under the contract that any rights or obligations cannot be assigned without the prior written agreement of the parties, the transfer of rights is not prohibited, but the consent of the obligor is required in any case.

In this sense, the Principles require the consent of the obligor if the assignment has been prohibited by the contract [Article III-5:108 (3) DCFR]. This consent acts as a subsequent agreement in time amending the original clause prohibiting assignment. There is thus a total respect for the autonomy of the parties.

However, if there is a lack of consensus, the OHADAC Principles do not provide for the hypothesis when a right is transferred without the required consent of the obligor. This issue will be governed by the applicable law which refers to the rules of private international law. There are, at this point, two possible solutions. The first goes to deny the validity or effectiveness of the credit assignment, due to the breach of the original contract [Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd (1993) UKHL 4]. Notwithstanding, the transferee might bring actions against the assignor. This solution seeks, therefore, to protect the maximum legal certainty and the “text” of the contract, and it has been partially adopted by Art III-5:108 (3) DCFR. It is true that the DCFR is referred to the validity and enforceability of the assignment without consent, but also it is true that the obligor is discharged if it performs in favour of the transferor and not of the assignee. The second solution is the affirmation of the validity or even the effectiveness of the assignment of rights, despite the provisions of the original contract. This solution aims to protect the assignee, as a third party in good faith, who does not know the existence of the prohibition of transfer, without prejudice to any claim brought by the obligor against the assignor. This solution has been followed by the UNIDROIT Principles, when they state that the assignment of monetary rights has effect despite the prohibition or limitation in the contract, notwithstanding the claim based on the breach of contract (Section 9.1.9). The same applies in relation to the assignment of non-monetary rights if the assignee did not know or could not know the prohibition of assignment.

Example 4: Company A transfers a debt to company B, but when A requires payment to the obligor C, B objects it on the grounds that, in the original contract, the parties had agreed the acceptance in writing of the obligor, which is not willing to do. The law applicable under the rules of private international law will determine whether or not the transfer produces effects. If this law establishes that there is no assignment of the right, the assignee B could sue the assignor A for damages, since the transferor knew or ought to have known the existence of such a prohibition of assignment. Conversely, if the law applicable to determine the effectiveness of the assignment, the assignee B may invoke it before the obligor C, although this latter may claim compensation for damages for breach of contract against the assignor.

3. Form and time of consent

Pursuant to these Principles, the parties are free to choose the form and time of the obligor's consent. Consent may be expressly given through unequivocal acts evidencing the obligor's acceptance, as, for example, an initial payment to the assignee (Article 1.962 of the Colombian Civil Code; Article 1.448 of the Guatemalan Civil Code; Article 2.038 of the Mexican Civil Code; Article 2.723 of the Nicaraguan Civil Code; Articles 1.550 and 1.551 of the Venezuelan Civil Code). In this regard, it is interesting to note, as in Article 1.105 of the Costa Rican Civil Code, that indirect knowledge is not itself equivalent to the notification and shall be accompanied by a fact that indicates tacit acceptance.

Similarly, consent may be obtained at any time. The safest option is that the obligor's consent is given at the time of signing the assignment. Consent given subsequent to the agreement has the advantage that the obligor knows the exact terms of the assignment, but it has the disadvantage that all the negotiations and conclusion of the contract of assignment may be frustrated by the subsequent position of the obligor. Lastly, the obligor's advance consent has the advantage that the transferor and transferee will negotiate and conclude the assignment agreement with maximum certainty as to their effectiveness, but it has the risk of mismatches between the terms accepted by the obligor the terms finally agreed by the assignor and assignee. In any case, when the obligor consents, it shall be informed of the exact date on which the transfer agreement will be effective in order to proceed to pay the assignee [Barbados Trust Company Ltd v Bank of Zambia & Anor (2007) EWCA Civ 148].

The requirement of consent by the obligor and the possibility that this occurs after the assignment raise questions about which effects are concerned by the transfer agreement if consent is not given. It should be understood that the assignment agreement includes a condition precedent, whereby the transfer agreement signed has no effect until the obligor accepts such assignment.

Commentary

Article 8.1.4

Effectiveness of the assignment

1. The assignment is effective against the obligor:

  1. From the time when the notification of the assignment is received by the obligor, if the consent was not required or has been given in advance.
  2. From the time when the consent is given by the obligor, simultaneously or subsequently to the conclusion of the agreement of assignment.

2. After the assignment is effective, the obligor is discharged only by performing in favour of the assignee.

3. When an assignee successively transfers the right to other assignee, the obligor is discharged according to the last assignment that was effective.

4. When the same assignor transfers the same rights to two or more assignees, the obligor is discharged according to the first assignment that was effective.

