"Assignee" redirects here. For the racehorse, see Assignee (horse).
An assignment (Latin cessio) is a term used with similar meanings in the law of contracts and in the law of real estate. In both instances, it encompasses the transfer of rights held by one party, the assignor, to another party, the assignee. It can also be a transfer of a benefit, including an equitable interest, according to established rules (at common law or in equity). The rights may be vested or contingent. The details of the assignment determines some additional rights and liabilities (or duties).
Typically a third party is involved in a contract with the assignor, and the contract is, in effect, transferred to the assignee. For example, a borrower borrows money from a local bank. The local bank receives a mortgage note and can thereafter transfer that note to a financial institution in exchange for a lump-sum of cash, thereby assigning the right to receive payment from the borrower to another entity. Mortgages and lending contracts are relatively amenable to assignment since the lendor's duties are relatively limited; other contracts which involve personal duties such as legal counsel may not be assignable.
The related concept of novation is not assignment. Rather than assigning only the rights to another party, novation involves the replacement of the original party with a new party or the replacement of the original contract with a new contract. Since novation creates a new contract, it requires the consent of all parties, but assignment does not require the consent of the nonassigning party, but in the case of assignment, the consent of the nonassigning party may be required by a contractual provision.
The assignment does not necessarily have to be in writing; however, the assignment agreement must show an intent to transfer rights. The effect of a valid assignment is to extinguish privity (in other words, contractual relationship, including right to sue) between the assignor and the third-party obligor and create privity between the obligor and the assignee.
Liabilities and duties
Unless the contractual agreement states otherwise, the assignee typically does not receive more rights than the assignor, and the assignor may remain liable to the original counterparty for the performance of the contract. The assignor often delegates duties in addition to rights to the assignee, but the assignor may remain ultimately responsible.
However, in the United States, there are various laws that limit the liability of the assignee, often to facilitate credit, as assignees are typically lenders. Notable examples include a provision in the Truth in Lending Act and provisions in the Consumer Leasing Act and the Home Ownership Equity Protection Act.
In other cases, the contract may be a negotiable instrument in which the person receiving the instrument may become a holder in due course, which is similar to an assignee except that issues, such as lack of performance, by the assignor may not be a valid defense for the obligor. As a response, the United States Federal Trade Commission promulgated Rule 433, formally known as the "Trade Regulation Rule Concerning Preservation of Consumers' Claims and Defenses", which "effectively abolished the [holder in due course] doctrine in consumer credit transactions". In 2012, the commission reaffirmed the regulation.
Assignment of contract rights
Assignment of rights under a contract is the complete transfer of the rights to receive the benefits accruing to one of the parties to that contract. For example, if Party A contracts with Party B to sell Party A's car to Party B for $10, Party A can later assign the benefits of the contract - i.e., the right to be paid $10 - to Party C. In this scenario, Party A is the obligee/assignor, Party B is an obligor, and Party C is the assignee. Such an assignment may be donative (essentially given as a gift), or it may be contractually exchanged for consideration. It is important to note, however, that Party C is not a third party beneficiary, because the contract itself was not made for the purpose of benefitting Party C. When an assignment is made, the assignment always takes place after the original contract was formed. An Assignment only transfers the rights/benefits to a new owner. The obligations remain with the previous owner. Compare Novation.
When assignment will be permitted
The common law favors the freedom of assignment, so an assignment will generally be permitted unless there is an express prohibition against assignment in the contract. Where assignment is thus permitted, the assignor need not consult the other party to the contract. An assignment cannot have any effect on the duties of the other party to the contract, nor can it reduce the possibility of the other party receiving full performance of the same quality. Certain kinds of performance, therefore, cannot be assigned, because they create a unique relationship between the parties to the contract. For example, the assignment of a legal malpractice claim is void since an assignee would be a stranger to the attorney-client relationship, who was owed no duty by the attorney and would imperil the sanctity of the highly confidential and fiduciary relationship existing between attorney and client.
