deed of assignment of chose in action

Assignment of Choses in Action

Property generally may be realty (real) or personalty (personal). Realty are characterized by geographical fixity(land) while personalty are generally mobile.

Personalty is also classified into tangible/corporeal and intangible/incorporeal. The former is capable of physical handling/possession/manipulation/enjoyment while the latter is incapable of any of these.

Incorporeal property is also called a chose in action which has been defined as a legal expression used to describe all personal rights of property which can only be claimed or enforced by action (in a court) and not by taking physical possession.

A chose generally is a thing capable of being owned. Choses in action may be legal or equitable. Legal choses in action are rights which were enforceable or recoverable only by an action at Common law. This category of choses includes debts, benefits under a contract, insurance policies, copyrights, patents etc.

Equitable choses on the other hand are rights over property which were only enforceable/recoverable/cognizable by the courts of Chancery. It could only be recovered by a suit in Equity and the rights under this category include interests of a beneficiary in a Trust, a legacy/reversionary interest under a will etc.

Choses in action may also be in respect of already existing things/property or things/property to be acquired at a future date but which are not yet in possession. The chose in action may be property in itself and it may also be a propriety right over property.

Assignment is the transfer of something from one person to another such that the assignee obtains rights of a nature that were hitherto exercisable only by the assignor. An assignment of a chose is thus the transfer of a chose in action from the assignor to the assignee such that the assignee obtains and becomes entitled to enjoy rights in respect of that chose, which were hitherto exclusively enjoyed by the assignor.

Assignment may be legal (statutory) or equitable.

Assignment and Novation

An assignment is quite distinct from a novation. Novation is essentially a legal device by which parties to a contract may legally vary/shift their obligations under the contract to third parties. Thus, A can agree with B, his creditor, that C, who owes him money, will pay that debt to B in full satisfaction of his own (A’s) debt.

Novation is however fundamentally different from assignment in three material aspects:

• The consent of the parties is sine qua non since the original contract is rescinded by the novation. There must thus be consensus ad idem. There can be no novation otherwise. This is contrary to the case in assignment where there only need be communication to the assignee, his consent and that of the trustee of the liability are immaterial.
• The original debt in novation must be totally extinguished under the new arrangement.

There is no such requirement for assignment to be valid.

• For novation to be valid, there must be consideration in all cases as it is essentially a new contract. The requirement for consideration in assignment is much more relaxed.

Assignment and Equities

The general rule as regards assignment of choses in action is that an assignee takes, subject to the equities thar already apply to the chose in action (property) in question. Thus, anyone who has an interest (legal or equitable) in an assigned chose is entitled to a higher priority than that of the assignee.

The logic here is based on a recognition that the assignee cannot acquire a better title than that of the assignor. What he essentially gains by virtue of the assignment is a right to continue in the stead of the assignor in respect of that chose and nothing better.

In Re Knapman (1881) 18 Ch. D 300 the beneficiaries of a will brought an action against the executor seeking to revoke the probate. While the matter was in court, these beneficiaries assigned the right under the will to someone else.

Their action subsequently failed in court, the court ruled that the executor had a right to set off the costs of the suit against the estate. As such, since the right to this had already been assigned, the assignee has to settle this cost since he was assigned a property that had a pre-existing liability.

Claims of equities that arise after notice of the assignment has been given to the trustee would not affect the assignee however, except where the claim is very closely related to the original transaction upon which the chose came into existence.

The rule that the assignee takes subject to equities will not apply where the trustee is estopped, either by conduct or deed, from setting up equities against the assignee. It would not also apply where the agreement occasioning the original transaction includes a clause that the assignees of the assignor would take free from all equities.

Historically, assignment of choses in action was largely unrecognized at Common law. There was the fear that allowing such assignment would bring about Maintenance and even cases of Champerty as well as the risk of encouraging a litany of contentious matters on the same res.

Maintenance arises where a person who has no legal interest in a matter provides assistance by money or otherwise to a party to the suit while Champerty marries the foregoing with the prospect of reward out of the possible spoils of the suit.

Thus, no debt could be assigned at Common law unless the debtor specifically agreed to the assignment. The only exceptions allowed by Common law were in respect of choses in action assigned by or to the King and assignment of negotiable instruments in order to promote trade.

Equity has however always recognized the assignment of choses in action, both equitable and legal. It would not however allow the assignment of bare rights without accompanying interest in property. This was to avoid, as in the case of the Common law, situations that encourage Maintenance.

Assignability

Not all choses in action are assignable. The courts would not give effect to such assignments either on grounds of public policy or on account of the nature of the subject matter of the assignment.

Choses in action that are not assignable include:

• Salaries of public officials. This is because it is perceived that if allowed to assign their salaries, they may deprive themselves of their means of sustenance and thereby impair the efficiency which is most desirable for the public service.
• Alimony is not assignable on much the same grounds as salaries of public officials as the money is meant for the maintenance of the spouse.
• Rights arising out of a contract of a personal nature i.e. contracts that require personal service like employment.
• Expectancies (future choses) are not assignable at Common law based on the maxim: Nemo dat quod non habet. They are assignable in Equity although, such assignment must be for value.

Equitable Assignment

An equitable assignment is of a flexible nature. This flexibility makes it quite distinct from legal assignments as they do not require all of the formality required under the law. It may be in respect of a legal or equitable chose. Thus, there may be an equitable assignment of an equitable chose or an equitable assignment of a legal chose.

While there is no strict formality required for equitable assignments, certain criteria are instructive as to whether it would be considered valid or not.

For an equitable assignment to be considered as having been effected, there must be a clear intent to assign. While Equity does not require that the assignment be in writing or made in any particular format, there must be a clearly deducible intent to assign on the part of the assignor.

The intent to assign here will be construed from the words used and the particular circumstances of the case. If what is construed is a mere mandate/authority to hold onto certain property, no intent to assign may be ascribed by the court.

The position that Equity does not require writing for equitable assignments has however been affected by S. 9 of the Statute of Frauds and S. 78(1)(c) of the Property and Conveyancing Law which require that the assignment of any equitable interest or trust must be in writing.

The assignment is also required to be communicated to the assignee. Although, the assignee may still take in certain instances even without communication, subject to the right of the assignee to repudiate the transfer when he becomes aware of it.

The particular chose intended to be assigned must be identified. It is insufficient to give a vague representation of what is sought to be assigned. Such vagueness may impair the court’s construction of an intent to assign in such circumstance.

Consideration in equitable assignment depends on the circumstance. Where the assignment is complete in the sense that there is nothing left for the assignor to do to perfect the assignee’s title, there would be no need for consideration.

If it is incomplete though, consideration may be required. Consideration will also be required where the assignment concerns some future chose as the agreement in such instance can only be a contract to assign and all contracts must be backed by consideration.