1. Functions of the notice to the obligor

It is a common principle in the OHADAC Member States that the transfer must be notified to the obligor [Article 1.960 of the Colombian Civil Code; Article 261 of the Cuban Civil Code; Article 1.690 of the French and Dominican Civil Code; Article 1.448 of the Guatemalan Civil Code; Article 2.036 of the Mexican Civil Code; Article 2.720 of the Nicaraguan Civil Code; Article 1.479 of the Saint Lucian Civil Code; Article 1.550 of the Venezuelan Civil Code; Section 136 (1) of the English Property Law Act; Article 1.599 of the Panamanian Civil Code; Section 16 of Chapter 6:01 of the Guyana Civil Law Act; Section 19 (d) of the Supreme Court Act of Bermuda; Article 1.104 of the Costa Rican Civil Code]. It is also a principle shared by Article 240 of the Proposals for the reform of French law on obligations of 2013, Section 9-406 of the UCC and Article 9.1.10 of the UP. Only in this case can the obligor perform on behalf of the transferee. Otherwise, it would be a “silent transfer” unknown to the obligor and therefore it is not enforceable against it. The obligor will be discharged of its obligation only by paying the assignor.

This principle of notice to the obligor applies each time the obligor's consent is not required or when the required consent was provided in advance. Note that, in the latter case, the obligor needs to know the actual date on which the agreement will enter into force. Conversely, if the obligor's consent has been given simultaneously or after the conclusion of the agreement, the transfer takes effect at that time, because the obligor has a full and actual knowledge of the existence of the assignment.

The principles set out shall be completed with the freedom of choice of the parties and, where appropriate, with the law governing the notice. Thus, the parties may agree on a deferred date of effect of the assignment, such that, in the notice or at the time of consent, the exact date on which the transfer becomes effective is specified. Since the OHADAC Member States do not have a clear stance on this issue, the Principles do not exhaustively regulate the contents of the notice (transferee data, scope of the assignment if partial, special information, etc.) that would be sufficient to allow adequate performance in favour of the assignee and, where appropriate, informed consent. In the latter case, the notice shall contain all the information necessary to assess whether or not the assignment increases burdensomeness.

2. Effects of the assignment

Once the assignment becomes effective against the obligor, the obligor is discharged only by performing in favour of the assignee, and not of the assignor [Article 2.041 of the Mexican Civil Code; Article 1.479 of the Saint Lucian Civil Code; Section 136 (1) of the Property Law Act and English Tolhurst v Associated Portland Cement Manufacturers Ltd (1902) 2 KB 660; Section 16 of Chapter 6:01 of the Guyana Civil Act; Section 19 (d) of the Bermuda Supreme Court Act; Section 9-406 of the UCC; Article 11:303 of the PECL; Article III-5:113 and 118 of the DCFR]. On the contrary, while there is no notice to the obligor or no consent if required, the obligor shall have no obligation to the assignee, which may not require their rights as transferee. The obligor is discharged by paying or performing in favour of the assignor (obligee in the original relationship) (Article 1.963 of the Colombian Civil Code; Article 1.106 of the Costa Rican Civil Code; Article 1.464 Haitian Civil Code; Article 1.691 of the French and Dominican Civil Code; Article 1.667 of the Honduran Civil Code; Article 2.040 of the Mexican Civil Code; Article 2.724 of the Nicaraguan Civil Code; Article 1.279 of the Panamanian Civil Code; Article 1.551 of the Venezuelan Civil Code).

3. Successive assignments

The Principles adopt the solution whereby, after the transferor assigns the right to the transferee, the transferee again assigns the right to a third party (“second assignee”). It is true that there is no definition of this rule in the OHADAC systems aside from a mere partial allusion, as that provided by Article 1.105 of the Costa Rican Civil Code, which refers to collusion or gross negligence of a second assignee. However, it is also true that there is a common solution in these systems, which may even be considered a contractual practice in international trade. This common solution in cases of successive assignments is that the obligor shall be discharged by paying according to the last assignment that produced effects according to the date of notification or acceptance by the obligor, as appropriate.

Example 1: Assignor A transfers a debt of $100,000 to assignee B, paying $95,000. Given the liquidity requirements of assignee B, it decides to further assign the debt to the second transferee C. If this second assignment is properly notified to the obligor, the obligor is discharged only by paying to the second assignee C.

In this context, successive assignments that do not produce effects against the obligor are not taken account.

Example 2: In the above case, assignee B notifies the assignment to the obligor. Once the credit is required, the obligor fulfils in favour of the transferee B, notifying the second transferee C of its assignment a few days after the performance. The obligor has been discharged by paying to the assignee B, because it was the last notified assignment.

A particular problem arises where the chain of notifications is broken, i.e., the second assignee notifies the assignment before the first assignee. This case implies a malfunction of the chain: the obligor is informed by the second assignee, which has no direct relation with this obligor in respect of assignment by a first transferee (now transferor), which has no direct relation with the obligor. In these cases, the second assignee is entitled to receive the performance of the obligation if the chain of assignments between transferor, second transferor and second transferee is proven.