Torts are not assignable as public policy, and various statutes may prohibit assignment in certain instances. In addition, the Restatement (Second) of Contracts lists prohibitions in §317(2)(a) based upon the effect to the nonassigning party (obligor), with similar prohibitions in the Uniform Commercial Code §2-210. For example, UCC §2-210 states the following:
|“||Unless otherwise agreed all rights of either seller or buyer can be assigned except where the assignment would materially change the duty of the other party, or increase materially the burden or risk imposed on him by his contract, or impair materially his chance of obtaining return performance. A right to damages for breach of the whole contract or a right arising out of the assignor's due performance of his entire obligation can be assigned despite agreementotherwise [sic].||”|
Requirements for an effective assignment
For assignment to be effective, it must occur in the present. No specific language is required to make such an assignment, but the assignor must make some clear statement of intent to assign clearly identified contractual rights to the assignee. A promise to assign in the future has no legal effect. Although this prevents a party from assigning the benefits of a contract that has not yet been made, a court of equity may enforce such an assignment where an established economic relationship between the assignor and the assignee raised an expectation that the assignee would indeed form the appropriate contract in the future.
A contract may contain a non-assignment clause, which prohibits the assignment of specific rights and some various rights, or of the entire contract, to another. However, such a clause does not necessarily destroy the power of either party to make an assignment. Instead, it merely gives the other party the ability to sue for breach of contract if such an assignment is made. However, an assignment of a contract containing such a clause will be ineffective if the assignee knows of the non-assignment clause, or if the non-assignment clause specifies that "all assignments are void".
Two other techniques to prevent the assignment of contracts are rescission clauses or clauses creating a condition subsequent. The former would give the other party to the contract the power to rescind the contract if an assignment is made; the latter would rescind the contract automatically in such circumstances.
Requirement of a writing
There are certain situations in which the assignment must be in writing.
- Assignment of wages; additionally, statutes may prohibit this assignment
- Assignment of any interest in real property
- Assignment of choses in action worth over $5,000
A parallel concept to assignment is delegation, which occurs when one party transfers his duties or liabilities under a contract to another. A delegation and an assignment can be accomplished at the same time, although a non-assignment clause may also bar delegation.
Legal remedies may be available if the nonassigning party's rights are affected by the assignment.
Assignments made for consideration are irrevocable, meaning that the assignor permanently gives up the legal right to take back the assignment once it has been made. Donative assignments, on the other hand, are generally revocable, either by the assignor giving notice to the assignee, taking performance directly from the obligor, or making a subsequent assignment of the same right to another. There are some exceptions to the revocability of a donative assignment:
- The assignment can not be revoked if the obligor has already performed
- The assignment can not be revoked if the assignee has received a token chose (chose being derived from the French word for "thing", as in a chose of action) - a physical object that signifies a right to collect, such as a stock certificate or the passbook to a savings account.
- The assignment can not be revoked if the assignor has set forth in writing the assignment of a simple chose - a contract right embodied in any form of token.
- Estoppel can prevent the revocation of a donative assignment if the assignee changed their position in reliance on the assignment.
Finally, the death or declaration of bankruptcy by the assignor will automatically revoke the assignment by operation of law.
Breach and defenses
A cause of action for breach on the part of the obligor lies with the assignee, who will hold the exclusive right to commence a cause of action for any failure to perform or defective performance. At this stage, because the assignee "stands in the shoes" of the assignor, the obligor can raise any defense to the contract that the obligor could have raised against the assignor. Furthermore, the obligor can raise against the assignee counterclaims and setoffs that the obligor had against the assignor. For example, suppose that A makes a contract to paint B's house in exchange for $500. A then assigns the right to receive the $500 to C, to pay off a debt owed to C. However, A does such a careless job painting the house that B has to pay another painter $400 to correct A's work. If C sues B to collect the debt, B can raise his counterclaim for the expenses caused by the poor paint job, and can reduce the amount owed to C by that $400, leaving only $100 to be collected.
When the assignor makes the assignment, he makes with it an implied warranty that the right to assign was not subject to defenses. If the contract had a provision that made the assignment ineffective, the assignee could sue the assignor for breach of this implied warranty. Similarly, the assignee could also sue under this theory if the assignor wrongfully revoked the assignment.
Occasionally, an unscrupulous assignor will assign exactly the same rights to multiple parties (usually for some consideration). In that case, the rights of the assignee depend on the revocability of the assignment, and on the timing of the assignments relative to certain other actions.
In a quirk left over from the common law, if the assignment was donative, the last assignee is the true owner of the rights. However, if the assignment was for consideration, the first assignee to actually collect against the assigned contract is the true owner of the rights. Under the modern American rule, now followed in most U.S. jurisdictions, the first assignor with equity (i.e. the first to have paid for the assignment) will have the strongest claim, while remaining assignees may have other remedies. In some countries, the rights of the respective assignees are determined by the old common law rule in Dearle v Hall.
- Earlier donative assignees for whom the assignment was revocable (because it had not been made irrevocable by any of the means listed above) have no cause of action whatsoever.