No consideration is however required for assignment of existing choses.

There is no real requirement for notice of the equitable assignment to be given to the trustee of the liability. Notice is however useful to the extent that it puts the trustee on guard as to the change of rights affecting the chose and may prevent him from settling in favour of the assignor instead of the assignee.

It also makes the trustee liable to the assignee where he settles in favour of the assignor in spite of the notice given to him. Again, while the assignee generally takes subject to any prior equities affecting the chose, giving notice ensures that he would not be affected by any subsequent equities.

Most importantly, notice allows the assignee to establish the priority of his interest in consequence of the rule in DEARLE v HALL.

An equitable assignment of a chose in action has bearing on the manner in which the rights can be enforced in a court of law. The effect here is largely dependent on whether the chose in question is a legal or equitable chose and if the chose was absolutely assigned or not.

Where the assignment concerns a legal chose, the assignee cannot assert his title over the property in his own name. He must join the name of the assignor either as co-plaintiff, where he agrees, or as a defendant. Where the chose is equitable though, the assignee can sue in his own name.

An assignment is absolute when the assignor transfers his whole interest in the chose to the assignee. It is however non-absolute where it is made subject to some condition at the happening of which it would become inoperable or where only a charge is made on the chose, in favour of the assignee.

In this instance, only a part of the assignor’s interest is transferred. The effect of this is that in situations where the transfer was absolute, the assignee would be able to sue in his own name. Where it is not absolute however, he must join the assignor before he can enforce his rights over the chose.

Where the chose is legal though, it is immaterial whether it is absolute or not, the assignee must join the assignor.

Legal Assignment

The Common law rule against assignment of choses in action was only lifted in 1875 and this was via the provision of the Judicature Acts, particularly S. 25(6) . This provision is impari materia with S. 150(1) Property and Conveyancing Law .

The purport of those provisions is that there can be absolute assignments by writing of any debt or other legal thing in action when express notice in writing has been given to the trustee of the liability. Also, it shall be effectual to transfer the legal right to sue in respect of such thing, along with the legal and other remedies in respect of it and the power to give a good discharge for the chose without the assignor’s permission.

The provisions clearly contain ingredients that would make a legal assignment valid and these include the following:

• The assignment must be in writing and signed by the assignor.
• It must be in respect of some existing debt or other legal thing in action and this includes equitable choses in action.
• It must be absolute.
• There must be an express notice in writing given to the debtor, trustee, or other person from whom the assignor would have been entitled to receive the debt or claim the thing in action.

The assignment takes effect from the date that notice is given. Failure to give notice at all or failure to give it in writing or failure to even execute the writing in the first place will not invalidate the assignment.

Rather, it becomes an equitable assignment instead of a legal one. Further, there is no requirement for consideration here.

The position at Common law before the Act amended it was that the assignee had no right independent of the assignor’s and was obligated to sue in the assignor’s name if he wanted to enforce his rights over the chose.

The Acts have however changed this and the assignee no longer needs to sue in the name of the assignor. He can sue all by himself.

2 thoughts on “ Assignment of Choses in Action ”

Your really hoshmeasures sir thankx

Great work. You are appreciated sir!

Leave a Reply Cancel reply

Notify me by email when the comment gets approved.

Join an online course that makes it easy for you to get A’s in your law exams, you can check it out here: Get Access to Ace LL.B Exams.

• Insights & events

Assigning debts and other contractual claims - not as easy as first thought

Harking back to law school, we had a thirst for new black letter law. Section 136 of the Law of the Property Act 1925 kindly obliged. This lays down the conditions which need to be satisfied for an effective legal assignment of a chose in action (such as a debt). We won’t bore you with the detail, but suffice to say that what’s important is that a legal assignment must be in writing and signed by the assignor, must be absolute (i.e. no conditions attached) and crucially that written notice of the assignment must be given to the debtor.

When assigning debts, it’s worth remembering that you can’t legally assign part of a debt – any attempt to do so will take effect as an equitable assignment. The main practical difference between a legal and an equitable assignment is that the assignor will need to be joined in any legal proceedings in relation to the assigned debt (e.g. an attempt to recover that part of the debt).

Recent cases which tell another story

Why bother telling you the above?  Aside from our delight in remembering the joys of debating the merits of legal and equitable assignments (ehem), it’s worth revisiting our textbooks in the context of three recent cases. Although at first blush the statutory conditions for a legal assignment seem quite straightforward, attempts to assign contractual claims such as debts continue to throw up legal disputes:

• In  Sumitomo Mitsui Banking Corp Europe Ltd v Euler Hermes Europe SA (NV) [2019] EWHC 2250 (Comm),  the High Court held that a performance bond issued under a construction contract was not effectively assigned despite the surety acknowledging a notice of assignment of the bond. Sadly, the notice of assignment failed to meet the requirements under the bond instrument that the assignee confirm its acceptance of a provision in the bond that required the employer to repay the surety in the event of an overpayment. This case highlights the importance of ensuring any purported assignment meets any conditions stipulated in the underlying documents.
• In  Promontoria (Henrico) Ltd v Melton [2019] EWHC 2243 (Ch) (26 June 2019) , the High Court held that an assignment of a facility agreement and legal charges was valid, even though the debt assigned had to be identified by considering external evidence. The deed of assignment in question listed the assets subject to assignment, but was illegible to the extent that the debtor’s name could not be deciphered. The court got comfortable that there had been an effective assignment, given the following factors: (i) the lender had notified the borrower of its intention to assign the loan to the assignee; (ii) following the assignment, the lender had made no demand for repayment; (iii) a manager of the assignee had given a statement that the loan had been assigned and the borrower had accepted in evidence that he was aware of the assignment. Fortunately for the assignee, a second notice of assignment - which was invalid because it contained an incorrect date of assignment - did not invalidate the earlier assignment, which was found to be effective. The court took a practical and commercial view of the circumstances, although we recommend ensuring that your assignment documents clearly reflect what the parties intend!
• Finally, in Nicoll v Promontoria (Ram 2) Ltd [2019] EWHC 2410 (Ch),  the High Court held that a notice of assignment of a debt given to a debtor was valid, even though the effective date of assignment stated in the notice could not be verified by the debtor. The case concerned a debt assigned by the Co-op Bank to Promontoria and a joint notice given by assignor and assignee to the debtor that the debt had been assigned “on and with effect from 29 July 2016”. A subsequent statutory demand served by Promontoria on the debtor for the outstanding sums was disputed on the basis that the notice of assignment was invalid because it contained an incorrect date of assignment. Whilst accepting that the documentation was incapable of verifying with certainty the date of assignment, the Court held that the joint notice clearly showed that both parties had agreed that an assignment had taken place and was valid. This decision suggests that mistakes as to the date of assignment in a notice of assignment may not necessarily be fatal, if it is otherwise clear that the debt has been assigned.