4. Multiple Assignments

The Principles also refer to those cases in which an assignor transfers the same right to several assignees. This case creates a situation of high legal uncertainty for the obligor, who must be given a clear solution to be discharged, i.e., perform in favour of the assignee whose assignment first took effect. The obligor shall be immediately discharged, regardless of any other assignments. As in the case of successive assignments, this solution is unusually not found in the OHADAC countries aside from Article 2.039 of the Mexican Civil Code, although it has been adopted by the legal systems of influence in the OHADAC region [Article 237 of the Proposals for the reform of the French law on Obligations of 2013 (Article 1.689 of the French Civil Code)] and international texts (Article 9.1.11 UP; Article 11:401 PECL; Arts III-5.114 and 121 DCFR). At any event, there is a consensus for a tacit solution, which can be classified as a contractual practice in international trade.

Example 1: transferor A assigns a right to transferee B and, a week later, B assigns the same right to the assignee C. C gives notice of the assignment to the obligor the day after the agreement, while the notification of the assignment to B is received fifteen days later. The obligor is discharged by paying to assignee C, regardless of whether the date of assignment is later than the contract in favour of transferee B. In fact, any payment made by the obligor to the assignee B will not discharge it since the first assignment that it received was not in favour of B.

A problem may arise in respect of notifications already made, but which are suspended until adequate proof of the assignment is given, in accordance with the requirements in the original contract. In such cases, the reference shall be the date of service, provided that proof of the transfer is offered in a reasonable time. Conversely, if adequate proof of transfer is not provided in reasonable time, the notice is considered as not given and therefore the assignment is not considered as a reference of the performance of the obligor.

Example 2: As in the previous case, the transferee C notified the assignment the day after the agreement, while the notification of the assignment to B was received two weeks later. The obligor, in accordance with its contract, requires that transferee C provide adequate proof of the transfer sixteen days after the notice. According to the Principles, transferee C continues to be the party most entitled to receive the payment. Although adequate proof of transfer was provided after notice of the transferee B, notice of the assignment was made prior to that.

These multiple assignments pose a problem with respect to the relations between the transferor and the transferees, which is not addressed by these Principles, given that these Principles are a rule of minimum consensus and this issue persists in the internal scope of several transfer agreements. Thus, the various assignees may claim against the assignor if the assignor has transferred a right that, strictly speaking, no longer belonged to it (it was already owned by the first assignee). It should also be analysed whether a hierarchy of the various assignees was established in the relevant assignment contracts and, in particular, if the credit was transferred to several assignees as contractual warranty.

Commentary

Article 8.1.5

Position of the obligor

1. The obligor may assert against the assignee all defences that it could assert against the assignor.

2. The obligor may assert against the assignee any right of set-off available against the assignor and that arose before the assignment took effect.

3. The obligor shall be compensated for additional costs caused by the assignment. The assignor and the assignee are jointly and severally bound to pay these costs.

1. Opposition of defences by the obligor

The Principles are based on a common fundamental idea in the legal systems of the OHADAC: the legal position of the obligor cannot be altered as a result of the transfer. This idea is projected in three key areas: the defences of the obligor, the right of set-off and the compensation for additional costs.

Firstly, the Principles recognise the obligor's right to assert against the transferee all defences that he could assert against the assignor [Article 1.964 of the Colombian Civil Code; Article 1.111 and Article 1.104 of the Costa Rican Civil Code; Article 262 of the Cuban Civil Code; Article 1.450 of the Guatemalan Civil Code; Article 6:145 of the Dutch and Suriname Civil Code; Article 1.440 of the Suriname Civil Code before the reform; Article 2,035 of the Mexican Civil Code; Article 2.725 of the Nicaraguan Civil Code; Section 16 of Chapter 6:01 of the Guyana Civil Act; Section 19 (d) of the Bermuda Supreme Court Act; Article 240 of the Proposal for the reform of the law of obligations; Section 9-404 UCC; Article 9.1.13 UP; Article 11:307 PECL; Article III-5:116 DCFR]. This is because the obligor cannot be in a worse situation due to the assignment, especially when it has to be remembered that, as a general rule, and subject to certain exceptions, the assignment takes effect without the obligor's consent. In any case, the obligor and the transferor might include a clause prohibiting this right (Section 9-403 UCC).

Example 1: The debt is barred under the governing law of the contract. Nevertheless, the transferor assigns the credit to a transferee which claims the obligor. In accordance with the Principles, the obligor may oppose the defence of limitations against the transferee, regardless of what assignee and assignor agreed in the contract.

The above does not affect the right of the assignee to exercise all legal action available against the assignor with regard to bad faith or breach of contractual duties of the transfer agreement. It should be recalled, in this sense, that one of the defences that the obligor could assert against the assignee could be the exceptio non adimpleti contractus or the right not to perform if the assignor has not fulfilled its obligations. In fact, it could happen that a negligent conduct of the assignor has negative implications for the transferee, to which the obligor might assert this exception.

Example 2: company A sells goods to company B and, immediately after conclusion of the contract, assigns the credit arising from the payment of money to the company C. However, company A (seller and transferor) does not deliver the goods, so that when the transferee C requires the payment of credit to company B (buyer and obligor), company asserts its right of non-performance until the company A fulfils its obligation. According to the Principles, the obligor is entitled to assert the exceptio non adimpleti contractus against the transferee, notwithstanding that the transferee may claim against the assignor on the basis of its negligent conduct in the sale.