- Earlier donative assignees for whom the assignment was made irrevocable can bring an action for the tort of conversion, because the assignment was technically their property when it was given to a later assignee.
- Later assignees for consideration have a cause of action for breaches of the implied warranty discussed above.
Special rules for assignment of certain rights
See also: Rule in Dumpor's Case and Privity of estate
Real property rights can be assigned just as any other contractual right. However, special duties and liabilities attach to transfers of the right to possess property. With an assignment, the assignor transfers the complete remainder of the interest to the assignee. The assignor must not retain any sort of reversionary interest in the right to possess. The assignee's interest must abut the interest of the next person to have the right to possession. If any time or interest is reserved by a tenant assignor then the act is not an assignment, but is instead a sublease.
The liability of the assignee depends upon the contract formed when the assignment takes place. However, in general, the assignee has privity of estate with a lessor. With privity of estate comes the duty on the part of the assignee to perform certain obligations under covenant, e.g. pay rent. Similarly, the lessor retains the obligations to perform on covenants to maintain or repair the land.
If the assignor agrees to continue paying rent to the lessor and subsequently defaults, the lessor can sue both the assignor under the original contract signed with the lessor as well as the assignee because by taking possession of the property interest, the assignee has obliged himself to perform duties under covenant such as the payment of rent.
Unlike a Novation where consent of both the lessor and lesse is required for the third party to assume all obligations and liabilities of the original lessee, an assignment does not always need the consent of all parties. If the contract terms state specifically that the lessor's consent is not needed to assign the contract, then the lesee can assign the contract to whomever the lesee wants to.
Absent language to the contrary, a tenant may assign their rights to an assignee without the landlord's consent. In the majority of jurisdictions, when there is a clause that the landlord may withhold consent to an assignment, the general rule is that the landlord may not withhold consent unreasonably unless there is a provision that states specifically that the Landlord may withhold consent at Landlord's sole discretion.
A person can also assign their rights to receive the benefits owed to a partner in a partnership. However, the assignee can not thereby gain any of the assignor's rights with respect to the operation of the partnership. The assignee may not vote on partnership matters, inspect the partnership books, or take possession of partnership property; rather, the assignee can only be given the right is to collect distributions of income, unless the remaining partners consent to the assignment of a new general partner with operational, management, and financial interests. If the partnership is dissolved, the assignee can also claim the assignor's share of any distribution accompanying the dissolution.
Intellectual property rights
See also: transfer (patent)
Ownership of intellectual property, including patents, copyrights, and trademarks, may be assigned, but special conditions attach to the assignment of patents and trademarks. In the United States, assignment of a patent is governed by statute, 35 U.S.C. § 261. Patent rights are assignable by an "instrument in writing." Title in a patent can also be transferred as a result of other financial transactions, such as a merger or a takeover, or as a result of operation of law, such as in an inheritance process, or in a bankruptcy. An assignment of a patent can be recorded with the United States Patent and Trademark Office. Although such recording is not required, if an assignment is not recorded at the USPTO within three (3) months or prior to a subsequent assignment, the assignment will be void against a subsequent assignee without notice of the earlier, unrecorded assignment.
With respect to a trademark, the owner of the mark may not transfer ownership of the mark without transferring the goodwill associated with the mark.
Companies sometimes request from employees that they assign all intellectual property they create while under the employment of the company. This is typically done within an Employment Agreement, but is sometimes done through a specific agreement called Proprietary Information and Inventions Agreement (PIIA).
Personal injury torts
The standard rule is that personal injurytort causes of action are nonassignable as a matter of public policy. These should be distinguished from final settlements or judgments resulting from lawsuits brought on such causes of action, which may be assignable.
In the majority of jurisdictions, assignments of legal malpractice causes of action are void as against public policy.
An equitable assignment is an assignment, or transfer of rights, in equity.
There are numerous requirements that exist for an equitable assignment of property, outside the 'standard' clear and unconditional intention to assign. These requirements are fundamental characteristics of a statutory assignment: Absolute assignment (an unconditional transfer: conditions precedent or part of a debt are not absolute) and the assignment must be made in writing and signed by the assignor, and in particular, this applies to real property.
Assigning future property in equity cannot be gratuitous. The assignor must receive consideration for the agreement, otherwise the assignment will be ineffective. However, an absolute assignment does not require consideration to be given. Secondly, between the period of agreement between assignor and assignee and acquisition by the assignor, the assignees rights are not contractual, but rather a proprietary right to the property. This means the assignee has an interest in this future property, in the same manner any owner has over property.