The conclusion from the above? Maybe it’s not quite as easy as first thought to get an assignment right. Make sure you follow all of the conditions for a legal assignment according to the underlying contract and ensure your assignment documentation is clear.

Contact our experts for further advice

Search our site

• Help and information
• Comparative
• Constitutional & Administrative
• Criminal Justice
• Criminology
• Environment
• Equity & Trusts
• Competition
• Human Rights & Immigration
• Intellectual Property
• International Criminal
• International Environmental
• Private International
• Public International
• IT & Communications
• Jurisprudence & Philosophy of Law
• Legal Practice Course
• English Legal System (ELS)
• Legal Skills & Practice
• Medical & Healthcare
• Study & Revision
• Business and Government
• Share This Facebook LinkedIn Twitter

Sealy and Hooley's Commercial Law: Text, Cases, and Materials (6th edn)

• Note: The Effect of Brexit
• Preface to the sixth Edition
• New to this Edition
• Acknowledgements
• Table of cases
• Table of legislation
• 1. An introduction to commercial law
• 2. Basic concepts of personal property
• 3. Bailment
• 4. Introduction
• 5. Creation of agency, and the authority of the agent
• 6. Relations with third parties
• 7. Relations between principal and agent
• 8. Introduction and definitions
• 9. Passing of the property in the goods as between seller and buyer
• 10. Transfer of title
• 11. Seller’s obligations as to quality
• 12. Performance of the contract
• 13. Remedies of the seller
• 14. Remedies of the buyer
• 15. International sales
• 16. Modern payment systems
• 17. Payment cards and electronic money
• 18. Negotiable instruments
• 19. Bills of exchange
• 20. Cheques and miscellaneous payment instruments
• 21. The financing of international trade
• 22. Assignment of choses in action
• 23. Receivables financing
• 24. Introduction
• 25. Possessory security
• 26. Non-possessory security
• 27. Insurance
• 28. Insolvency

p. 787 22. Assignment of choses in action

• D Fox , D Fox Professor of Common Law, University of Edinburgh
• RJC Munday , RJC Munday Reader Emeritus in Law, University of Cambridge
• B Soyer , B Soyer Professor of Commercial and Maritime Law, Institute of International Shipping and Trade Law, Swansea University
• AM Tettenborn AM Tettenborn Chair in Law, Swansea University
•  and  PG Turner PG Turner Visiting Senior Fellow of the Melbourne Law School
• https://doi.org/10.1093/he/9780198842149.003.0022
• Published in print: 13 July 2020
• Published online: September 2020

This chapter deals with the general law of assignment of choses in action. Beginning with the historically based difference between equitable and statutory assignment, it then explains what ‘chose in action’ and ‘assignment’ are before discussing the requirement that there be an existing and assignable chose in action or right as well as the requirement that a person who holds an existing assignable chose in action intends to assign it. It also examines whether and when a rule of legal formality requires writing to be made; whether and when notice of the assignment is required; and obstacles to the enforcement of an assigned chose in action.

• chose in action
• law of assignment
• legal formality
• enforcement

You do not currently have access to this chapter

Please sign in to access the full content.

Access to the full content requires a subscription

Printed from Oxford Law Trove. Under the terms of the licence agreement, an individual user may print out a single article for personal use (for details see Privacy Policy and Legal Notice).

date: 03 April 2024

• Cookie Policy
• Privacy Policy
• Legal Notice
• Accessibility
• [66.249.64.20|185.66.15.189]
• 185.66.15.189

Characters remaining 500 /500

• Find a Lawyer
• Ask a Lawyer
• Research the Law
• Law Schools
• Laws & Regs
• Newsletters
• Justia Connect
• Pro Membership
• Basic Membership
• Justia Lawyer Directory
• Platinum Placements
• Gold Placements
• Justia Elevate
• Justia Amplify
• PPC Management
• Google Business Profile
• Social Media
• Justia Onward Blog

2020 Georgia Code Title 44 - Property Chapter 12 - Rights in Personalty Article 2 - Choses in Action § 44-12-22. Assignment of Choses in Action Arising Upon Contracts

Except as may be otherwise provided in Title 11, all choses in action arising upon contract may be assigned so as to vest the title in the assignee, but he takes it, except negotiable instruments subject to the equities existing between the assignor and debtor at the time of the assignment, and until notice of the assignment is given to the person liable.

(Orig. Code 1863, § 2224; Code 1868, § 2218; Code 1873, § 2244; Code 1882, § 2244; Civil Code 1895, § 3077; Civil Code 1910, § 3653; Code 1933, § 85-1803; Ga. L. 1943, p. 263, § 1; Ga. L. 1952, p. 225, § 9; Ga. L. 1982, p. 3, § 44; Ga. L. 1987, p. 3, § 44.)

- For note, "Wrongful Refusal to Pay Insurance Claims in Georgia," see 13 Ga. L. Rev. 935 (1979).

• General Consideration
• Requirements for Assignment of Choses in Action
• Assignable Choses in Action
• Rights of Parties

O.C.G.A. § 44-12-22 makes all choses in action assignable with full protection to the debtor as to all equities existing until the time of notice. Gilmore v. Bangs, 55 Ga. 403 (1875); Baer v. English & Co., 84 Ga. 403, 11 S.E. 453, 20 Am. St. R. 372 (1890); Hartford Fire Ins. Co. v. Amos, 98 Ga. 533, 25 S.E. 575 (1896); Herring v. First Nat'l Bank, 13 Ga. App. 492, 79 S.E. 359 (1913); Few v. Pou, 32 Ga. App. 620, 124 S.E. 372 (1924); Lamon v. Perry, 33 Ga. App. 248, 125 S.E. 907 (1924).

Except where contract involves relation of personal confidence, such as to show that the party conferring the rights must necessarily have intended them to be exercised only by that party upon whom they were actually conferred. Tifton, T. & G. Ry. v. Bedgood & Co., 116 Ga. 945, 43 S.E. 257 (1903); Adair v. Smith, 23 Ga. App. 290, 98 S.E. 224 (1919).

Intent of O.C.G.A. § 44-12-22. - The manifest intent of O.C.G.A. § 44-12-22 seems to be that the notice prescribed is intended to fix the status of all equities, and that, after such notice has been given, any equities subsequently arising are barred. Ellis v. Dudley, 19 Ga. App. 566, 91 S.E. 904 (1917).

To avoid disturbing the time-honored rule that none save the holder of the legal title can prosecute an action, O.C.G.A. § 44-12-22 provides that a regular assignment, in conformity to established custom, should operate to pass the legal title, and thus enable the assignee to maintain a suit in own name. Haug v. Riley, 101 Ga. 372, 29 S.E. 44, 40 L.R.A. 244 (1897).

