1. Proposal for a functional regulation

The OHADAC Principles on the assignment of obligations are structured, as in the case of the assignment of rights, on two objectives. The first objective is to give the maximum importance to the freedom of choice of the parties, which is essential in systems such as Belize, Guyana and Trinidad and Tobago, and in general in systems, which, due to their common law tradition, have no legal provisions on the transfer of obligations. The second is to collate the rules on which there is a consensus in comparative law of the OHADAC, ignoring matters where there is no lowest common denominator. Consequently, a functional rule is proposed, which does not have too much of an effect on the codification of the assignments of obligations, as much on its effectiveness in respect of the non-contracting third parties.

With this idea, the Principles are proposing rules structured into seven articles, organised according to the points of special interest to the parties: conditions for the conclusion of the assignment (Article 8.2.1 on the definition, Article 8.2.2. about the permitted terms of assignment, and Arts. 8.2.3 and 8.2.4 about the objective and subjective conditions, respectively) and effectiveness of such assignment (Article 8.2.5 on the obligor's discharge conditions, Article 8.2.6 on its subsidiary obligations, and Article 8.2.7 on joint and several obligations). In any case, the full application of the Principles requires that they are chosen in the original contract, especially for determining the position of the obligor, and also in the assignment agreement in order to regulate the relationship between the transferor and the transferee.

For the rules to be useful to operators without imposing non-consensual solutions in the OHADAC States, important points have not been treated, concerning the scope of information provided to the obligee in order to accept the assignment or situations that result from the assignment such as confusion of debts or concurrence in the same person of the status of obligor and obligee. Legal consequences arising from the situation of invalidity or nullity of legal relations concerned are not regulated either, except with regard to the transmission of the defences of the transferor or the transferee. Thus, provisions concerning the nullity or invalidity of the contract from which the debt arises (object of the assignment) are not included, as well as the effect of the nullity of the main contract between the original obligor and the assignee (cause of the assignment), since few systems contain a regulation in this regard, with exceptions such as the Dutch and Suriname Civil Code (Article 6: 158). Voidness and invalidity of the proper assignment contract are not considered either, particularly if original obligor's obligation resurfaces, except with respect to third parties in good faith. Consequently, the case where the obligee may claim compensation from the transferee for damages resulting from the defective assignment (e.g. by extension of guarantees of third parties in good faith) is also not addressed. There is no unanimity on this point, although some articles can be noted as paradigmatic, such as Article 816 of the Costa Rican Civil Code; Article 1.468 of the Guatemalan Civil Code; Article 2.057 of the Mexican Civil Code; Articles 2.097 and 2.103 of the Nicaraguan Civil Code; Article 1.162 of the Puerto Rican Civil Code; and Article 1.094 of the Panamanian Civil Code. Compensation will be determined by the law applicable under the rules of private international law.

2. Definition and scope

The Principles do not exclusively focus on the assignment of monetary debt, but refer to any obligation contractually determined (e.g. Article 1.690 of the Colombian Civil Code; Article 9.2.1 UP). This assignment of obligations has two types. On the one hand, it may refer to the agreement in which the original obligor assigns its obligation to assume the debt to the assignee. On the other hand, it can be pointed out the agreement of expromissio whereby it is the obligee, not the obligor, which makes an agreement of assumption of the obligation with the assignee. Despite their significant differences, these terms have a common consequence, which is that a third party assumes the obligation generated under a previous relationship with another obligor. Therefore, many instruments provide rules with a common core, for instance, the UP and the DCFR, which is less categorical.

In this context, the OHADAC Principles seek to provide a useful mechanism that is accepted in the various systems of the OHADAC with respect to contractual assignments. They therefore do not apply to transfers of non-contractual and quasi-contractual obligations arising out of the contracts. Moreover, they cannot be applied to the assignment of obligations subject to special rules on joint transfer of a business or assets. There are individual agreements of assignment of obligations for these assignments and they are therefore excluded from the Principles (Articles 1.465 and 1.466 of the Guatemalan Civil Code; Article 9.2.2. UP).

Example: A company owes several debts to companies B, C and D. When company A is absorbed by company E, all A's debts are assumed by E. This assignment is excluded from the Principles.

Several OHADAC legal systems establish classifications of types of assignment of obligations (Article 1.694 of the Colombian Civil Code; Article 2.101 of the Nicaraguan Civil Code; Article 9.2.5 UP; Article III-5:202 DCFR). But even in those systems which ignore any classification by virtue of the common law, all kind of agreement between the parties in this regard are admitted through “novation” [Tolhurst v Associated Portland Cement Manufacturers Ltd [1902] 2 KB 660; Essar Steel Ltd v The Argo Fund Ltd (2006) EWCA Civ 241, Co-Operative Group (CWS) Ltd v Stansell Ltd & Anor (2006) EWCA Civ 538].

Under these circumstances, the OHADAC Principles are restricted to ensuring the maximum freedom of choice of the parties. Thus, the assignor and assignee may agree on three types of assignment that may be included in the same contract concerning different obligations: a discharge of the original obligor, an obligation of subsidiary performance by the original obligor or joint and several liability of the original obligor and the assignee. Before dealing with each term, it must be pointed out that, in order to find the maximum consensus among the OHADAC States, the Principles have avoided innovative terms such as those included in the DCFR, which refers to “complete substitution” with relation to the obligor's discharge, to the “incomplete substitution” referring to the subsidiary obligation of the transferor, and to the “addition of obligors” in reference to the joint obligation of the transferor and transferee.