2. Obligor's right to set-off

To preserve the obligor's position and to ensure that it is not adversely affected by the transfer, these Principles include a provision on the obligor's right to set off its claims. In this sense, the obligor may assert against the assignee any right to set-off that it has against the assignor and that was incurred prior to notification of the assignment or, if applicable, prior to acceptance of this [Article 1.718 of the Colombian Civil Code; Articles 813 and 1.111 of the Costa Rican Civil Code; Article 6:130 Dutch and Suriname Civil Code; Article 1.476 of the Honduran Civil Code; Article 2.035 of the Mexican Civil Code; Article 1.084 of the Panamanian Civil Code; Article 1.152 of the Puerto Rican Civil Code; Article 1.122 of the Saint Lucian Civil Code; Article 1.452 Suriname Civil Code prior to the reform; Article 1.337 of the Venezuelan Civil Code; Article 240 of the Proposals for Reform of the French law on obligations of 2013; Section 2-210 UCC; Article 9.1.13 UP; Article 11:307 PECL; Article III-5:101 DCFR]. In short, the rationale of the first paragraph is followed, according to which the obligor may assert against the assignee the defences enforceable against the assignor. The “anomaly” of asserting a claim against the assignee when the obligor is the assignor is based on the fact that the right to set off under these Principles had arisen before the transfer becomes effective. In other words, the peculiarity is that the claim to be set off arose before the assignment, but the set-off is asserted after the transfer.

Example 1: Company A is the supplier of distributor B which makes regular purchases. Company A assigns its right to C. Meanwhile the distributor B holds a claim against the supplier A, based on the obligation to repurchase the stock in the event that this stock cannot be placed in the market. The credit of the distributor-obligor is due and payable fifteen days before the transferee C informed about the assignment. When the transferee seeks payment of the assigned right, the obligor-distributor B asserts set off with its proper credit against the supplier A. According with the Principles, the set off is opposable because it was created before the notification of the assignment.

Once the notice was sent or once the obligor has accepted the assignment, in cases where it is required, the right of set-off arising in respect of debts of the transferor is no longer enforceable, as set out in Article 1.476 of the Honduran Civil Code. On the contrary, the obligor may invoke the right to set-off in relation with debts of the transferee.

Example 2: The case is the same as in example 1. The credit of the distributor-obligor based on the repurchase of stock by the supplier-obligee is due and payable one month after the assignee has notified the transfer of credit. Under the Principles, the obligor is not entitled to assert set off against the assignee.

3. Compensation of additional costs

As a result of the assignment, the obligation of the obligor cannot be more burdensome. Therefore, according to the trend of the UNIDROIT Principles (Article 9.1.8), the DCFR (Article III.5:107) and what can be considered a general practice contract, the obligor is entitled to be compensated for the additional costs of the assignment, unless otherwise agreed (Article 240 of the Proposals for Reform of the French law on obligations of 2013). The compensation is payable by the transferor or transferee, establishing joint and several liability in accordance with the rules of the OHADAC Principles. Thus, the obligor may require the transferor or transferee which will be bound to pay the full additional costs, without prejudice to any reimbursement and without the obligor being able to claim double compensation for the same cost.

This joint and several obligation of the transferor and the transferee favours the obligor and is for two reasons. On one hand, it is logical that the transferor be required to compensate the obligor, because it is causing the transfer and it is the party in the original contract with the obligor. On the other hand, it is also logical that the transferee be obliged to compensate the obligor, because it is the payment to it which has increased the costs of the obligation. In the practice of the transfer of monetary rights, perhaps the fastest and most agile way to compensate the additional cost is attribute them to the transferee. Thus, when the obligor pays this assignee, it may deduct the additional costs in advance.

Example: The obligor, established in State A, and the transferor had agreed to the payment of a $100,000 loan through a transfer to a bank account in State A. When the credit is assigned to the transferee, payment shall be made through a transfer to a bank account in State B. Since this is a cross-border bank transfer, there are $2,000 of charges, so that, in accordance with the Principles, the obligor can claim these costs to the assignor or the assignee. Even at the time of paying to the assignee, the obligor could deduct these additional costs ex ante.

Commentary

Article 8.1.6

Position of the assignor

Unless otherwise is agreed, the assignor undertakes towards the assignee that:

  1. the right exists or is a future and recognizable right, that can be assigned and that is free from any right or claim of a third person; and
  2. it is entitled to assign the right, that the obligor does not have any defences and that there is not and there will not be any set-off with debts of the assignor.

1. Guarantee of the objective conditions of the right

The Principles set out the obligations assumed by the assignor in relation with the assignee, the non-performance of which results in contractual liability unless otherwise agreed [Article 1.965 of the Colombian Civil Code; Article 1.113 of the Costa Rican Civil Code; Article 259 of the Cuban Civil Code; Article 1.693-1.695 of the French and Dominican Civil Code (Article 239 of the Proposals for Reform of the French law on obligations of 2013); Article 1.466 of the Haitian Civil Code; Article 1.451 of the Guatemalan Civil Code; Article 1.669 of the Honduran Civil Code; Article 2.042 of the Mexican Civil Code; Article 2.726 of the Nicaraguan Civil Code; Article 1.281 of the Panamanian Civil Code; Article 1.419 Puerto Rican Civil Code; Article 1.553 of the Venezuelan Civil Code; Section 16 of Chapter 6:01 of the Guyana Civil Act; Article 9.1.15 UP; Article 11:204 PECL; Article III-5:104 and 112 DCFR].