- O.C.G.A. § 44-12-22 does not undertake to prescribe the manner in which choses in action may be assigned so as to vest the title. Haug v. Riley, 101 Ga. 372, 29 S.E. 44, 40 L.R.A. 244 (1897).

O.C.G.A. § 44-12-22 does not prohibit parties from providing that their contract shall not be assignable. Mingledorff's, Inc. v. Hicks, 133 Ga. App. 27, 209 S.E.2d 661 (1974).

O.C.G.A. §§ 9-12-21 and44-12-22 must be construed together harmoniously. Western Nat'l Bank v. Maverick Nat'l Bank, 90 Ga. 339, 16 S.E. 942, 35 Am. St. R. 210 (1892).

"Assigned" means transferred. Haug v. Riley, 101 Ga. 372, 29 S.E. 44, 40 L.R.A. 244 (1897).

- O.C.G.A. §§ 44-12-22 and44-12-24 distinguish damages to property and damages to person, and under them a right of action for damage to the person cannot be assigned, and a right of action for damage to property can be assigned. Benjamin-Ozburn Co. v. Morrow Transf. & Storage Co., 13 Ga. App. 636, 79 S.E. 753 (1913).

- In an executed sale, as distinguished from an executory contract to sell, where the instrument purports to make a present transfer of title, if the existence of the subject matter is not then actual or complete, it must at least be so potential as to amount to a present right in the vendor to a future interest or benefit; but where the instrument is merely an executory contract to sell, the parties may be bound, even though the subject matter is known to have neither an actual nor a potential existence, provided the agreement is not merely speculative, but contemplates an actual future delivery of the thing bargained for. Eibel v. Mechanics Loan & Sav. Co., 52 Ga. App. 349, 183 S.E. 133 (1935).

Cited in Murray & Co. v. Jones, 50 Ga. 109 (1873); Adams v. Robinson, 69 Ga. 627 (1882); Zellner v. Mobley, 84 Ga. 746, 11 S.E. 402, 20 Am. St. R. 390 (1890); Western Nat'l Bank v. Maverick Nat'l Bank, 90 Ga. 339, 16 S.E. 942, 35 Am. St. R. 210 (1892); Loudermilk v. Loudermilk, 93 Ga. 443, 21 S.E. 77 (1894); Peoples Bank v. Exchange Bank, 116 Ga. 820, 43 S.E. 269 (1902); Dean v. Bateman, 12 Ga. App. 253, 77 S.E. 102 (1913); Ellis v. Dudley, 19 Ga. App. 566, 91 S.E. 904 (1917); Fourth Nat'l Bank v. Odom, 147 Ga. 170, 93 S.E. 91 (1917); Garrard v. Milledgeville Banking Co., 168 Ga. 339, 147 S.E. 766 (1929); Macon Nat'l Bank v. Smith, 170 Ga. 332, 153 S.E. 4 (1930); Doepke v. Cocke, 45 Ga. App. 65, 163 S.E. 310 (1932); Southern Ry. v. Cole, 49 Ga. App. 635, 176 S.E. 512 (1934); National Fin. Co. v. Citizens Loan & Sav. Co., 184 Ga. 619, 192 S.E. 717 (1937); West v. Anderson, 187 Ga. 587, 1 S.E.2d 671 (1939); Delray, Inc. v. Reddick, 194 Ga. 676, 22 S.E.2d 599 (1942); Padgett v. Butler, 84 Ga. App. 297, 66 S.E.2d 194 (1951); Whatley v. Alto Corp., 211 Ga. 718, 88 S.E.2d 398 (1955); Mobley v. GMAC, 103 Ga. App. 584, 119 S.E.2d 804 (1961); S.M. & M. Realty Corp. v. Highlands Ins. Co., 123 Ga. App. 170, 179 S.E.2d 781 (1971); Ampex Credit Corp. v. Bateman, 554 F.2d 750 (5th Cir. 1977); Arrow Dyeing & Finishing Co. v. Clarklift of Dalton, Inc., 148 Ga. App. 693, 252 S.E.2d 197 (1979); Cobb Bank & Trust Co. v. American Mfrs. Mut. Ins. Co., 624 F.2d 722 (5th Cir. 1980); Dennard v. Freeport Minerals Co., 250 Ga. 330, 297 S.E.2d 222 (1982); Decatur N. Assocs. v. Builders Glass, Inc., 180 Ga. App. 862, 350 S.E.2d 795 (1986); Rome Hous. Auth. v. Allied Bldg. Materials, Inc., 182 Ga. App. 233, 355 S.E.2d 747 (1987); Hammond v. City of Warner Robins, 224 Ga. App. 684, 482 S.E.2d 422 (1997).

Assignment of chose in action must be in writing. Hawkes v. Mobley, 174 Ga. 481, 163 S.E. 494 (1932); Jarecky v. Arnold, 51 Ga. App. 954, 182 S.E. 66 (1935); Lumpkin v. American Sur. Co., 69 Ga. App. 887, 27 S.E.2d 412 (1943).

- Any language, however informal, will be sufficient to vest the title in the assignee, if it shows the intention of the owner of the chose in action to at once transfer it so that it will be the property of the transferee. Southern Mut. Life Ins. Ass'n v. Durdin, 132 Ga. 495, 64 S.E. 264, 131 Am. St. R. 210 (1909); Myers v. Adams, 14 Ga. App. 520, 81 S.E. 595 (1914); Peck v. Calhoun, 38 Ga. App. 764, 145 S.E. 528 (1928); Baker v. Sutton, 47 Ga. App. 176, 170 S.E. 95 (1933); Lumpkin v. American Sur. Co., 61 Ga. App. 777, 7 S.E.2d 687 (1940), later appeal, 69 Ga. App. 887, 27 S.E.2d 412 (1943).

Where the petition set forth a right in the petitioners, as assignees of a written option, to a reconveyance of described land upon the tender and offer to perform as made to the defendant, the court did not err in overruling the motion to dismiss the action. Barron v. Anderson, 204 Ga. 7, 48 S.E.2d 846 (1948).

- In order to infer an equitable assignment, such facts and circumstances must appear, as would not only raise an equity between the assignor and the assignee, but show that the parties contemplated an immediate change of ownership with respect to the particular fund in question, not a change of ownership when the fund should be collected or realized, but at the time of the transaction relied upon to constitute the assignment. Brown Guano Co. v. Bridges, 34 Ga. App. 652, 130 S.E. 695 (1925).

- It is not necessary that the fund attempted to be assigned shall be in actual existence at the time, for it is well settled that it is sufficient if it exists potentially. Brown Guano Co. v. Bridges, 34 Ga. App. 652, 130 S.E. 695 (1925).