As noted, the first mode of transfer involves the discharge of the original obligor and the new obligor assuming the debt in full, without any liability or burden for the original obligor (Article 814 of the Costa Rican Civil Code; Article 1.276 of the French and Dominican Civil Code; Article 1.462 of the Guatemalan Civil Code; Article 1100 of the Saint Lucian Civil Code; or in the English “novation”: British Energy Power & Trading Ltd & Ors v Credit Suisse & Ors (2008 ) EWCA Civ 53; Shell UK Ltd & Ors v Total UK Ltd & Ors (2010 ) EWCA Civ 180, Bexhill UK Ltd v Razzaq (2012 ) EWCA Civ 1376]. Due to the lack of consensus among the Caribbean States, the Principles do not regulate what happens in the event of transfers of obligations when there are several original obligors. Whether the substituted obligor is the only discharged obligor in the amount that corresponds in the partial obligations is an issue governed by the applicable law under the rules of private international law. In joint and several obligations, this issue also depends on the provisions of domestic law, although it is true that many systems, especially of Napoleonic influence, lays down the discharge of all joint and several obligors by the “novation” of one of them, unless the obligee has demanded accession (Articles 1.576 and 1.704 of the Colombian Civil Code; Article 819 of the Costa Rican Civil Code; Article 1.281 of the French and Dominican Civil Code; Article 1.065 of the Haitian Civil Code; Article 1.409 of the Honduran Civil Code; Article 2.109 of the Nicaraguan Civil Code; Article 1.110 of the Saint Lucian Civil Code; Article 1.229 of the Venezuelan Civil Code; Article 1.445 of the former Suriname Civil Code). The discharge of the obligor means that this obligor cannot guarantee the future solvency of the new obligor. However, since there is no unanimity, the Principles do not govern the liability of the original obligor for the insolvency of the new assignee-obligor if this insolvency is known and precedes the transfer (Article 1.276 of the French and Dominican Civil Code; Article 1.061 of the Haitian Civil Code; Article 1.485 of the Honduran Civil Code; Article 1.092 of the Panamanian Civil Code; Article 1.160 of the Puerto Rican Civil Code; Article 1.318 of the Venezuelan Civil Code; Article 1.439 of the former Suriname Civil Code; and with a different scope, Article 2.053 of the Mexican Civil Code). It depends on the law applicable under the rules of private international law.

Example 1: A sells to B industrial machinery worth $1 million, payable in ten instalments of $100,000. After paying $500,000, B resells the machinery to C for $900,000. The parties agreed in the contract to pay an initial deposit of $400,000 to B (reseller) and pay the remaining payments to A (original seller) in the agreed time, discharging to B. After A (original seller) has accepted the assignment, the non-performance by C (assignee) does not entitle A to claim against B (reseller) in its position of transferor.

The second form of assignment of obligations is where the original obligor maintains the legal relationship of having subsidiary liability for the case when the transferee does not adequately perform its obligations. Therefore, its cause is an assignment of debt without discharge.

Example 2: In the same case of example 1, for the seller to accept the assignment, the contract establishes that reseller B will have subsidiary liability if the new buyer C does not perform the instalments due to initial seller A. In this context, before any default of the transferee C, seller A may claim against the reseller B in its position of transferor.

With the third form of assignment, the original obligor continues to be bound pursuant to the initially agreed terms. What is different here is that a new obligor is incorporated. This accumulation of obligors does not mean substitution of obligors, but creates a joint and several obligation between the new and the former obligor, under which both are liable for the entire debt with respect to the obligee. Although a joint and several obligation is more characteristic in assignments of total debt, it can also occur in cases of assumption of a part of the debt, for which the transferee is bound by the same conditions as the original obligor.

Example 3: Obligor A concludes a contract with B, making it an obligor of the obligee C, under the same conditions as the original obligor. The obligee C may claim performance from both A and B.

Finally, special attention must be paid to the initial expression “assignor and assignee may agree” about the appropriate form of assignment. It is clear, therefore, that the parties in the assignment contract establish the type of assignment, with the consent of the other party when required, in accordance with the following provisions. The OHADAC Principles differ here from the UP, which state that the “obligee” may discharge to obligor, retain it or make it a joint obligor. At first sight, it appears that the Unidroit Principles grant an exclusive right that excludes the obligee without the assignor and the assignee being able to decide on this issue. Conversely, the OHADAC Principles are based on the maximum respect of the autonomy of the parties. The transferor and the transferee agree on the type of assignment, and the other party can only consent or refuse the agreed type.

2. Silence of parties

To determine the effect intended by the parties, the contract should be interpreted and completed. It may be that there is an implied intention of the parties, deducible from the content and context of the transaction, in particular, from the negotiation, from the backgrounds, from purposes and from other contract terms. This is the case, for example, of clauses that govern the remedies open to the original obligor against the new obligor. It can be inferred that is this whether there are joint and several liabilities, as a result of an agreement of addition of obligors, or whether there are a secondary liability, a result of transmission of debt without discharge, from the reimbursement. It must be also stressed that the obligee has to consent to the assumption of debt, including their effect on the original obligor, so that some indication of the will of the parties could be inferred from the communications to that obligor or from the wording of the consent of the obligee.

When the contract does not establish the type of assignment and a solution cannot be inferred from its terms, the OHADAC Principles opt, as the UP and the DCFR (Article III-5: 202), for establishing a joint liability between the transferor and the transferee. This solution is also inferred from most Caribbean systems where novation is not presumed (e.g. Article 815 of the Costa Rican Civil Code). This secondary solution is justified by the stability and “life” of the contract and, in particular, because the original obligor shall continue liable to the obligee under the terms originally agreed. This can only be achieved by establishing a joint liability between the original obligor and the assignee, which promotes legal certainty and protects the expectations of the obligee. Conversely, if as a subsidiary solution a secondary liability of the original obligor is established, the terms of the original contract would be disproportionately altered, since the parties have expressed that intention.

As is stated in the assignment of rights, not only duties to pay a monetary debt but also any other obligation of performance may be assigned. It is a principle of consensus in the OHADAC, which tries to respect the autonomy of the parties.

Similarly, not only existing obligations at the time of assignment and those which are individually identified may be assigned, but also future or generic obligations, provided that they can be identified by the parties. Unlike what happens in relation with transfer of rights, such a principle is rare in written law, but in any case it is a widespread and fully accepted contractual practice.

Finally to give the parties maximum importance and reduce the regulations to a generally agreed minimum, it must be underlined that the maximum permissiveness of the transfer of obligations can conflict with the limit of the mandatory rules and public order. So much so, that the assumption can be made for one or more assignees and for all or part of the debt. The only requirement is that the obligation results be divisible, since otherwise the transfer distorts and perverts the configuration of the obligation.

Example: A sells a high-tech asset to B worth $300,000, payable in 3 instalments of $100,000. While the two instalments are pending, B resells the asset for $ 250,000 to C. In the resale contract, the parties agree that the re-buyer (transferee) pays the second instalment of $100,000 to the seller (obligee) and the other one of $ 150,000 to the re-seller, which would continue bound by the third instalment. This is a partial assignment of debts, only per one instalment, which can be extremely useful for the assignor by cash or liquidity reasons.

