Assignment and Delegation

1. Assignment and Delegation The Freedom to Assign a Creditor’s Right and its Limitation The Delegation for Contractual Duty and Security Interest

2. The Freedom of Assignment and Its Limitations • A creditor may transfer a claim of an obligation to a third party, unless; • (1) The nature of the claim does not permit the transfer; or • (2) The parties have agreed that the claim shall not be transferred; or • (3) The claim is not subject to judicial attachment. • The agreement mentioned in the second section of the preceding paragraph shall not be a valid defense against any bona fide third party. (Article 294)

3. Method of Assignment • Assignment by Juristic Act • Made by either oral or written contract • A dispositive contract • Notify the debtor • The transfer of a claim will not be effective as against the debtor until the debtor has been notified of it by the transferor or by the transferee, unless otherwise provided by the act. • The effect of tendering by the transferee to the debtor the deed of transfer executed by the transferor is equivalent to the effect of notice. (Article 297)

4. Effect of Assignment • Constructive transfer of security interest and accessory rights • When there is a claim being transferred, all the securities of the claim and other accessory rights are transferred together, except those rights which cannot be separated from the transferor. • Interests in arrears are presumed to be transferred, together with the capital. (RCC Article 295) • Duty to deliver document • The transferor is bound to deliver to the transferee all documents which serve as evidence of the claim, and to give him all information necessary for the assertion of such claim. (RCC Article 296)

5. Effect of Assignment • Right of Defense by the debtor • When the transferor has notified the debtor that he has transferred the claim, the debtor may take all the defenses which he has against the transferee as the valid defenses against the transferor, even though the transfer is not executed or is invalid. (RCC Article 298I) • The notice under the preceding paragraph shall not be revoked without the consent of the transferee. (RCC Article 298II) • At the time of the debtor being notified, all of the valid defenses he has against the transferor may be taken against the transferee.At the time of the debtor being notified, if the debtor had the claim against the transferor, and if such claim matures before or at the same of the claim transferred does, he may claim for offset against the transferee. (RCC Article 299)

6. Delegation of obligation • Type of delegation • When a third party agrees with the creditor to assume the obligation of the debtor, the obligation is deemed to be transferred to the third party at the time of the constitution of the contract. (RCC Article 300)

7. Delegation of Contractual Duty • Prerequisites of Delegation • When a third party agrees with the debtor to assume the obligation of the debtor, it is not effective as against the creditor until the creditor has acknowledged. (RCC Article 301)

8. Delegation of Contractual Duty • Effect of delegation • The debtor or the person assuming the debt under the preceding article may fix a reasonable deadline and notify the creditor to reply definitely before such deadline whether he acknowledges the transfer or not.If the creditor does not give a definite reply before such period, he is deemed to have refused to acknowledge the said transfer.If the creditor refuses to acknowledge the transfer, the debtor or the person assuming the debt may revoke the contract concerning the assumption of the debt. (RCC Article 302)

9. Delegation of Contractual Duty • The person assuming the debt may take the debtor’s valid defenses against the creditor on account of their legal relationship as his valid defenses against the creditor, unless he shall not offset a claim belonging to the debtor.The person assuming the debt shall not take his valid defenses against the debtor on account of the legal relationship arising from the assumption of the debt against the creditor.(RCC Article 302)

10. Delegation of Contractual Duty • The assumption of a debt does not affect the existence of the accessory rights of the claim, unless the accessory rights shall not be separated from the debtor. • The securities given by a third party for the performance of the obligation are extinguished on account of the assumption of the debt, unless such third party has acknowledged the assumption.(RCC Article 304)

11. General Assumption • In case of generally assuming all the assets and liabilities from the property or enterprise of a person, the assumption of the debts becomes effective from the moment the transfer has been published or has been notified to the creditor.In the case specified in the preceding paragraph, the original debtor remains jointly liable with the person assuming the debt for a period of two years from the date of notice or publication of the transfer for the obligations due, or from the date of maturity for the obligations which are not yet due. (RCC Article 305)

12. Article 306When one enterprise is amalgamated with other enterprises and they are assumed each other’s assets and liabilities, it is deemed as the general assumption in the preceding article.The new enterprise after the amalgamation shall be responsible for the obligation of each enterprise before the amalgamation.