The first obligation is to ensure the conditions of the assigned right. Thus, the transferor shall ensure that the credit exists or it is a future right which can be identified. It must be noted that, otherwise the right cannot be assigned, in accordance with these Principles. This guarantee does not mean that the transferor shall ensure the solvency of the obligor, unless otherwise is agreed, which is a general principle adopted, for example, by the Costa Rican Civil Code (Article 1.114) by the French and Dominican Civil Code (Articles 1.694 and 1.695), the Haitian Civil Code (Article 1.467), by the Guatemalan Civil Code (Sections 1.451 and 1.452), the Honduran Civil Code (Article 1669), the Mexican Civil Code (Article 2.043), the Nicaraguan Civil Code (Article 2.726 ), the Panamanian Civil Code (Article 1.281), the Puerto Rican Civil Code (Article 1.419), or by the Venezuelan Civil Code (Article 1.554), and also present in Article 239 Proposals for Reform of the French law on obligations of 2013.

In addition, the assignor shall ensure that the credit can be assigned, taking into account the restrictions that may be applied to such an assignment: in case of generic rights, which cannot be identified; or in the case of a partial transfer, where the right is not divisible, etc. Finally, the assignor shall ensure that the credit is free from any rights and claims of third parties. Note that this is especially important in cases where the transferor has made multiple assignments to multiple assignees. Sometimes a pathological situation occurs when the second assignment affects rights that are not owned by the assignor. At other times, multiple transfers are regular situations: the assignor is the owner of the right in all assignments that have been made as securities.

Unlike what happens in the UNIDROIT Principles [Article 9.1.15 (c)], in OHADAC Principles there is no express reference to “credit has not been previously assigned to another assignee”. Thus, repetitions are avoided since this obligation is already included in the statement that the assigned right is free from any rights or claims of third parties, which may be other assignees with a better right. This expression also is more accurate than the expression used by the UP, because terms such as “the claim has not been previously assigned to another assignee” appear to harm perfect legal situations that do not give rise to any problem, as is the case of successive assignments “chain” (assignor-assignee-subsequent assignee). In these cases, the right has been previously assigned to another assignee, but no pathology is observed, because that “other assignee” becomes “subsequent assignor” and assigns the credit again to a “second assignee”. The first assignee legally acts because it is the owner of the right, with the peculiarity that it repeats the operation and assigns the right again, which does not necessarily happen in the multiple transfers of rights.

2. Guarantee of the subjective conditions of assignment

The second obligation of the assignor, under penalty of breach of contract, is to ensure the existence of the necessary conditions for the assignment with regard to the parties. The assignor shall ensure, therefore, that it is entitled to assign the credit or otherwise it makes mention of the need for obligor's consent due to the assignment involves an increase in the burdensomeness, the obligation of the obligor is personal or when the obligor and obligee have agreed such consent of the other party. This latter is perhaps the more interesting case, since it is the most difficult to estimate by the transferee, particularly if it has no access to the original contract between the obligor and the obligee for reasons of confidentiality. In such a case the assignee shall trust in the statements of the transferors concerning its power to assign the right.

In this sense, the transferor also guarantees that the obligor has no defences against it that can be asserted against the assignee. Along the same lines, it must be ensured that there is no right of set-off between the assigned claim and the debts of the transferor. This assurance is especially useful for the transferee, who assumes a significant risk until notice of the transfer or if the acceptance occurs, if the obligor can assert the set-off against the assignee but in relation to the transferor's debts. This situation is detrimental to the transferee because the value of the assigned credit is null (the obligor sets off a debt of the transferor and not a debt of the transferee). It must be also stressed that the Principles establish that the transferor ensures that there is not and there will not be a right of set off. That “there is not” refers to the time of conclusion of the assignment; that “there will not be” refers to the period between the conclusion of the agreement and the time when the assignment is notified to the obligor, when it takes effect and the right to set off is extinguished. Logically, this guarantee does not extend to the right to set off between the assigned claim and the debts of the assignee, which already belongs to the scope of the assignee and does not result in any liability of the transferor.

Commentary

Article 8.1.7

Position of the assignee

1. The assignee acquires the assigned right, as well as the accessory rights and guarantees.

2. Notwithstanding the provisions of the preceding paragraph and unless otherwise stated by a guarantor, a guarantee made by third persons shall be extinguished if:

  1. the obligation of the obligor is more burdensome as a consequence of the assignment; or
  2. assignor and obligor had agreed the prohibition of the assignment of rights; or
  3. the guarantor had granted the guarantee with the condition that the right should not be assigned.