1. Assignment by the obligee

The OHADAC Principles state that, in the event of transfer of the obligation by the obligee, the obligor's consent is generally not required. This is a widely accepted principle in the different systems of the OHADAC Member States [Article 1.690 in fine of the Colombian Civil Code; Article 1.274 of the French and Dominican Civil Code; Article 1.459 of the Guatemalan Civil Code; Article 1.059 of the Haitian Civil Code; Article 1.484 of the Honduran Civil Code; Article 2.096 of the Nicaraguan Civil Code; Article 1.091 of the Panamanian Civil Code; Article 1.159 of the Puerto Rican Civil Code; Article 1.103 of the Saint Lucian Civil Code; Article 1.316 of the Venezuelan Civil Code; Article 1.437 of the former Suriname Civil Code; Article 248 of the Proposals for the Reform of the French law on obligations of 2013; Article 9.2.3 UP; Article III-5:203 DCFR). However, there are two other cases in which the obligor's consent is required in accordance with the freedom of the parties. Firstly, when the parties have included this consent in the contract [Barbados Trust Company Ltd v Bank of Zambia & Anor (2007) EWCA Civ 148] and secondly, when the parties have prohibited the assignment of obligations in the contract by [Co-Operative Group (CWS) Ltd v Stansell Ltd & Anor (2006) EWCA Civ 538]. In this regard, the prohibition does not preclude the validation of this assignment by a subsequent agreement with the other party. Consequently, the obligor's consent therefore acts as a subsequent agreement that has precedence over the previous agreement: the original contract which prohibited the assignment. It is therefore acknowledged that contracts are not frozen but can be can be changed according to the wishes of the parties, which must be respected, in accordance with the primary purpose of the Principles on this point.

Aside from these two exceptions, the transfer of obligations by obligee constitutes an agreement in favour of a third party, the obligor, which is the beneficiary of the assignment. Provisions relating to the waiver of this right by the obligor, set out in Section 2 of Chapter 5 of these Principles may therefore apply. This could create a joint and several liability between the transferee, which is bound by the agreement with the obligee, and the original obligor, which waives the discharge (Article 1695 of the Colombian Civil Code; Article 2,102 of the Nicaraguan Civil Code).

2. Assignment by the obligor

The OHADAC Principles reflect a common denominator of all the OHADAC systems, whereby the transfer of the obligation by the obligor requires the consent of the obligee [Article 263 of the Cuban Civil Code; Article 1.275 of the French and Dominican Civil Code; Article 1.459 of the Guatemalan Civil Code; Article 6:155 of the Dutch and Suriname Civil Code; Article 1.438 of the former Suriname Civil Code; Article 1.484 of the Honduran Civil Code; Article 2.051 of the Mexican Civil Code; Article 1.091 of the Panamanian Civil Code; Article 1.159 of the Puerto Rican Civil Code; Article 241 of the Proposals for the reform of the French law on obligations of 2013; Graiseley Properties Ltd & Ors v Barclays Bank Plc & Ors ( 2013) EWCA Civ 1372]. The obligee is only entitled to discharge the obligor or modify the requirement that an obligor had assumed, since the obligor cannot unilaterally decide on the assignment of the obligation, so altering the position of the obligee without its consent. The need for consent can be explained using two test cases.

Under the first one, it is agreed to discharge the obligor or relegate its obligation, making it a secondary one. Here the requirement of consent of the obligee is common in international texts [Article 9.2.3 UP; Article 12:101 PECL; Article III- 5:203 (1) DCFR]. The main reason is that the assignment of debt implies a modification of the contract, on which the original parties must agree. This consent plays an essential role in discharge-transmissions, where the original obligor is discharged of its obligation. There is no doubt that this is a substantial modification of the contract, which cannot be understood without the consent of the obligee-counterparty. Consent also plays a key role in cases of non-discharge transmissions, where the original obligor is presented as having secondary liability in the event of the non-performance of the new obligor. The position of the original obligor changes: it is no longer the principal obligor, which means that there is a significant change in the contract terms.

In the second test case, a joint and several liability is agreed between the original obligor and the assignee. Again, the OHADAC Principles opt for the more consensual and less innovative solution, i.e., even in cases where the obligation is created between the obligor and the transferee, the obligee's consent is required. This is a change that may be relevant to the obligee and will therefore lead it to take a stance. It is true that for the obligee, the creation of joint and several obligations has the advantage of increasing its chances of successful payment. However, it also has disadvantages in the case where confidential data about the contract may be revealed. The solution adopted by the Principles departs from other more innovative ones, like those found in certain systems which, as a result of the many obligors for the obligee, do not require the obligee's consent. As a result, the consent of the obligee is presumed unless it expresses its objection [Article III- 5:203 (3) DCFR].

In this context, we should remember something already stated in reference to the modalities of assignment. These are agreed by the transferor and transferee; the obligee only consents or not the form of the assignment chosen by the transferor and transferee, but the obligee is not entitled to choose the type of transfer, unless this right has been conferred by the transferor and the transferee.

3. Form and time of the consent

The third and fourth paragraphs refer to common rules for any case where the consent of the other party is required. Paragraph 3 refers in particular to the possibility that the consent is express or tacit, for example, accepting partial payments or interests by the new obligor and on its own behalf (Article 1.461 of the Guatemalan Civil Code; Article 2.052 of the Mexican Civil Code).

This third paragraph also covers the possibility that the consent of the other party is prior, simultaneous or after the transfer agreement. It is worth to repeat here the considerations about the consent of the transfer of rights. As noted there, it is maybe advisable to obtain the consent of the obligor when the assignment is signed. Otherwise, the consent in advance of the other party (Article 9.2.4 UP; Article 12:101 PECL) has the advantage that the transferor and the transferee negotiate the transfer agreement with full certainty of its effectiveness, but also it is true that creates risk of distortions between the terms accepted by the obligor and the terms of the subsequent contract. For its part, the consent subsequent to the agreement has the advantage that the other party knows the terms of the assignment exactly. However, it entails a risk of frustration of the assignment by the subsequent opposition of the obligor. While the consent of the other party does not occur, it should be understood that the assignment agreement includes a condition precedent under which the transfer agreement signed has no effect until the obligor accepts such assignment.

