In daily commercial life rights and debts are constantly transferred between parties — a company sells its receivables to a finance house, or a contractor assigns its entitlements to a supplier. Assignment is a precise legal tool that must be handled with care.
Initial distinction: assignment of a right = the creditor transfers their right to another person. Assumption of a debt = the debtor transfers their debt to another person. The rules are entirely different.
Contents
1) Assignment of a Right
A creditor may transfer their right to another person (the assignee) without the debtor's consent:
- Assignor: the original creditor who transfers the right.
- Assignee: the person to whom the right is transferred.
- Debtor: remains obligated to perform.
Key requirement: the assignment is formed by agreement between the assignor and assignee — the debtor's consent is not required. But it takes effect against the debtor only upon notice to or acceptance by the debtor.
2) Notice to the Debtor
The assignment may not be set up against the debtor and third parties until:
- Formal notice of the assignment is served on the debtor (by judicial process or official notice).
- Or the debtor's acceptance of the assignment with a certified date.
Effect of omitting notice: if the debtor is not notified and pays the original creditor (the assignor) — the debtor is discharged. This is the most dangerous practical consequence of neglecting notice.
In commercial assignments: formality is relaxed — any written notification (letter, documented email) proving the debtor's knowledge suffices.
3) Effects of Assignment
- The right transfers with its accessories: securities, privileges and accrued interest pass with the right.
- Debtor's defences: the debtor retains all defences available against the assignor — limitation, set-off, nullity.
- Assignor's warranty: the assignor warrants the existence of the right at the time of assignment — but does not warrant the debtor's solvency unless specifically agreed.
Practical point: the assignee takes the right as it is — with its defects and defences. If the right is disputed or voidable, it transfers in that state.
4) Assumption of Debt
Transfer of a debt from the original debtor to a new debtor — the rules here differ fundamentally:
- Creditor's consent is required: an assumption of debt is effective only with the creditor's consent — because the identity of the debtor matters to the creditor.
- Discharge of the original debtor: once the creditor consents, the original debtor is released.
- Creditor's right to refuse: the creditor is not obliged to accept the assumption — and refusal needs no reasons.
Key difference from assignment of a right: assignment of a right does not need the debtor's consent, while assumption of a debt cannot proceed without the creditor's consent. The logic: in the first case the debtor's position does not change; in the second the creditor's position changes because they may face a less solvent debtor.
5) Effect on Guarantees
In assignment of a right
- Guarantees (mortgage, suretyship, privilege) transfer automatically with the right.
- The surety remains bound towards the assignee.
- The mortgage continues in favour of the assignee.
In assumption of debt
- Guarantees provided by the original debtor lapse unless the provider consents.
- Third-party suretyship falls away unless the surety agrees.
- A mortgage provided by the debtor lapses unless agreed otherwise.
Reason for the difference: in assignment of a right the debtor has not changed, so the guarantees stand. In assumption of debt the guaranteed person has changed — it would be unjust to bind a surety to guarantee someone they did not undertake to guarantee. See suretyship in Kuwaiti law.
6) Commercial Applications
Assignment is a common tool in commercial transactions:
- Receivables factoring: a company sells its outstanding invoices to a finance company in return for immediate liquidity.
- Assignment of construction entitlements: the contractor assigns sums due from the employer directly to the supplier.
- Assignment of lease: transfer of the tenant's rights and obligations to another person (requires landlord consent).
- Assignment of insurance proceeds: the insured assigns the right to indemnity to a financier.
Factoring: one of the most active commercial applications — SMEs use it to liquidate receivables. But it requires notice to the debtors; otherwise they pay the original creditor and the factor loses out.
7) Common Disputes
In assignment of a right
- Debtor paid the assignor after the assignment because they were not notified.
- The assignee discovers the right was disputed.
- Multiple assignments of the same right — who prevails?
- Dispute over the scope of defences the debtor may raise.
In assumption of debt
- The creditor did not expressly consent to the assumption.
- The new debtor is insolvent — can the creditor revert to the original?
- Suretyship lapsed without the creditor's knowledge.
Multiple assignments: if a creditor assigns the same right to two different persons, the one who notified the debtor first or whose assignment was accepted first with a certified date prevails. Speed of notice is therefore decisive. See evidence in civil and commercial matters.
8) Practical Guidance
For the assignor (seller)
- Notify the debtor immediately after the assignment.
- Expressly warrant the existence of the right in the assignment contract.
- If the right is disputed — disclose that fact.
- Keep a copy of the notice to the debtor as evidence.
For the assignee (buyer)
- Verify the right exists and is valid before purchasing.
- Notify the debtor yourself — do not rely on the assignor.
- Study the debtor's potential defences before agreeing.
- Stipulate a warranty of the debtor's solvency if possible.
Golden rule: in assignment notice is everything. An assignment without notice is a right without protection — the debtor pays the original creditor and your money is lost.
Have a right you want to assign or a debt you want to transfer? Contact Attorney Meshari Obaid Al-Enezi — Yumnaak Law Firm.