1. Scope of the assignment

It is a common principle that the transferee acquires all the rights derived from the assigned right [Article 1.964 of the Colombian Civil Code; Article 1.109 of the Costa Rican Civil Code; Article 257.1 of the Cuban Civil Code; Article 1.692 of Dominican and French Civil Code; Article 1.444 of the Guatemalan Civil Code; Article 1.465 of the Haitian Civil Code; Article 6:142 of the Dutch and Suriname Civil Code; Article 1.668 of the Honduran Civil Code; Article 2.032 of the Mexican Civil Code; Article 1.280 of the Panamanian Civil Code; Article 1.418 Puerto Rican Civil Code; Article 1.479 of the Saint Lucian Civil Code; Article 1.552 of the Venezuelan Civil Code; Section 136 (1) of the English Law Property Act in relation to the “statutory assignment”; Section 19 (d) of the Bermuda Supreme Court Act; Article 9.1.14 UP; Article 11:201 PECL; Article III-5:115 DCFR]. For this reason, the OHADAC Principles guarantee the full transmission of rights, including all accessory rights and rights derived from the assigned right. This implies a contractual duty of cooperation between the parties and, in particular, the transferor, which shall inform about all ancillary rights added to the assigned right and shall take all appropriate measures to enable the assignee to exercise these rights. In any case, the assignor and the assignee may agree on a solution other than the one mentioned, using a transfer only of the principal right. It is also recommended that the parties clearly agree on how to assign accessory rights in cases of partial assignment of a divisible right.

The aforementioned is particularly important in relation to the monetary rights, because if the late performance includes payment of a contractual interest, this one shall be paid to the assignee [e.g. Article 2,032 of the Mexican Civil Code and paragraph 2 of Article 6:142 Dutch and Suriname Civil Code].

Example 1: Buyer and seller agreed the payment by instalment of some goods and the payment of certain penalties in case of delay. The seller assigns the debt to a third party (assignee), which claims for recovery of interest in accordance with the Principles, due to the late payment by the obligor.

The transfer of accessory rights to the assigned right also applies to non-monetary-rights after determining what rights derive from the assigned right.

Example 2: Buyer and seller agree that any delay in delivery of goods will result in compensation in accordance with a penalty clause in the contract. The buyer assigns its right to receive the goods to a third party (assignee), which demands that the assignor pays for this compensation, in accordance with the Principles, due to the late delivery.

Similarly, the OHADAC Principles state, in order to preserve the integral transmission of the assigned rights, that the assignee shall be the beneficiary of all guarantees to ensure compliance (Article 1.109 of the Costa Rican Civil Code, Article 257.2 of the Cuban Civil Code, Article 1, 692 of the French and Dominican Civil Code, Article 1.668 of the Honduran Civil Code; Article 2.725 of the Nicaraguan Civil Code; Article 1.280 of the Panamanian Civil Code; Article 1,418 Puerto Rican Civil Code). There is here a preservation of the status quo with the aim of not to damage any of the parties involved. It is logical that the transferor, when it transfers its right, also assigns those additional rights to ensure the performance of the obligation. The transferee also has a special interest in that the transfer of securities occurs in order to ensure compliance. For the obligor, the transfer of securities does not alter its legal position and its obligation to fulfil in favour of the assignee. As for the guarantor, if it is not the same as the obligor, its position also remains unchanged, since it is concerned by the performance of the obligor and not the beneficiary of the guarantee that it provides.

That said, it should be noted that the keeping of the guarantees relating to the assignee may cause a double-guarantee effect. As already noted, it is usual that the assignment of claims is made precisely to guarantee the performance of an obligation of the transferor. Thus, upon the default by the assignor, the compliance by the obligor of the assigned claim would be a first guarantee for the assignee. Upon the default by the obligor of the assigned claim, the performance by the guarantor would be a second security in favour of the transferee.

2. Exceptions to the conservation of the guarantees

Unlike the UP, the OHADAC Principles include three exceptions to the principle of conservation of guarantees, which may be considered as contractual practices in international trade concerning guarantees provided by third parties. Any of these exceptions implies that the guarantor shall not ensure the performance on behalf of the transferee and, therefore, the security shall be extinguished as a result of the assignment, unless there is a statement against the guarantor. One might think that the Principles are innovative in this area, but it is a more apparent rather than a real impression. The Principles do nothing different but explain a principle that informs the laws of the states within the OHADAC: the impossibility of putting the third party guarantor is in a different and more adverse situation than that under which it provided the security.

The first exception to the conservation of the guarantee is where the obligor's obligation becomes more burdensome as a result of the transfer. In this case, the risk that the obligor will not comply significantly increases and the guarantor shall not automatically assume this risk, unless expressly stated otherwise. In this regard, notice that the transfer requires the consent of the obligor, but its consent alone cannot affect third-party guarantors, who may not agree with the assignment involving such a relevant change of circumstances. Article 1701.III of the Colombian Civil Code includes an interesting case when it provides that “if, for example, the first debt does not generate interests, and the second one does, the mortgage over the first debt shall not extinguish the interest”.

The second exception concerns the case where the obligee and obligor agreed in the original contract on the prohibition of assignment of rights. In this case, the guarantor has provided securities in certain circumstances, which cannot be altered by an agreement between the assignor and assignee affecting third parties.