4. Consequences of lack of consent

It is important to determine the consequences of the absence of required consent, either of the obligor or of the obligee. In this regard, the Principles have adopted the widely accepted rule that the lack of acceptance means that the original obligor remains bound and has to pay the debt on the agreed time. The Principles also regulate the particular case of performance by the assignee without the consent of the obligee, either because the consent was not obtained or because the assignment is an “internal” assumption between the original obligor and assignee, which does not provide rights to the obligee. In this case, performance by the transferee will be treated as payment on behalf of a third party (the original obligor): Articles 1.691 and 1.694 of the Colombian Civil Code; Article 819 of the Costa Rican Civil Code; Arts. 1.275 and 1.277 of the French and Dominican Civil Code; Article 1.060 of the Haitian Civil Code; Article 2.101 of the Nicaraguan Civil Code; Article 1.104 of the Saint Lucian Civil Code; Article 1.441 of the former Suriname Civil Code; Article 1.317 of the Venezuelan Civil Code; Article of the 256 proposals for the Reform of French law on obligations of 2013; North & Anor v Brown & Anor (2012 EWCA Civ 223), concerning the vicarious performance. Given that in these cases there has been no actual transfer of the obligation, but mere delegated performance, the Principles opt for the reference to the rules of the performance on behalf of a third party contained in Article 6.1.6 of these Principles, unlike what is suggested by the UP (Article 9.2.6).

Note, however, that these Principles, in the absence of consensus among the legal systems of the OHADAC States, do not rule on the validity and effectiveness of legal relations without consent (as set out for example in Article 1.487 of the Honduran Civil Code). These issues will be governed by the applicable law in accordance with the rules of private international law. For example, the Principles do not determine the validity of the assignment agreement concluded without consent. This agreement of the parties will have to suffice since it will be up to them to draw up the transfer agreement as an obligation conditional upon obtaining the obligee's consent. Without this consent, the contract will be terminated, including internal obligations between obligor and transferee. For resolving cases where the parties have not reached an agreement, we observe two trends in the systems that do contain rules on this point. The first one, present in instruments such as the German Civil Code, simply establishes that the fact that the obligee has not given its consent removes all effectiveness from the assignment of the obligation [§ 415 (2) BGB]. The second one, followed by the UP, qualifies this solution and acknowledges the validity and effectiveness of the transfer between the obligor and the transferee, as an “internal” assumption, which creates rights and obligations between them [Article 9.2.6 (1) UP]. With regard to the obligee, no rights and obligations are created, since they have not given their consent. The obligee therefore retains its actions against the original obligor and not against the transferee [Article 9.2.6 (2) UP]. If the transferee pays, performance is functionally considered as payment on behalf of third persons, which cannot be refused by the obligee unless the payment concerns a personal obligation [Article 9.2.6 (1) UP].

In the framework of the consequences of the assignment without the consent of the other party, the case of an assignment that hides the fact that there is a contractual prohibition or requirement of consent is particularly interesting. The assignee could claim to the assignor for bad faith or negligence in the negotiation and conclusion of the assignment contract.

1. Defences of the original obligor

In the legal systems of the OHADAC States, the attribution to the assignee of all the defences of the original obligor is commonly accepted [Article 265 of the Cuban Civil Code; Articles 1.463 and 1.467 of the Guatemalan Civil Code; Article 2.056 of the Mexican Civil Code; Article 242 of the Proposals for the reform of French law on obligations of 2013; Article 9.2.7 UP; Article 12:102 PECL; Article III-5:205(1) DCFR]. It is therefore a complete transmission of the legal relationship based on the fact that the transferee acquires the same obligations and defences as those of the original obligor. The integrity of the assignment is positive for the new obligor, who knows in advance all available defences at its disposal. However, it also does not imply risks to the obligee, whose contractual position is not altered.

Example: A is designing and manufacturing industrial machinery to B, worth $500,000. B must pay half at the time of order and the other half at the time of delivery. Before delivery of the machinery, B resells machinery to C, which assumes the debt against the manufacturer. If the manufacturer demands the payment of the price from C, this new obligor may preclude such payment for as long as the manufacturer has not delivered the machinery (exceptio non adimpleti contractus), under the same conditions that B could have asserted.

In any case, it must be remembered that these triangular relationships often result from the consent of all parties: the obligors, as signatories to the transfer agreement; the obligee, as the party that agrees to the transmission. This means that, in most systems, some of these exceptions are negotiable for parties. Obligors could agree in the contract to reduce defences and exceptions and the obligee could easily agree if this is to its benefit. The obligee may also: a) consent to an extension of the defences of the new obligor by accepting a contractual change in its position; b) to accept the assignment on condition that the scope of the defences of the new obligor is reduced or modified. In the latter case, the effectiveness of the contract will depend on whether or not obligors have included the obligee's claims.

Similarly, it should be noted that the law applicable under the rules of private international law can qualify this solution. For example, domestic law determines whether there are personal exceptions that are therefore out of the scope of transmission (Article 1.467 of the Guatemalan Civil Code; Article 2.056 of the Mexican Civil Code). In addition, domestic law determines whether the transmission of defences extends to those that were created after the substitution without the consent of the obligee.

Lastly, the domestic law that governs the contract between the obligee and the obligor (the expromissio contract) will determine the defences that the new obligor has against the obligee. This case has not been treated by the Principles because it is a purely contractual matter depending on the contract between the obligee and the new obligor, without affecting third parties, which is the case that these Principles refer to.

2. Defences between obligors

It is a common principle in OHADAC States that the assignee cannot assert any defence against the obligee, if these defences arise from the contract of assignment concluded between the original and the new obligor. This is because such exceptions are born from a relationship in which the obligee has not participated, whose contractual position cannot be modified, unless otherwise specified. In particular, the transferee cannot assert to the obligee the breach of contract of transfer of debt by the former obligor: the exceptio non adimpleti contractus. Non-performance of this type belongs to the scope of relations between the both obligors and that does not include the obligee.

Example: A sells to B industrial machinery worth $600,000, with $200,000 payable at the time of the order, $200,000 payable at the time of the delivery and $200,000 within the next two years. After it has delivered the machinery and paid two of the three instalments, B resells the machinery to C, which assumes the debt against the manufacturer. The manufacturer may demand payment from C (re-purchaser and transferee), who cannot refuse the payment on the grounds that B (re-seller and transferor) has not delivered the machinery to C.