In equity, these principles operate to protect both the assignor and the assignee. In Norman v Federal Commissioner of Taxation, a taxpayer attempted to assign by deed, to his wife certain moneys which he was eventually going to receive. This included dividends and interest due on loans. The court held the interest and the dividends were expectancies or possibilities which could not be assigned without consideration. The court's worry was that assignments without consideration might be used as instruments of fraud, to avoid creditors and tax collection.
Courts will not enforce a contract to assign an expectancy unless there is a valuable consideration. For example, under a settlement of property the respondent "the son" would have been entitled to an equal portion of properties along with his other siblings which was gained in a settlement by his mother. This portion was only his when allocated to him at his mothers discretion. Prior to this allocation being made, the respondent allotted his benefit to trustees for a voluntary settlement. He was assigning or purporting to assign something which he might become entitled to in the future, not a contingent interest. The judgment held it ineffective and elaborated on previous points to state the respondent cannot be compelled to allow the trustees to retain the appointed sum.
- ^For the assignment of claim see Trans-Lex.org
- ^Australian Law Dictionary (second ed.). oxford university press.
- ^ abcNorman v Federal Commissioner of Taxation HCA 21, (1963) 109 CLR 9, High Court (Australia).
- ^Tips and traps in contracting: novation versus assignmentArchived January 26, 2013, at the Wayback Machine.. Association for General Counsel. (Australia).
- ^ abAssignee Liability: Through the Minefield. Arnstein & Lehr LLP.
- ^See 15 U.S.C. 1641(a).
- ^ abCommercial Paper: Holder in Due Course & DefensesArchived 2012-11-28 at the Wayback Machine..
- ^FTC Opinion Letter Affirms Consumers' Rights under the Holder Rule. FTC.
- ^ abcdStark T. (2003). Negotiating and Drafting Contract Boilerplate, Ch. 3: Assignment and Delegation. ALM Publishing.
- ^Chapter 18: Assignment and Delegation. LexisNexis study outline.
- ^Uniform Commercial Code § 2-210. Delegation of Performance; Assignment of Rights.
- ^Pony v. County of Los Angeles, 433 F.3d 1138 (9th Cir. 2006).
- ^Cowan Liebowitz & Latman, PC v. Kaplan, 902 So. 2d 755, 759-760 (Fla. 2005).
- ^Westbourne Grammar School v Sanget Pty VSCA 39, Court of Appeal (Vic, Australia).
- ^Conveyancing Act 1919 (NSW) s 23C.
- ^Federal Commissioner of Taxation v Everett FCA 39, (1978) 21 ALR 625 at p. 643, Federal Court (Full Court) (Australia).
- ^Northumberland (Duke) v Inland Revenue Comrs
A recent decision in the Court of Appeal, Bibby Factors Northwest Ltd v HFD Ltd  EWCA Civ 1908, concerns the extent to which an assignee of debts is bound by set-offs arising between the assignor and the debtor.
The law in this area is reasonably clear, but somewhat complicated, and was summarised succinctly and accurately by the Court of Appeal in paragraphs  to  of the decision:
‘First the debtor may show that the money claimed is not due, in whole or in part, either because of some substantive defence or some right of abatement.
Second, the debtor may have a contractual right of set off.
Third, the debtor may have a cross claim which equity will regard him as entitled to set off against the debt such that only the balance may be claimed. If so, and subject to any question of estoppel, the factor, as assignee, can be in no better position than his assignor, whether the assignment takes effect as a statutory assignment or in equity. It is no matter that the cross claim had not accrued due before the debtor had notice of the assignment.
Fourth, the debtor may have a cross claim which is independent of the claim against him in the sense that it does not fall into the category of a claim which forms the subject of an equitable set off. In such a case the factor/assignee cannot successfully be met by a cross claim which arose after the Customer/debtor had notice of the assignment.’
Bibby deals with one matter of possible uncertainty in this area, but others remain, some of which were raised but not decided in Bibby. One such matter is discussed later in this blog, and other matters, such as the interaction with insolvency set-off, will be discussed in a later blog.
The judgment in Bibby
The Bibby case concerned a factoring agreement, which provided for the sale of all present and future debts. The assignor, who had for many years supplied goods to the debtor, was in administration and the factor (Bibby) sued the debtor on outstanding invoices. The debtor claimed to set off, inter alia, rebates to which it was entitled under its contracts with the assignor, which, it said, constituted equitable set-off, and therefore could be relied upon whether or not they accrued before notice of assignment (under the third principle set out above).