- A partial assignment of a debt due the assignor will not vest in the assignee such a title to the part of the debt assigned as can be enforced in a common-law action, without a previous acceptance by the debtor. Rivers v. Wright & Co., 117 Ga. 81, 43 S.E. 499 (1903); Central of Ga. Ry. v. Dover, 1 Ga. App. 240, 57 S.E. 1002 (1907); Ison Co. v. Atlantic Coast Line R.R., 17 Ga. App. 459, 87 S.E. 754 (1916).

- An action at law by the assignee against a railway company, for that part of the wages earned by the assignor at the date of the assignment, cannot be maintained, unless the railway company assented to the assignment. Central of Ga. Ry. v. Dover, 1 Ga. App. 240, 57 S.E. 1002 (1907).

All choses in action arising upon contract, including accounts receivable, may be assigned so as to vest title and the right to sue on them in the assignee. William Iselin & Co. v. Davis, 157 Ga. App. 739, 278 S.E.2d 442 (1981).

Claim arising from breach of contract to become surety on a guano note is assignable. Adams v. Williams, 125 Ga. 430, 54 S.E. 99 (1906).

- A policy of insurance being a chose in action may be assigned so as to vest the title in the assignee, but the assignee takes it subject to the equities existing between the assignor and debtor at the time of the assignment. Morris v. Georgia Loan, Sav. & Banking Co., 109 Ga. 12, 34 S.E. 378, 46 L.R.A. 506 (1899); Sprouse v. Skinner, 155 Ga. 119, 116 S.E. 606 (1923); Baldwin v. Atlanta Joint Stock Land Bank, 189 Ga. 607, 7 S.E.2d 178 (1940); Parramore v. Williams, 215 Ga. 179, 109 S.E.2d 745 (1959).

After a life insurance policy has matured by the death of the insured, the policy may be assigned as any chose in action regardless of any stipulation in the policy. Progressive Life Ins. Co. v. Bohannon, 74 Ga. App. 617, 40 S.E.2d 564 (1946).

An assignment of an insurance policy for value received which recites that it "is an absolute assignment" is an absolute assignment as against the original beneficiary, and the insured under such an assignment will have no interest in the policy after assignment. Parramore v. Williams, 215 Ga. 179, 109 S.E.2d 745 (1959).

A beneficiary, having only a divestible interest which is not a vested right, is, in effect, divested of this interest by the assignment of an insurance policy subject to the payment of a debt. Ruis v. Bank of Albany, 213 Ga. 41, 96 S.E.2d 580 (1957).

- Trial court properly denied the appellant's motion to stay arbitration and granted the appellees' motion to compel arbitration because the assignment of the claims to the reinsurance company was valid and enforceable and, therefore, the reinsurance company could proceed as the sole claimant. McLarens Young Int'l, Inc. v. Am. Safety Cas. Ins. Co., 334 Ga. App. 819, 780 S.E.2d 464 (2015).

Subscription to capital stock of railroad company is a chose in action and assignable, and the assignee can enforce its payment under circumstances where the company could do so. Chattanooga R. & C.R.R. v. Warthen, 98 Ga. 599, 25 S.E. 988 (1896).

Any chose in action involving a property right may be assigned, and so a deed, as made after a breach, vested all the rights of the grantor as to this property, including the right to sue. Evans v. Brown, 196 Ga. 364, 27 S.E.2d 300 (1943).

- Automobile dealer had the right to assign a retail installment sales contract, and a discount deducted from the face amount of the contract when it was sold to a finance company was not a finance charge required to be disclosed by the dealer to the purchasers. Chancellor v. Gateway Lincoln-Mercury, Inc., 233 Ga. App. 38, 502 S.E.2d 799 (1998).

Chose in action based on tort is transferable where it directly involves right of property. Colter v. Livingston, 154 Ga. 401, 114 S.E. 430 (1922); Lamon v. Perry, 33 Ga. App. 248, 125 S.E. 907 (1924); Lumpkin v. American Sur. Co., 69 Ga. App. 887, 27 S.E.2d 412 (1943); Ricketts v. Liberty Mut. Ins. Co., 127 Ga. App. 483, 194 S.E.2d 311 (1972).

While action is pending for tort, there can be no legal assignment of the cause of action or of the damages to be recovered. Gamble v. Cent. R.R. & Banking Co., 80 Ga. 595, 7 S.E. 315, 12 Am. St. R. 276 (1888); Sullivan v. Curling, 149 Ga. 96, 99 S.E. 533, 5 A.L.R. 124 (1919); Colter v. Livingston, 154 Ga. 401, 114 S.E. 430 (1922).

Therefore, an action of deceit arising under O.C.G.A. § 51-6-2, which is a tort, is not assignable. Bates & Co. v. Forsyth, 64 Ga. 232 (1879).

- Where a surety company contracts to indemnify a bank against loss occasioned by the defalcation of any employee thereof, and upon an alleged defalcation by one of the bank's employees, the company pays the loss sustained by the bank upon the presentation to it by the bank of a claim of loss in accordance with the terms of the contract, the bank may properly transfer and assign its right of action against the employee to recover the amount of its loss to the company, and the surety company may maintain an action in its own name against the defalcating employee of the bank to recover the amount paid by it to the bank under the contract of indemnity made with the bank. Lumpkin v. American Sur. Co., 61 Ga. 777, 7 S.E.2d 687 (1940), later appeal, 69 Ga. App. 887, 27 S.E.2d 412 (1943).

Liability is asset assignable by trustee in bankruptcy of a corporation under an order of the referee in bankruptcy. Baker v. Sutton, 47 Ga. App. 176, 170 S.E. 95 (1933).

Transfer of note is fully within the terms of O.C.G.A. § 44-12-22. Jackson v. State, 5 Ga. App. 177, 62 S.E. 726 (1908).

- See Mordecai v. Stewart, 37 Ga. 364 (1867); Barron v. Walker, 80 Ga. 121, 7 S.E. 272 (1887); Akin v. Feagin, 90 Ga. 72, 15 S.E. 654 (1892); Nix v. Ellis, 118 Ga. 345, 45 S.E. 404 (1903); Central of Ga. Ry. v. King Bros. & Co., 137 Ga. 369, 73 S.E. 632 (1912); Southern Ry. v. Pitner & Raines, 17 Ga. App. 451, 87 S.E. 754 (1916).

Right of action on letter of credit is assignable. Adams v. Williams, 125 Ga. 430, 54 S.E. 99 (1906).

- Although a bond for title obligated the owners of certain land to make title thereto to the obligee, heirs, executors, and administrators, without adding assigns, it is nevertheless assignable under O.C.G.A. § 44-12-22. Fulcher & Co. v. Daniel & Son, 80 Ga. 74, 4 S.E. 259 (1887).