From a transnational point of view, the UP are silent in this regard, but the impossibility of asserting defences against the obligee arising from the relationship between obligors is derived from the general functioning of its rules and from a sensu contrario interpretation of its Article 9.2.7 (which only allows to asserting defences from the relationship between obligee and original obligor). Meanwhile, the DCFR contains the prohibition that, in the context of a complete or incomplete substitution, the new obligor asserts defences or rights derived from the delegation contract signed with the original obligor [Arts III-5:205 (3) and III-5:207 (1)].

3. Set-off of the claims

Special mention must be made of set-off rules for cases of assignment of monetary debts. In this sense, set-off with regard to the assignee's claims seems possible, insofar as the obligee has consented to the assignment and has thus accepted this possible method of payment. This rule may however vary, as a result of the freedom of the parties (novation agreements), with maximum observance of the common law systems, such as Belize, Guyana and Trinidad and Tobago , which have no written law about this question [Hughes v Groveholt Ltd ( 2005) EWCA Civ 897]. Firstly, if the original contract between the obligee and the obligor excluded the possibility of setting off claims, this exclusion is asserted against the transferee. In fact, the transferee has the obligation to fulfil the terms originally agreed with the original obligor. Secondly, and conversely, the third party may be only willing to assume the debt if the possible set-off of claims is included, which will only have effect if it is accepted by the obligee. Thirdly, it is possible that the obligee accepts the transmission under the condition that eventual set-off is excluded. This happens, for example, in cases where the obligee did not include such clause in the original contract because it had no prior relationship with the original obligor, unlike what happens with the third party, with which it has previously done business. From a transnational perspective, neither the UP nor the DCFR have rules with respect to this set-off of claims between the obligee and the obligor-transferee. Nevertheless, the assignee's right to assert its own claim against the obligee's claim is included in the general rules of set-off.

After analysing the set-off of the assignee's claims, these Principles deal with the set-off of claims of the original obligor. It is commonly accepted that, once the original obligor has been discharged, the new obligor may not assert any right to set-off that the original obligor had. The original obligor has been discharged and is no longer liable to the obligee. Claims belonging to that obligor can therefore not be asserted by the assignee, who may consequently only assert the rights of set-off of its own claims. This also has practical relevance for the obligee who agrees to the substitution of obligors. If, after substitution has taken place, the original obligor claims the payment of debts not covered by the substitution from the obligee, the obligee is obliged to pay. It cannot assert the set-off of claims because it agreed with the full discharge and substitution of the obligor. The UP (Article 9.2.7) and the DCFR [Article III -5: 205 (2)] follow this solution by stating that the obligor-transferee may not assert any right of set-off that the original obligor had against the obligee.

4. Extinction of the guarantees

There is a common principle in the OHADAC States, whereby the transfer of obligations extinguishes any personal guarantee or security that the obligor had provided to the obligee for performance (Article 1.701 of the Colombian Civil Code; Article 820 of the Costa Rican Civil Code; Article 264 of the Cuban Civil Code; Articles 1.278, 1.279 and 1.281 of the French and Dominican Civil Code; Article 1.063 of the Haitian Civil Code; Article 6:157 Dutch and Suriname Civil Code; Articles. 1.443 and 1.445 former Suriname Civil Code; Article 1.463 of the Guatemalan Civil Code; Article 2.055 of the Mexican Civil Code; Article 2.106 of the Nicaraguan Civil Code; Article 1.108 of the Saint Lucian Civil Code; Article 1.321 of the Venezuelan Civil Code; Article 243 of the Proposals for the reform of French law on obligations of 2013). This is a common principle in comparative law, based on the fact that the guarantor has provided the guarantee according to the risk of performance or not (solvency or insolvency) of the original obligor. The advent of a new obligor introduces a variable outside the assessment of the guarantor, which has not participated in the negotiation of the assignment and could not calculate ex ante the risk of insolvency of the transferee. National law applicable under rules of private international law determines whether extinction occurs even though the assignment is later declared void or invalid.

However, this general principle has an exception: the guarantee attached to performance by the assignee is maintained if the guarantor, whether the original obligor or a third party, accepts it. This is reflected in the UP (Article 9.2.8), in the PECL (Article 12:102), in the DCFR [Article III -5: 205 (5)] and may of the OHADAC systems (e.g. Article 820 of the Costa Rican Civil Code; Article 1.463 of the Guatemalan Civil Code; Article 2.055 of the Mexican Civil Code; Article 2.106 of the Nicaraguan Civil Code; Article 1.443 of the former Suriname Civil Code; Article 1.108 of the Saint Lucian Civil Code; Caterpillar Financial Services Ltd v Goldcrest Plant & Groundworks Ltd & Ors (2007) EWCA Civ 272; Rhodia Rhodia International Holdings Ltd v Huntsman International UK Ltd LLC (2007) EWHC 292]. Due to the lack of a clear and unanimous solution among the different systems analysed, the OHADAC Principles have not included a second exception, under which a guarantee is not void if the guarantor is the new obligor [Article 9.2.8 UP; Article 12:102 PECL; Article III-5:205 (5) DCFR]. In any case, this lack of regulation is easily resolved by the acceptance of the obligee, on condition that the new obligor keeps the guarantees that it had provided in favour of the former obligor. These Principles have also not included a third exception under which the security is maintained if it covers property whose ownership is transferred from the original obligor to the assignee previously or simultaneously to the assignment of obligations. This is because some systems, such as Nicaragua, require the termination of the guarantee and the formation of a new one (Articles 2.107 and 2.108 Civil Code). At any event, as it will be seen below, it is recommended to include a contractual clause in this sense, because of its significant legal and economic function.

1. Position of the assignee

When the original obligor agrees to an obligation of subsidiary compliance, the assignee shall have the rights and obligations provided by the preceding article. This is based on the fact that the assignee is placed in a position of main obligor, leaving the original obligor as the subsidiary obligor. It is logical, therefore, that the transferee, which is the main obligee, may assert against the obligee all defences of the original obligor, avoiding by this way that the defences are relegated to the background, in the event of a subsidiary claim against the original obligor. At the same time, it is also justified that the transferee may not assert any exception against the obligee arising from the relationship between the assignee and the original obligor, as well as the transferee cannot claim any right of set-off belonging to the original obligor, since this would create an anomaly in the payment, made with assets not included in the new contractual relation: those of the original obligor.