The third exception is where the third-party guarantor has provided the security under the condition that the guaranteed right is not assigned. In this case, the transfer takes effect (Section 9-401 UCC), but the Principles should protect the wish expressed by that guarantor. This rule is probably tacitly inferred from the UP, but needs to be made explicit regarding the legal certainty of the commercial trade of guarantees.

SPECIFIC TERMS OF ASSIGNMENT OF RIGHTS

1. Clauses on the consent to the assignment

The clause by which the transfer is prohibited is not recommended for monetary rights, since the payment is not dependent on the personal qualities of the obligee or the obligor and the transfer of credit involves a way for the assignor to obtain liquidity or ensure performance of other contracts. The use of the clause may be, however, more justified when the parties consider that the contractual rights have been granted intuitu personae or when they want to preserve absolute confidentiality of the contract:

Clause A: Prohibition of assignment of rights

“The transfer of any right conferred by this Agreement is prohibited.”

The validity of the assignment of rights contravening this clause will depend on the law applicable under the rules of private international law and, in any event, can give rise to a claim for damages. However, this clause is always open to a change of opinion by the parties, manifested by the assignor's intention to conclude an agreement of assignment, and by the obligor throughout the consent required in such cases, in accordance with these Principles.

Moreover, the parties may expressly refer to the need for the obligor's consent in order for the assignment to take effect. Unlike the preceding clause, the assignment is not prohibited but requires acceptance of the obligor, as in the following clause:

Clause B: Mandatory consent of the obligor to the assignment of rights

“The assignment of any rights under this contract requires the agreement in writing of the parties.”

In this case, the Principles comply with the will of the parties and require their consent. This type of clauses provides the parties with greater legal certainty and reduces the risk of dispute about terms that may be debatable, as for example, if a personal obligation has or has not been assigned, or if the assignment makes the obligor's obligation more burdensome. For greater security, this can be agreed in writing in order to record the obligor's consent. As in the previous clause, its use is recommended in case of transfers of non-financial rights, which may alter the configuration of the obligation. It is less desirable in case of transfer of monetary rights, because compliance is not affected by the personal quality of the transferee and because these assignments are a source of liquidity for the transferor and a way of ensuring the compliance with other contracts.

A variant of these clauses that call for the obligor's consent is that in which the obligor defines a time limit for objection to the assignment as from the notification of the assignment.

Clause C: Opposition to the assignment of rights by the obligor

“The assignment of any rights under this contract does not require the agreement of the parties.

However, the obligor of the obligation may object to the transfer within [number of days], starting from the date in which it received notice of such assignment.”

The specific feature of this clause is that the obligor's silence is understood as an acceptance of the assignment. However, the obligor may object to the transfer. As in the preceding clause, the obligor's opposition implies that this obligor is discharged of its obligation by performing in favour of the transferor and not of the transferee.

2. Clauses on adequate proof of the assignment

Notification can be made by any party in the assignment agreement, the transferor or the transferee (Article 1.449 of the Guatemalan Civil Code; Article 2.037 of the Mexican Civil Code; Section 9-406 UCC), although the transferee may have the greater economic interest in the performance of the obligor in its favour. It happens, however, that notification through the transferee creates a level of insecurity or mistrust of the obligor, due to the fact that the transferee is an unknown third party, without any legal relationship with the obligor. Given that the actual assignment of rights has not taken place, there is an increased risk that the obligor pays a third party by mistake and then it is forced to pay the original obligee. To avoid these risks, it is advisable to include contractual clauses that provide greater security to the notice by the transferee and, in particular, require that transferee provides adequate proof of the assignment within a reasonable time. Thus, for example:

Clause: Adequate proof of assignment

“The transfer of any right conferred by this Agreement shall be notified to the obligor-counterparty. If it is notified by the assignee, the obligor-counterparty may request adequate proof of the assignment within a reasonable time. Until this proof is provided, the assignment shall not take any effect.”

The appropriate proof required by the recommended clause could be a statement of the transferor with which the obligor does have a legal relationship, but also a copy of the assignment (Article 1.961 of the Colombian Civil Code; Article 2.721 of the Nicaraguan Civil Code), to the extent that confidentiality clause is not violated. Unlike the UP (Section 9.1.12), the PECL (Article 11:303), the DCFR (Section III-5: 120) or the UCC (Section 9-406), the OHADAC Principles have not regulated this provision of accredited proof because there is no common principle in Caribbean legal systems. It is therefore recommended that the parties include contract clauses that deal with this issue.

When proof of the transfer is requested, the effects of the transfer are suspended. This means that the obligor is no longer obliged to pay the transferee and will be discharged from its obligation if it pays the original obligee. Once adequate proof of the transfer has been given, the notification shall be effective from the time it was received or at a later date if it is specified in the notification (deferred effectiveness). The reference to the date on which the notice was given, provided that is subsequent to that of the adequate proof, is especially important in cases of multiple assignments. This can be illustrated by the following example:

Example: Assignor A transferred a claim to the assignee B, which immediately informs the obligor of this. Since the obligor has no relation to the transferee, that obligor may require adequate proof of the transfer. Until accredited proof of the assignment is given, the obligor is obliged to the assignor and he will not have any obligation to pay assignee B.