Architects' certificate is assignable. Timmons v. Citizens Bank, 11 Ga. App. 69, 74 S.E. 798 (1912).

- An entry in a bank book is equivalent to a receipt for money and is, consequently, evidence of a loan and of a contract for repayment on demand; as such, it is sufficient to establish the relation of debtor and creditor between the parties and it is assignable so as to vest a right of action in the assignee in the assignee's own name. Flanders & Huguenin v. Maynard, 58 Ga. 56 (1877).

Covenants are assignable. Tucker v. McArthur, 103 Ga. 409, 30 S.E. 283 (1898).

Right of heir to interest in ancestor's estate is assignable. Greenwood v. Greenwood, 178 Ga. 605, 173 S.E. 858 (1934).

Contingent right in certain real estate is assignable even though it is not at all certain that it would ever be transformed into a present right. Chattahoochee Holdings, Inc. v. Marshall, 146 Ga. App. 658, 247 S.E.2d 167 (1978).

- Although a debtor has no vested title or interest in an exemption at the time of its sale or assignment, the debtor has a chose in action and a potential right in the nature of a defeasible title, which is assignable. Eibel v. Mechanics Loan & Sav. Co., 52 Ga. App. 349, 183 S.E. 133 (1935).

An interest in the title to an exemption may be assigned in good faith to a creditor, not only before the exemption is set aside by the court, but even before bankruptcy proceedings are instituted. Eibel v. Mechanics Loan & Sav. Co., 52 Ga. App. 349, 183 S.E. 133 (1935).

O.C.G.A. § 44-12-22 inapplicable to bill of lading. Postell v. Avery & Co., 12 Ga. App. 507, 77 S.E. 666 (1913).

- The exclusive use of a person's name conveyed to a party for consideration may be assigned by that party in an enforceable contract. Fletcher v. Atlanta Bd. of Realtors, Inc., 250 Ga. 21, 295 S.E.2d 737 (1982).

- Appellate court properly affirmed the denial of summary judgment to a lawyer on a legal malpractice claim because in light of assignments allowable under O.C.G.A. §§ 44-12-22 and44-12-24, the Georgia Supreme Court agrees that the assignment of legal malpractice claims is not prohibited as a matter of law. Villanueva v. First Am. Title Ins. Co., 292 Ga. 630, 740 S.E.2d 108 (2013).

Georgia Supreme Court agrees with the Georgia Court of Appeals that legal malpractice claims are not per se unassignable. Villanueva v. First Am. Title Ins. Co., 292 Ga. 630, 740 S.E.2d 108 (2013).

Assignee can acquire no greater rights than the assignor had. Healey v. Morgan, 135 Ga. App. 915, 219 S.E.2d 628 (1975).

Contracting parties may waive or renounce what law has established in their favor provided such waiver or renunciation does not thereby injure others or affect the public interest. Young v. John Deere Plow Co., 102 Ga. App. 132, 115 S.E.2d 770 (1960).

Debtor under a conditional sale contract, by expressly agreeing not to set up as a defense to an action on the contract by the assignee thereof any claim the debtor may have had against the assignor of the contract, waived the right to plead failure of consideration in an action on the contract by the assignee, and such plea and the cross action for the down payment are without merit. Jones v. Universal C.I.T. Credit Corp., 88 Ga. App. 24, 75 S.E.2d 822 (1953); Young v. John Deere Plow Co., 102 Ga. App. 132, 115 S.E.2d 770 (1960).

Because third party failed to present sufficient evidence supporting its position that it had a right, as successor in interest, to sue on a creditor's account with the creditor's debtor in order to support that right, summary judgment in its favor in suit against the debtor was erroneously entered. Ponder v. CACV of Colo., LLC, 289 Ga. App. 858, 658 S.E.2d 469 (2008).

- If the agreement is for a consideration, it is binding on the same terms as any other agreement; and if it is executed, it needs no consideration. National Sur. Corp. v. Algernon Blair, Inc., 114 Ga. App. 30, 150 S.E.2d 256, rev'd on other grounds, 222 Ga. 672, 151 S.E.2d 724 (1966).

Claim of assignee of judgment is subject to such equities and defenses as may have existed in favor of the judgment debtor against the judgment creditor at the time of the assignment, but is not subject to rights which did not then exist in favor of such judgment debtor and of which the judgment debtor did not become possessed until some time later, as by the subsequent purchase of judgments against the judgment creditor. Sheffield v. Preacher, 175 Ga. 719, 165 S.E. 742 (1932).

Equities existing between assignor and debtor include the terms and conditions of the contract under which the indebtedness arose. National Sur. Corp. v. Algernon Blair, Inc., 114 Ga. App. 30, 150 S.E.2d 256, rev'd on other grounds, 222 Ga. 672, 151 S.E.2d 724 (1966).

- The equities between the maker and the payee, originating after a transfer to a third person, will not affect the rights of the holder, though the transfer is made after the note becomes due. Central Trust Co. v. Fargason, 21 Ga. App. 696, 94 S.E. 902 (1918).

- An assignee may sue in own name, but a mere equitable assignment or interest arising from paying for a chose in action, without written transfer, gives no right to sue upon it in the name of the equitable assignee. Florida Coca Cola Bottling Co. v. Ricker, 136 Ga. 411, 71 S.E. 734 (1911). See also Lamon v. Perry, 33 Ga. App. 248, 125 S.E. 907 (1924).

- Where the subject matter of a sale, purchase, and assignment is not a mere naked right of action, but assignable property, such as an execution, mortgage and note, the ownership carried with it a right to sue as an incident of such ownership. Reed v. Janes, 84 Ga. 380, 11 S.E. 401 (1890).

Upon the transfer to the plaintiffs of a bill of lading calling for a full quantity of corn, there is assigned to plaintiffs the right of action for the defendant's loss or conversion of a part of the corn. Askew & Co. v. Southern Ry., 1 Ga. App. 79, 58 S.E. 242 (1907).

Mere equitable title insufficient when plaintiff relies on title to recover possession of personal property wrongfully withheld from the plaintiff who must show a legal title; a mere equitable title will not suffice. Eibel v. Mechanics Loan & Sav. Co., 52 Ga. App. 349, 183 S.E. 133 (1935).

- An instrument, other than a draft, purporting to assign a sum of money to be paid out of a fund claimed to be in the hands of another, without describing the identical money intended to be conveyed, will not of itself convey legal title to any part of the fund which in fact may be in the hands of such other person; if anything is conveyed it is an equitable interest in the entire fund. Western & A.R.R. v. Union Inv. Co., 128 Ga. 74, 57 S.E. 100 (1907).