2. Position of the original obligor

Unlike the aforementioned, the Principles follow the idea that the original obligor's position changes in relation with the previous article, because it has not been discharged and it remains as a subsidiary obligor. In this context, if the new obligor makes the payment and the obligee secondarily claims payment to former obligor, the latter may, at that particular time, assert its right of set-off, because it asserts a proper claim. The UP is silent on this matter and the DCFR is also not too clear, because it simply states that, in the case of incomplete substitution, the rules of set-off will be the same as the one applicable to complete substitution [Article III -5: 207 (1)], i.e., the inadmissibility of the set-off with the claims of the original obligor. This article is appropriate to prevent that the new obligor sets off claims belonging to the original obligor. But it is insufficient because it does not focus on the differentiated fact of incomplete substitution, i.e. the original obligor has secondary liability and, as such, may set off its own claims.

Example 1: A, the obligee, accepts that B, the obligor, assigns $100,000 of debt to C, the transferee, provided that the transferor B remains as a subsidiary liable in the event that the assignee does not perform. Meanwhile, the transferor B has also a claim against the obligee A, worth $ 80,000. When the obligee requires payment to the assignee C, this latter is not entitled to assert set-off. But if the assignee C fails to pay to A and the obligee claims against the assignor B, which has subsidiary liability, B can assert the set-off of its own claim.

This same applies to the guarantees provided before the transfer in order to ensure the performance of the original obligor, when it is claimed subsidiarily (Article 243 of the Proposals for the reform of French law on obligations of 2013). The guarantees must have the same treatment as the principal obligation to which they are attached, the non-performance of the original obligor in this case. It would be disproportionate, in fact, for these guarantees to be extinguished when the liability of the original obligor that they guarantee is not extinguished. The iter of the claim is therefore as follows: in the event of non-performance of the new obligor, a claim against the original obligor; in the event of the failure of the original obligor. This approach has been followed by the DCFR (Article III-5:207). It is also followed by the UP through a sensu contrario interpretation of the provisions on termination of securities in cases of discharge of the obligor (Article 9.2.8). of course, the above does not prevent that the third guarantor accepts a modification of the guarantee and ensures the performance of the transferee-obligor.

Example 2: In the same case as in example 1: obligee A, accepts that B, the obligor, assign $100,000 of debt to C, the transferee, provided that the transferor B remains as a subsidiary liable in the event of breach of the assignee. The debt was secured by a personal guarantee of D. If the transferee does not pay, the obligee may claim against transferor B; if this latter does not pay, the obligee may enforce the personal guarantee.

1. The rationale of joint and several liabilities

Most OHADAC systems and international instruments do not expressly refer to the original defences in cases of joint and several liabilities between the original obligor and the assignee. Therefore, the Principles refer to the general rules on joint and several obligations, as also occurs in the DCFR (Article III-4:112) and the UP (Article 11.1.4), that enable each obligor to assert their own defences or those ones that are common to all obligors.

In the same vein, both the new and the original obligor could set-off their claims with the obligee, extinguishing the obligation for the remaining obligors. This happens in other international instruments, such as the DCFR, which, by referring to the rules on plurality of obligors [Article III-5:209(2)], provides a clear solution about the set-off of one of the obligors extinguishes the obligation of the others [Article III-4:108 (1)]. Although the UP do not expressly envisage it, it is understood that there is a reference to the rules on solidarity and, in particular, to Article 11.1.5, which states the extinction of the obligations by the set-off of claims of any co-obligors.

Example 1: obligee A claims debt to a new obligor C, jointly added by the original obligor B. The new obligor asserts the set-off of an own claim against the obligee, resulting the extinction of the obligation of both the new and the former obligor B and C.

The required obligor, whether the original obligor or the jointly and severally added obligor, does not assert defences of other obligors that are not common to the other obligors. Likewise, the obligor may not assert the set-off of the claims of other obligors, because they are not part of its own assets.

Example 2: In the case of Example 1, the obligee A claims the debt to the original obligor B and not to the new obligor C, jointly and severally added and which has a claim against the obligee A. The original obligor is obliged to pay without the possibility of claiming set-off of claims of other obligors. Thus, the obligee can obtain liquidity by avoiding set-off of claims.

Finally, in relation with guarantees, since the original obligor ‘s position is not modified and it remains jointly and severally responsible for the performance, the guarantees are preserved in order to ensure performance (Article 1.702 of the Colombian Civil Code; Article 243 of the Proposals for the reform of French law on obligations of 2013).

2. Rationale of stipulation in favour of third parties

If the transferee is jointly and severally liable with the transferor-obligor through an agreement with the transferor-obligor, it becomes functionally bound through a “stipulation in favour of a third party”, the obligee (beneficiary), with which it has not established a direct relationship. Therefore, the Principles, along the same lines as the DCFR [Article III -5: 209 (1)], allow that the new obligor can assert the defences that it has against the original obligor. For the obligee, there is no prejudice and it has the same contractual position before the addition of the obligor, where it was obliged only to the original obligor. As it can be noted, unenforceability of exceptions among obligors against the obligee, which exists in cases of discharge of the original obligor or the establishment of a subsidiary obligation, does not apply in these cases. Strictly speaking, there is no “assignment” of the obligation, but joint and several obligations assumed by the original obligor and the new obligor.

Example: obligee A has a claim against original obligor B who agrees with C to add C as a joint and several obligor in payment for services provided by the original obligor B. After B fails to provide the agreed services, the new obligor may raise the exception of non-performance (exceptio non adimpleti contractus) against obligee A when it is asked to fulfil its performance.

SPECIFIC CLAUSES FOR THE TRANSFER OF OBLIGATIONS

1. Clauses relating to the form of assignment of obligations

As noted above, these Principles leave the assignor and assignee with the freedom to agree on the form of assignment of obligations that they deem appropriate, notwithstanding that the consent of the other party is sometimes required. Thus, the assignor and assignee may agree to discharge of the original obligor, who is then freed of all liability to the obligee.

Clause A: Discharge of the assignor

“The assignee assumes the debt mentioned in clause [insert number]. The assignor shall be discharged without any liability to the obligee.”

Moreover, the parties may agree that the assignor continues to have subsidiary liability, in the event that the assignee fails to perform its obligation.

Clause B: Subsidiary obligation of the assignor

“The assignee assumes the debt mentioned in clause [insert number]. The obligee may bring legal action against the assignor only if the assignee does not fully pay the debt mentioned.”