3. Clauses on the place of performance of the assigned right

Since most legal systems of the OHADAC have not provided any rule about the place of performance of the assigned right, the Principles have not included a provision regarding the effect of the transfer on the place of performance. The UP is also silent on this point, in contrast with the PECL (Article 11:306) and the DCFR (Article III-5: 117). Given this absence of codification, it is advisable for the assignor and obligor to include an express clause in the original contract, with which the assignee shall have to comply.

To this end, the performance of economic rights must be differentiated from that of non-economic rights. Regarding the first category, there may be greater flexibility in changing the place of payment, because it might not be excessively more burdensome. In any case, it may require that payment be made in the same State as the one in which the assignor was going to pay, to avoid the risk of increasing additional costs. For added security, and although it is now expressly provided in the Principles, by way of reinforcing of the Principles an additional stipulation could be included requiring that any additional cost for the obligor will be supported by the transferor or transferee, which are jointly and severally liable. This clause protects the obligor more than the application, for example, of the PECL or the DCFR, which only provides for the liability of the transferor. For these reasons, the following types of clauses are recommended:

Clause A: Place of performance of a claim

“In case of assignment of the monetary debt, the assignee may require payment anywhere in [insert State].

Any additional cost for the obligor caused by the change of the place of payment will be compensated by the transferor or the transferee, who are jointly and severally liable.”

The issue is presented differently when a non-monetary right is transferred, since any personal obligation is potentially more burdensome if it is to be performed in a place other than the location initially agreed. Therefore, in line with the PECL and the DCFR, it is recommended that contractual clauses prohibit any alteration of the place of performance:

Clause B: Place of performance of a non-monetary right

“The assignment of a non-monetary right may not involve any modification of the place of performance.”

In any case, in order to avoid the rigidity of such clauses, the obligor can always accept the change of the place of performance once it knows the conditions of the transfer and the specific circumstances of the transferee.

4. Clauses about the repercussion of the assignee's performance

The transferor may assume the obligation of passing on to the assignee any performance made in its own favour. The OHADAC Principles, unlike UP, do not envisage this obligation because it is not unanimously recognised by the various legal systems analysed. However, and especially when the obligor's consent is not mandatory, it is advisable that the assignor and the assignee include this clause in the assignment agreement, so that any payment made by the obligor to the assignor is transferred to the assignee. Similarly, when non-monetary rights are assigned, the delivered goods to the assignor shall be forwarded to the transferee. Therefore the introduction of clauses like the following are recommended:

Clause: Imputation of the performance on behalf of assignee

“The transferor shall impute in honour of the assignee any performance made in favour of such transferor from the entry into force of this agreement until it has been served on the obligor.”

In this regard, one of the differences of the proposed clause in respect of the UP is that the term “reimburse” the payment is avoided. This is because, in some languages, this term connotes the beneficiary-assignee has been returned the money that it first paid in advance, which does not happen in this case. Furthermore, the term “reimburse” may have the connotation of referring only to monetary rights, ignoring other situations such as delivery of goods by the transferor to the transferee.

The term referred to the clause is the period between the entry into force of the assignment agreement and the notification of this to the obligor. The case is especially important: the obligor, unaware of the transfer agreement, pays to the assignor in good faith and with full diligence on its part. However, since the transferor is aware of the existence of the transfer agreement, it is obliged to repay the amount to the transferee. In this regard, a reference to the “entry into force” of the contract is preferable if this is later or delayed with respect to the time of conclusion of the assignment. Anyway, the obligation is not referred to other time periods. Payment prior to assignment agreement does not create any obligation to reimburse in favour of the transferee, unless otherwise agreed by the parties. Furthermore, the performance of the obligor in favour of the assignor after notice of the assignment has already indicated some negligence on the part of the obligor and unjust enrichment of the transferor. These circumstances will be solved by the law applicable according to the rules of private international law.

5. Clauses of additional costs reimbursement

According to OHADAC Principles, the obligor is entitled to be compensated by the additional costs generated by the assignment, unless otherwise agreed. The compensation is payable by the transferor or transferee, including a joint and several liability in accordance with the rules of the OHADAC Principles. However, the Principles are silent on which party should bear these costs and how the actions of reimbursement operate between the assignor and the assignee. The governing law of the contract will determine which party shall finally bear the compensation by additional costs depending basically on what the parties agree in the contract. For example, the Proposals for Reform of the French law on obligations of 2013 establishes that the costs should be borne by the transferee unless otherwise agreed (Article 240). Haitian Civil Code (Article 1.471) has a similar provision. For these reasons, it is advisable that an allusion to the reimbursement of costs is made in the contract, with provisions as follows:

Clause: Reimbursement of paid additional costs

“The assignee shall reimburse to the assignor any amount paid or discounted to the obligor by way of additional costs generated by the assignment.”

Commentary

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