The chief ground on which Bibby challenged this allegation was to argue that the degree of closeness between the claim (on the invoices) and the cross-claim (the rebates) was insufficient to establish equitable set-off (according to the test set out by Rix LJ in Geldof Metaalconstructie NV v Simon Carves Limited  EWCA Civ 667). This was because the debtor should have informed the factor about the rebates once they realised that the claims were assigned, and, therefore, it was not ‘manifestly unjust to allow [the factor] to enforce payment without taking into account the cross-claim’, despite the fact that the claims and cross-claims were otherwise closely connected.
The Court of Appeal upheld the judge’s decision that the test for equitable set-off was satisfied. There was no duty on the debtor to inform the factor about the rebates, nor was there a sufficiently clear representation as to the absence of rebates to give rise to an estoppel. The court confirmed what had been made clear in the Geldof case: that there was only one test, which had two elements:
- the ‘close connection’ part was the formal element to the test, which was ‘to ensure that the doctrine of equitable set-off is based on principle and not discretion’; and
- the ‘unjust’ part was the functional element and was ‘to remind litigants and courts that the ultimate rationality of the regime is equity’ (Geldof ).
In very many cases it will be the closeness of the connection which gives rise to the manifest injustice, but there are some situations in which this can be rebutted by other matters. One (at least where the court is deciding whether to award summary judgment on the claim) is the strength and calculability of the cross-claim. For example, in Star Rider Ltd v Inntrepreneur Pub Co  1 EGLR 53, the speculative quantum of the cross-claim was one reason for holding that it was just to award summary judgment on the claim. Another is the conduct of the cross-claimant, who cannot rely on his own wrongful conduct to manufacture a cross-claim (Bluestorm Ltd v Portvale Holdings Ltd  EWCA Civ 289).
This analysis shows that the relevant question is whether it is manifestly unjust as between the claimant and the cross-claimant not to allow the cross-claim to be set off. The assignee, since he can be in no better position than the assignor, takes subject to any set-off. The conduct of the debtor vis a vis the assignee is irrelevant, unless it gives rise to an estoppel. The decision of the Court of Appeal in Bibby confirms this reasoning (see paragraphs  and .
As a result, sensible receivables financiers who wish to know about potential cross-claims will both make enquiries themselves before making their advances and will make sure that their contracts with assignors include an obligation to inform them of such. In the absence of a separate agreement, a factor assignee cannot oblige a debtor to pass on information about cross-claims. While the assignment, once notice is given, creates a relationship between the assignee and the debtor in that the debtor must pay the assignee to obtain a good discharge, it cannot, of itself, impose any further obligations on the debtor.
Having come to this conclusion, there was no need for the Court of Appeal to consider independent set-off. Tantalisingly, a point on this type of set-off that had been raised and considered at first instance is one on which there is little authority and considerable academic debate. This rest of this blog is devoted to discussion of this point.
Can a notice of assignment of future debts prevent the debtor relying on set-offs which arise after the notice?
Under the fourth principle listed above, an assignee is not bound by an independent set-off between the assignor and the debtor which arises after notice of assignment has been given to the debtor. The rationale for this rule is that once the debtor knows about the assignment he should not be able to erode the assignee’s rights by allowing further set-offs to accrue. Bibby made the argument that the debtor had been notified ‘of the assignment’ at the time of the initial factoring agreement, and that all independent set-offs arising after that time could not be relied upon by the debtor.
This raises the contentious question of whether a notice of assignment given in relation to future debts can prevent the debtor relying on independent set-offs which arise after the date of the notice but before the debt arises. An assignment of a future debt takes effect immediately as a contract to assign, but the assignment does not take place until the debt comes into existence. There is remarkably little modern authority on the effect of a notice of such an assignment which is given before the debt actually arises.
It seems that such a notice will not be sufficient to make the assignment a statutory one, on the grounds that the section itself does not refer to agreements to assign, but only assignments. Further, there are a number of (mainly nineteenth century) cases which establish that a notice given of a ‘mere expectancy’ is ineffective to establish priority under Dearle v Hall, so that another notice must be given after the debt arises to protect the priority position of the assignee. Many of these cases were in the context of an army officer’s expectancy of a fund were he to be gazetted out of the army: the fund was a mere expectancy until the day the notice in the Gazette appeared, at which point it was held on trust for the officer by the army. Not surprisingly, army officers often raised money on the strength of this expectancy, but the incumbrancer(s) had to keep serving notices daily on the army agents to try and be the first to give notice on the day of the Gazette (see Re Dallas  2 Ch 385)!