Although this clause does not provide for the discharge of the original obligor, its obligation is relegated to the secondary background, and it is no longer the main obligor.

Lastly, the assignor and the assignee may agree on a joint and several relationship between them, so that the obligee may claim the entire debt from any of the co-obligors without prejudice of actions of reimbursement:

Clause C: Joint and several obligations between co-obligors

“The assignee assumes the debt mentioned in clause [insert number]. The assignor shall continue to be jointly and severally bound with respect to the obligee.”

Although the Principles have opt for this condition when the parties are silent on this point, it is highly recommended to include a clause of this type in the assignment contract.

2. Clauses on the obligor's consent to the assignment

As already noted, the OHADAC Principles regulate the assignment of obligations by the obligor or by the obligee. In the latter case, the general rule is that the obligor's consent is not required, unless otherwise stated in the contract.

The first contrary stipulation may concern the prohibition of assignment of obligations, for example:

Clause A: Prohibition of assignment of obligations

“The assignment of any obligation under this contract is prohibited.”

This type of clause is not very common because the assignment of obligations by the obligee is usually beneficial to both parties. The obligee is interested because it preserves its free will to assign the obligation for reasons it deems appropriate. The obligor is interested because the assignment may discharge it from its obligations. However, the insertion of this clause has two consequences. Firstly, any assignment of obligations by the obligee will requires the obligor's consent, so that the initial prohibition included in the contract will be considered modified if the obligor consents to an assignment at a later date. Secondly, if the obligee assigns the obligor's obligation without its consent, it could be liable for compensation for damages.

The second possibility, which is more flexible than the previous one, is that the parties expressly include in the contract that the obligor's consent is required. The same situation arises when the clause refers not to the consent of the obligor but to the “agreement of the parties”.

Clause B: Mandatory consent of the obligor to the assignment

“The assignment of any of its obligations under this contract requires the written consent of the parties.”

In such cases, the obligee's will is clear by the mere fact of signing the assignment, and the obligor's consent is therefore mandatory. Likewise, the obligor may be granted a right of opposition within a given period. Thus, for example:

Clause C: Obligor's right to object to the assignment

“The assignment of any of its obligations under this contract does not require the consent of the parties.

However, the obligor of the obligation may refuse the assignment within [insert time], as from the date it receives notice of this assignment.”

In regard to the latter clause, if there are no objections, the obligor's silence is understood as acceptance of the assignment. While the DCFR has laid down this rule (Article III-5: 202), the lack of a clear rule in the OHADAC States makes it advisable to include a simple recommendation as a contractual clause.

3. Statements on acceptance of the assignment

The Principles require acceptance of the other party in the original contract only in specific cases, the most important of which is the case where the obligee's consent is required for the assignment agreed between the original obligor and a third party. Statements of acceptance are therefore very importance for the effectiveness of the assignment. In this regard, it should be noted that the obligee may accept the assignment, but cannot decide on the assignment conditions, unless this right has been granted by the assignor and the assignee. These principles reject such questionable assertions as those of UP according to which “the obligee may discharge the original obligor” or “the obligee may also retain the original obligor” (Article 9.2.5). Instead, the OHADAC Principles and recommended clauses and statements make clear that the choice of the conditions of assignment is up to the parties to this agreement (assignor and assignee). The obligee has simply the power to accept, reject or make a counteroffer.

Thus, the first possibility involves the acceptance of the assignment under the terms and conditions that have been notified to the other party. It is important, therefore, to include in the statement of acceptance documents setting forth the terms of the assignment, and stating that any variation in these terms and conditions shall be notified to the other party who will decide whether or not to accept. The statement below is therefore recommended:

Statement A: Acceptance of assignment

“[Name], holder of passport number [insert], national of [State], of legal age, residing at [insert], and on behalf of the corporation [company name], incorporated by public document authorised by the Notary of [insert town and country], [name of authorising notary], dated [insert date] and protocol number [insert number of protocol], with its registered office in [insert full address], registered in the Commercial Register of [insert town, country and circumstances of the registration: volume, sheet, inscription], and tax identification code [indicate number] STATES:

1. - That it ACCEPTS the assignment of the debt mentioned in the document appended to this statement in the terms and conditions set forth therein [attach the document signed by the assignor or the assignee by which the assignment is notified and the other party is informed of its conditions].

2. - That any variation in the terms and conditions of the assignment contained in the document appended to this statement shall be notified to the signatory in order to pronounce whether or not it is accepted.

Statement signed in [insert town and country] on [insert date].”

The second possibility of the other original party, usually the obligee, consists in not accepting the assignment under the terms and conditions that have been notified to it. It is not really necessary to have a declaration objecting to the assignment, since consent is given by silence. However, an express statement of the other party provides greater legal certainty to the parties. It has two advantages. For the transferor and transferee, the statement avoids undue delay that would occur if they wait to know the opinion of the other party, even after the conclusion of the assignment agreement. For the other party, the statement may be useful to neutralize any hint of tacit acceptance, if it is stated that any past or future act shall not be considered as acceptance. In short, statements like the following would be advisable:

Statement B: Opposition to the assignment

“[Name], holder of passport number [insert], national of [State], of legal age, residing at [insert], and on behalf of the corporation [company name], incorporated by public document authorised by the Notary of [insert town and country], [name of authorising notary], dated [insert date] and protocol number [insert number of protocol], with its registered office in [insert full address], registered in the Commercial Register of [insert town, country and circumstances of the registration: volume, sheet, inscription], and tax identification code [indicate number] STATE:

1. - That I DO NOT ACCEPT the assignment of the debt mentioned in the document appended to this statement and I do not accept any of the terms or conditions set forth therein [attach the document signed by the assignor or by the assignee by which the assignment is notified and the other party is informed of its conditions].

2. - That any past or future act made by the undersigned shall not be considered as tacit acceptance of such assignment.

Statement signed in [insert town and country] on [insert date].”

