Assignment of receivables – what is it and how does it work?

Assignment in the context of a receivable means the transfer of rights related to it to another person or entity. For this purpose, an appropriate contract is usually concluded (although this is not a necessary condition). What is the assignment of receivables, when is it worth using and what should you know about it before you decide to implement it?
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Art. 509 of the Civil Code specifies that a creditor may transfer a claim to a third party even without the consent of the debtor – unless this would be contrary to the law, a contractual stipulation or the nature of the obligation. This means that the sale of receivables can – under certain conditions – take place without involving the debtor in the process. We will return to this later in the article.

In Art. 509 §2 of the Civil Code reads that the purchaser, when deciding to purchase a receivable, also gains the right to claim overdue interest and any other rights arising from the purchased receivable.

As a result, the entrepreneur decides to assign the claim to another entity. That’s how – in a nutshell – invoice financing works at PragmaGO.

Mr. Arkadiusz finds a company that decides to purchase the claim from him. In this situation, Mr. Arkadiusz becomes the assignor, while the buyer of the claim becomes the assignee. The parties then agree on the details, such as the form and term of payment or the type of agreement (it can be a written agreement or even a notarial deed – a debt transfer should not be implemented on the basis of an oral agreement).

The next step should be to inform the debtor of the assignment. Although in most cases we don’t need permission to execute an assignment, the debtor must be aware that there has been a transfer of the claim – if only because he should make payments to the new bank account number.

Lack of clear information may result in the debtor paying the previous creditor. This will only lengthen the path the receivable must take.

In a situation where a creditor has notified the debtor that an assignment has taken place, and the debtor nevertheless makes a transfer to the wrong account (for example, to the account of a previous creditor), the current creditor may demand payment from the debtor. This is mentioned in Art. 512 KC:

As long as the transferor has not notified the debtor of the transfer, performance to the previous creditor has effect against the transferee, unless the debtor knew of the transfer at the time of performance. This provision shall apply mutatis mutandis to other legal transactions between the debtor and the previous creditor.

Finally, there is an assignment of receivables, in accordance with the terms of the agreement between the assignor and assignee. This agreement should state what type of receivables the assignment concerns, as well as the value of the assignment and the due date.

There are several situations in which it is impossible to make an assignment of claims under penalty of invalidity:

  • When the parties to a transaction have indicated in the contract between them that the claim and the rights arising from it cannot be transferred to another person or entity – this is called an exclusion of the transfer of the claim.
  • When the parties to the transaction establish restrictions on the transfer of claims in the contract and these provisions are broken.
  • When the assignment opposes the nature of the obligation. This applies to situations where it matters to whom the debtor owes money (e.g., in the case of alimony payments, claims for pension rights, claims for protection of property), as well as when the purpose of the claim can only be achieved if the performance is fulfilled personally to the creditor (this applies to parts of contracts of mandate, contracts of work, leases and rental agreements).

In theory, drafting an assignment agreement in writing is not necessary. It can even be concluded verbally, but in the vast majority of cases Art. 511 of the Civil Code, which states that “if a claim is stated in writing, the transfer of that claim should also be stated in writing.”

Moreover, the written form of the assignment significantly facilitates the resolution of any disputes. Even the above-cited Art. 511 of the Civil Code, however, does not preclude the possibility of an assignment based on an oral agreement. This is evidenced by the Supreme Court Judgment of dn. 8.02.2002 r. (ref. II CKN 1160/99), which reads:

The provision of Art. 511 of the Civil Code does not provide for the rigor of nullity if the transfer is made without the requirement of written form. In such a situation, according to Art. 74 § 1 of the Civil Code, failure to observe the written form stipulated in Art. 511 of the Civil Code does not result in the invalidity of the transfer agreement, but only in certain statutory limitations of evidence.

Notarization of the assignment of receivables can not only be an additional safeguard against possible problems with the enforcement of the assignment provisions, but also an obligation.

If the creditor has taken legal action against the debtor for an unpaid debt, won the case, and an enforceability clause was imposed on the court judgment or payment order before the assignment was made, the transfer of the claim must be notarized.

Only in this way will the current owner of the claim be able to refer the case to the bailiff without hindrance. If the parties to the assignment decided to enter into it without a notarial deed, the creditor would have no recourse to an already issued judgment or order for payment – after all, all the court documents would refer to a different entity or person.

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