The only case to mention the effectiveness of a notice of an assignment of a future debt in the context of set-off is also an army officer case (Roxburgh v Cox (1881) LR 17 Ch D 520). Here, the set-off arose the moment the Gazette notice appeared, and the notice of assignment was not given until the next day, so the point was not in issue (the assignee clearly took subject to the set-off). Thus, Baggally LJ’s dictum that ‘any notice given by [the assignee] before the money came into the possession of [the army agents asserting the set-off] would have been ineffectual’ was obiter.
The point is therefore an open one. Opinion is divided. Oditah (at 8.3 of Legal Aspects of Receivables Financing) supports the view of Baggally LJ, as did the judge in Bibby at first instance. However, Derham (at 17.29 of his magisterial book on set-off) and Philip Wood (at 16-119 of English and International Law of Set-Off, where he describes the view of Baggally LJ as ‘arbitrary and out of accord with realities’) support the view that notice given of an assignment of future debts marks the moment after which the accrual of independent set-offs do not bind the assignee.
There are also some obiter judicial remarks: Andrew Smith J at first instance in Dry Bulk Handy Holding Inc v Fayette International  EWHC 2107 (Comm)  firmly supports Philip Wood’s view. Mance J in Marathon Electrical Manufacturing Corp v Mashreqbank PSC  2 BCLC 460 at 466-467 appears to implicitly accept the Oditah’s view in relation to true future receivables (where the contract under which the receivable arises has not yet been entered into), but his discussion is focused on the fact that English law has a wide interpretation of ‘present receivables’ which includes any debts arising from existing contracts, even though they have not yet accrued.
The better view: notice of assignment of future debts prevents the assignee from asserting independent set-offs
The view that notice of an assignment of future debts is enough to prevent further independent set-offs being asserted against an assignee certainly accords with common sense, given the rationale for the rule mentioned earlier (that it is unconscionable for the debtor to reduce the assignee’s rights once he knows about the assignment). It also accords with the practice of taking an assignment or a security interest over present and future debts: any notice would normally not differentiate between the two categories.
Further, as mentioned, the category of present debts is very wide, including debts which are payable, but also unearned rights to payment arising out of present obligations. To distinguish between these and debts arising under future contracts seems perverse. There is one qualification: the notice has to be of an ‘assignment’ (albeit inchoate, under the principle in Holroyd v Marshall) rather than of a general agreement to assign, or of a floating charge. There is authority establishing that it is only after the floating charge has crystallised (and notice given) that the debtor can no longer set off independent set-offs against the charge (Biggerstaff v Rowatt’s Wharf Ltd  2 Ch 93)
The position argued for is also that which pertains under UCC Article 9 (9-404(a)(2), the Canadian and New Zealand PPSAs, and the UNCITRAL draft Model law. Under those instruments, notice (or knowledge) is of the ‘assignment’ or ‘security interest’ which can be given over future property. Only under the Australian PPSA is the position potentially different, since section 80(1) provides that the cut-off point is ‘before the first time when payment by an account debtor to the transferor no longer discharges the obligation of the account debtor under subsection (8) to the extent of the payment’. Presumably this point cannot arise until the relevant account has accrued, since only at that point can payment be made.
While it is a shame that the Bibby case did not prove a vehicle for deciding this point, the fact that it has not arisen directly for decision in an English law case shows that it does not cause all that many problems in practice. This is, probably, partly because of the wider definition of ‘present debts’ and also partly because many set-offs relied upon in are equitable set-offs, which can be asserted against an assignee irrespective of the timing of notice.
In the context of notification receivables financing, notice of a facultative master agreement is unlikely to have any effect on set-off, as this would be merely a general agreement to assign (if that: it may be unilateral and therefore only binding if under seal) and not an assignment of future debts, that is, it would not have immediate effect once a debt came into existence.
Notice of a ‘whole turnover’ agreement, however, is more likely to raise the issue discussed above, as this agreement would be seen as an assignment in equity, taking effect as soon as the debts come into existence. Of course, the terms of the contract are likely to be determinative.
Where financing is based on a fixed charge over receivables, this is likely to cover future debts, but notice to the debtors is unlikely to be given, except as a prelude to enforcement.
The issue discussed, therefore, is not an everyday problem, but a definitive answer (as provided in the codified systems mentioned) would improve certainty for assignees of debts (in whatever context) who wish to protect their value from future set-offs.