There is a third possibility: the other party could accept the assignment on condition that the terms of the transfer agreement be modified, and in particular, the conditions of assignment. In this respect, it is usually in the interest of the assignor and assignee to discharge the original obligor, who will be exempt from all obligations to perform. Conversely, the obligee's interest is usually the relationship of joint and several liability between the new obligor and the original obligor, to increase the chances of performance of the obligation. To this end, there are several options open to the other party. These include opposition to the assignment, accompanied by an invitation to modify the terms of the transfer agreement. After the modification is completed, the assignment will be submitted to the other party for a final decision. In such cases, a statement of the following type is recommended:

Statement C: Opposition to the assignment and invitation to negotiate

“[Name], holder of passport number [insert], national of [State], of legal age, residing at [insert], and on behalf of the corporation [company name], incorporated by public document authorised by the Notary of [insert town and country], [name of authorising notary], dated [insert date] and protocol number [insert number of protocol], with its registered office [insert full address], registered in the Commercial Register of [insert town, country and circumstances of the registration: volume, sheet, inscription], and tax identification code [indicate number] STATE:

1. - That I DO NOT ACCEPT the assignment of debt referenced in the document appended to this statement under the terms and conditions set forth therein [attach the document signed by the assignor or the assignee in which the assignment is notified and the other party is informed of its conditions].

2. - That any past or future act made by the signatory shall not be considered as tacit acceptance of such assignment.

3. - That I agree to reconsider the acceptance of the assignment of debt mentioned if the assignor and assignee modify the terms set forth in the document attached to this statement and agree that the assignor [Option 1: remains jointly and severally liable for the debt] /Option 2: can be sued for payment if the assignee does not pay the referenced debt in full].

Statement signed in [insert town and country] on [insert date].”

One last option would be the acceptance of the assignment in advance by the other party, provided that the condition imposed is included. This normally consists in maintaining the subsidiary or joint and several liability of the original obligor. It must be pointed out that if the condition is not accepted, this means there is opposition to the assignment. Thus, for example:

Statement D: Conditional acceptance

“[Name], holder of passport number [insert], national of [State], of legal age, residing at [insert], and on behalf of the corporation [company name], incorporated by public document authorised by the Notary of [insert town and country], [name of authorising notary], dated [insert date] and protocol number [insert number of protocol], with its registered office in [insert full address], registered in the Commercial Register of [insert town, country and circumstances of the registration: volume, sheet, inscription], and tax identification code [indicate number] STATE:

1. -. That if, and only if, the assignor [Option 1: continues to have subsidiary liability for the entire debt] / Option 2: can be sued for payment if the assignee does not fully pay the referenced debt]. I ACCEPT the assignment of the debt referenced in the appended document [append the document signed by the assignor or the assignee in which the assignment is notified and which contains the terms of the assignment].

2 -. That any change to the terms and conditions of the assignment contained in the document appended to this statement, and other than the terms set out in paragraph 1, shall be notified to the signatory who will state whether or not it accepts these changes.

3. - That, if the conditions set out in paragraph 1 are not met, I DO NOT ACCEPT the debt referenced in the document appended to this statement in the terms and conditions set forth therein.

4. - That, if the conditions set out in paragraph 1 are not met, any past or future act made by the signatory shall not be considered as tacit acceptance of this assignment.

Statement signed in [insert town and country] on [insert date].”

4. Clauses relating to securities in case of assignment

The OHADAC Principles follow the basic principle that the transfer of debt voids any personal or proprietary security, unless its preservation is accepted by the guarantor, whether is the original obligor or a third party. The Principles have not gone beyond this point for lack of consensus among the OHADAC States, but it is highly recommended that a “shield” clause be included in the original contract between obligee and obligor, under which the security is preserved if it concerns property that has been transferred by the original obligor to the assignee prior to or at the same time as the assignment of obligations. To provide the obligee with added certainty, at the time of acceptance of the assignment, the obligee may make this acceptance conditional upon the preservation of the security. This could result in a clause such as follows:

Clause in the original contract: Conservation of security

“The obligee shall accept the assignment of this debt to a third party only if, after the assignment, the asset mentioned as being the guarantee of payment of the debt continues to be available.”

Statement: Acceptance of the assignment with conservation of security

“[Name], holder of passport number [insert], national of [State], of legal age, residing at [insert], and on behalf of the corporation [company name], incorporated by public document authorised by the Notary of [insert town and country], [name of authorising notary], dated [insert date] and protocol number [insert number of protocol], with registered office in [insert full address], registered in the Commercial Register of [insert town, country and circumstances of the registration: volume, sheet, inscription], and tax identification code [indicate number] STATE:

That I ACCEPT that the assignment of the debt mentioned in the appended document [append the document signed by the assignor or the assignee in which the assignment is notified and which contains the terms of the assignment], IF, AND ONLY IF, the assignee and new owner of the asset referenced as security of the payment of this debt, maintain that asset as security.

Signed in [insert town and country] on [insert date].”

This consists in inserting a contractual clause or a statement along the lines of the UP (Article 9.2.8), the PECL (Article 12:102), the DCFR [Article III-5:205 (4)] and of some OHADAC legal systems [Article 1.464 of the Guatemalan Civil Code; Article 6:157 of the Dutch and Suriname Civil Code; or contrary: Article 2.107 of the Nicaraguan Civil Code; Article 1.063 of the Haitian Civil Code]. The consent of the original obligor, which is the original owner of the asset that serves as a security, is not necessary for the security to ensure the new obligor's performance. The clause and the statement are based on an economic rationale and they attribute “parallel destinies” to the parties and their assets: discharge of the original obligor and its asset, replaced by the new obligor and its property. This rationale does not have an adverse impact on the expectations of the assignee which carried out the negotiation on property with collateral charges. It also protects the expectations of the obligee: if the original obligor, as the owner of the property, uses them to guarantee the transaction, it makes perfect sense that the assignee, as the new owner, also assigns the asset to the transaction. The fact that the asset continues to be used as security does not harm the original obligor because it is no longer the owner of the asset in question. The following example shows how this clause works:

Example: the obligor buys unmovable property and obtains financing from a bank by creating a mortgage on the property. Then the obligor sells the property to a third party who assumes the debt to the bank under the same conditions and with the same instalments. The proposed clause implies that the obligee's consent to the assignment is conditional upon the continued effectiveness of the mortgage.

As noted, the clause covers two standard situations. In the first one, the assets guarantee the payment by the transferee when its assignment is linked to the relationship resulting from the duty to assume the debt. The above example illustrates the case of the sale of mortgaged property whereby the assignee acquires the property and the debt owed to the obligee under the same conditions as the original obligor. In the second example, the assets also ensure the performance of the assignee, if they are transferred through a transaction unrelated with the duty assume the debt but prior to this duty. Conversely, the security is extinguished if the component asset is transferred to the assignee after the duty to assume the debt and irrespective of the security.