Choses in action are not subject to seizure and sale under executions based upon ordinary judgment, and can only be reached by the judgment creditor through a garnishment or some other collateral proceeding; and, inasmuch as such garnishment or collateral proceeding is necessary to fix the lien of the judgment so as to make it effective, an assignment of the chose in action by the debtor before the institution of such collateral proceeding passes to the assignee the property of the debtor in the chose in action assigned, freed from the lien of a general judgment previously rendered against the assignor. Greenwood v. Greenwood, 178 Ga. 605, 173 S.E. 858 (1934).

- Where a second assignment is of the entire chose in action, it vests in the assignee the legal title to the whole chose in action, and it is entitled to priority over the holder of a prior partial assignment of a chose in action to which the debtor of the assignor has not assented. King Bros. & Co. v. Central of Ga. Ry., 135 Ga. 225, 69 S.E. 113, 1912A Ann. Cas. 672 (1910).

Get free summaries of new opinions delivered to your inbox!

• Bankruptcy Lawyers
• Business Lawyers
• Criminal Lawyers
• Employment Lawyers
• Estate Planning Lawyers
• Family Lawyers
• Personal Injury Lawyers
• Estate Planning
• Personal Injury
• Business Formation
• Business Operations
• Intellectual Property
• International Trade
• Real Estate
• Financial Aid
• Course Outlines
• Law Journals
• US Constitution
• Regulations
• Supreme Court
• Circuit Courts
• District Courts
• Dockets & Filings
• State Constitutions
• State Codes
• State Case Law
• Legal Blogs
• Business Forms
• Product Recalls
• Justia Connect Membership
• Justia Premium Placements
• Justia Elevate (SEO, Websites)
• Justia Amplify (PPC, GBP)
• Testimonials

• Personal Profile
• See all online law products
• Guided Tour
• Subscriber Services

• Financial Law [FBL]
• International Commercial Arbitration [ICMA]
• Private International Law [PRIL]
• International Commercial Law [ICML]

Recently viewed (0)

• Save Search
• Share This Facebook LinkedIn Twitter
• Collapse All
• Foreword to The Third Edition
• Foreword to the Second Edition
• Foreword to the First Edition
• Preface to The Third Edition
• Preface to the First Edition
• Summary Contents
• Detailed Contents
• Table of Cases
• Statutory Instruments
• Netherlands
• United States
• Conventions
• Regulations
• International Conventions
• List of References
• List of Authority Abbreviations
• Preliminary Material
• Part III.01

Lorem ipsum dolor sit amet, consectetuer adipiscing elit, sed diam nonummy nibh euismod tincidunt ut laoreet dolore magna aliquam erat volutpat.

Go to full text on:

• United Nations

Treaty Establishing the European Community (as amended by other Treaties) (European Union) [2006] OJ 321 E/37 (Date signed: 25th March 1957)

• External Link

Part II The Transfer of Intangible Property, 13 Equitable Assignment of Choses in Action

From: the law of assignment (3rd edition), marcus smith, nico leslie.

This chapter studies the requirements that are necessary for an effective assignment of choses in action. In order to effect the assignment or a chose in action: the assignor must have manifested an intention to transfer the chose; the thing being assigned must be a chose in action, in present existence, certain or capable of being ascertained; the identity of the assignee must be clear; and the appropriate forms and formalities must have been satisfied. These requirements apply both to legal and equitable assignments. However, since legal assignments can only be affected by statute, the forms and formalities required for a legal assignment are those set out in the relevant legislation, and addressed elsewhere.

• [66.249.64.20|185.66.15.189]
• 185.66.15.189

•   Home

Welcome to the   Yale Law School Legal Scholarship Repository. This repository provides open, global access to the scholarship of Yale Law School faculty and jornals, as well as a selection of unique collections. 

Communities in Yale Law School Open Scholarship Repository

Select a community to browse its collections.

Recently Added

Local Legislatures and Delegation

THE DUTY OF CLIMATE CARE

The Constitutionality of Medicare Drug-Price Negotiation under the Takings Clause

The Synergy of Legal and Medical Palliative Care: Challenges and Opportunities in Palliative MLP and the Yale Experience

Targeting Health-Related Social Risks in the Clinical Setting: New Policy Momentum and Practice Considerations

Export search results.

The export option will allow you to export the current search results of the entered query to a file. Different formats are available for download. To export the items, click on the button corresponding with the preferred download format.

By default, clicking on the export buttons will result in a download of the allowed maximum amount of items.

To select a subset of the search results, click "Selective Export" button and make a selection of the items you want to export. The amount of items that can be exported at once is similarly restricted as the full export.

After making a selection, click one of the export format buttons. The amount of items that will be exported is indicated in the bubble next to export format.

• ASSIGNMENT OF CHOSES IN ACTION

Share This Post

 Emmanuel Bassey

• INTRODUCTION

As a general rule and based on the doctrine of privity a contract cannot confer rights or impose obligations on any person except the parties to the contract. Accordingly, a contract cannot be enforced by or against a person who is a stranger to it even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it. The main reason for this is that it is the parties’ contract, and they are always free to vary or discharge it by agreement. The creation of a third party right would impede this freedom unless an agreement for such third party involvement has been made part of the agreement.

As with every general rule, there is always an exception. One of the exceptions to the doctrine of privity of contract arises in the assignment of choses in action where the owner of a contractual right can transfer same to a third party without the consent of the debtor (the counter-party to the contract), thereby enabling the third party to enforce the right against the debtor. The process of transfer of such a right is known as “assignment” and the types of property which are susceptible to this type of transfer are known as “choses in action.”

This article sets out to trace the evolution, incidence, and the conditions precedent for a valid assignment of choses in action under Nigerian law.

• WHAT ARE CHOSES IN ACTION?

Choses in action is a legal expression used to describe all personal rights of property which can only be claimed or enforced by action and not by taking physical possession of them. They are also called “things in action” because they are things which a person is not possessed but has to bring an action in court in order to recover them. Choses in action may be legal or equitable. Legal choses in action are those which could historically only be enforced by an action at common law whilst equitable choses in action are choses in action which could only be enforced in the courts of equity- they arose out of property rights over which the Chancery Court formerly had exclusive jurisdiction. Examples of choses in action include debts, shares, negotiable instruments, policies of insurance, bills of lading, patents, copyrights, rights under trusts and legacies, benefit of a contract for sale of reversionary interest, rights to claim indefinite sums of money, as for compensation under Statute; damages for loss in which the assignee was the assignor’s insurer, a debt or benefit arising out of an existing contract, but payable at a future time and a claim for damages in tort. All these are intangible rights which cannot be physically possessed but only claimed or enforced by an action in court. They are in law permitted to be assigned by the holders (though they can neither be seen nor possessed) to third parties who would be able to enforce the rights against the debtors even though they were not parties to the original contract.

The term “assignment” refers to the act of transferring to another all or part of one’s property, interest, or rights.   The term denotes not only the act of transfer, but also the instrument by which it is effected. In Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd   the Court of Appeal held that “assignment means to give something to some body for their use or benefit. It also may mean to transfer right, property or title from the persons legally entitled to them to some body else for their benefit.”

The assignment of choses in action may be legal or equitable. Due to the vagaries of the historical evolution of law and equity, different considerations apply to the assignment of choses in action at law and in equity.

• ASSIGNMENT AT COMMON LAW

Historically, under common law contractual rights were hitherto not assignable without the consent of both contracting parties since they were things in action as opposed to things in possession. This common law rule stemmed from the difficulty of conceiving of transfer of an intangible, and the desire to avoid maintenance and champerty. The only methods of assigning contractual rights at common law were by novation and by procuring the debtor’s acknowledgment that he held for the assignee, both of which required the consent of the debtor, unless the assignment was done by the king or it involved the assignment of a mercantile chose in action like a negotiable instrument which are transferrable by mere delivery. Accordingly, legal choses in action could only be assigned at law with the consent of the debtor. The assignor was however, required to be joined as a party to any action to enforce the assignment (either as a plaintiff if he consented or as a defendant in the absence of consent) since there was no privity of contract between the debtor and the assignee.

Given the rigors of assignment of legal choses in action under the common law, the courts of equity developed more flexible requirements for the assignment of equitable choses in action. However, the most significant intervention was introduced by the enactment of the English Judicature Act of 1873 which introduced the concept of statutory assignment.

• STATUTORY ASSIGNMENT

The enactment of the Judicature Act, 1873 (a statute of general application in Nigeria) created an exception to the doctrine of privity of contract by introducing the concept of trust of a chose in action in section 25(6) of the Act, which provides as follows:

Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice;- (a) The legal right to such debt or thing in action (b) All legal and other remedies for the same and (c) The power to give a good discharge for the same without the concurrence of the assignor; Provided that if the debtor, trustee or other person liable in respect of such debt or thing in action has notice:- i. That the assignment is disputed by the Assignor or any person under him or; ii. Of any other opposing or conflicting claim to such debt or thing in action, he may if he thinks fit either call upon the person making claim hereto to inter plead concerning the same, or pay the debt or other in action in Court.

By section 25(6) of the Judicature Act, a contractual party could assign his rights under the contract subject to the conditions stated in the Act without any need for a novation or acknowledgment by the debtor.

• CONDITIONS FOR A VALID ASSIGNMENT OF CHOSES IN ACTION

In order for Section 25(6) of the Judicature Act 1873 to apply, three conditions must be fulfilled:

6.1 The assignment must be absolute and not purport to be by way of charge only

An absolute transfer is a transfer of the whole not a part of the chose in action. The test to be applied in determining whether an assignment is absolute is whether the assignor has unconditionally transferred to the assignee for the time being, the sole right to the debt in question as against the debtor in which case the assignment is absolute. The fact that the assignee is to hold proceeds of the debts or the surplus proceeds beyond the stated amount, on trust for the assignor does not prevent the assignment from being absolute.

An assignment that purports to be by way of charge only is not an absolute assignment. The relevant test is to decide whether the assignment merely gives a right to the assignee to payment out of a particular fund by way of security rather than an unconditional transfer of the fund to the assignee. The judicial reasoning behind the requirement for an absolute assignment is that the debtor should not be put in doubt or jeopardy by the arrangements between the assignor and the assignee as to whom he is to discharge his obligations.

No particular form or mode is prescribed or required by law for a legal assignment as long as the assignor absolutely and unequivocally indicates the transfer of the benefit, interest or title to the assignee.

6.2 It must be in writing under the hand of the assignor

No particular mode or form is necessary as the writing can be informal, as for instance, a direction in writing by a creditor to his debtor to pay the assignee, handed to the assignee, may amount to an assignment but such a direction handed to the debtor may not by itself constitute an assignment unless there is evidence that the assignee has requested or consented to it. It is also the law that even if the debtor has the direction, it may not constitute more than authority to pay, and gives the assignee no rights unless the instructions can be said to amount to an irrevocable mandate to the debtor.

6.3 Express notice in writing thereof must be given to the debtor or trustee

This notice is not required to be in a separate document purposely prepared as a notice and described as such. What is needed is that information relative to the assignment shall be conveyed to the debtor, and that it shall be conveyed in writing. A written demand for payment sent by the assignee to the debtor has been held to be sufficient once the notice is unconditional and given to the debtor personally before the assignee commences his action. It has also been held that since a creditor can assign by directing his debtor to pay the assignee, a single written document would suffice to constitute both the Assignment as well as the notice envisaged by the Act. Furthermore, it is not necessary for the notice to the debtor to be given by the assignor or the assignee; it may be given by a third party.

• LEGAL EFFECT OF A STATUTORY ASSIGNMENT

Once the above conditions have been fulfilled, certain legal consequences immediately follow:

• The assignee can sue the debtor in his own name instead of having to sue in the name of the assignor and perhaps to go to the Court of equity to compel his joinder in the action.
• Consideration is not required for the assignment.
• The consent of the assignee is not required for the assignment. However, where it is the liabilities or the burdens under a contract that are to be assigned to a debtor, the consent of the assignee is required.
• EQUITABLE ASSIGNMENT OF CHOSES IN ACTION

An equitable assignment of a chose in action arises in the event of an assignment of an equitable chose in action and where there has been a failure to comply with the statutory conditions for a valid assignment of a legal chose in action. Such an assignment which fails to comply with the requirements of the statute will not become invalid but will operate as an equitable assignment.

An equitable assignment may be in writing or oral. It may operate by way of a charge only or be part of the debt or chose. If there is an equitable assignment of an equitable chose in action the assignment being absolute, then the assignee is entitled to sue in his own name.

Any words will suffice provided they are unambiguous to the effect that an identifiable debt has been made over by the creditor to some third person. No privity of contract or consideration is required for equitable assignment provided that the assignor has, at the material time, done all that he can to perfect the gift.

An equitable assignment is binding even without notice to the debtor. However, as a matter of practice, notice to the debtor is very important for three reasons:

• In the absence of notice the debtor is entitled to discharge his obligations to the assignor and not to the assignee, whereas if he has notice he does so at his own peril and he may well be required to discharge the obligation a second time to the assignee with no entitlement to recovery from the assignor.
• The giving of notice to the debtor has an effect on prior equities. The general rule as regards assignment of choses in action is that an assignee takes subject to the equities that already apply to the property in question. Thus, anyone who has a prior interest (legal or equitable) in an assigned chose is entitled to a higher priority than that of the assignee. The reason for this is that the assignee cannot acquire a better title than that of the assignor. What he essentially gains by virtue of the assignment is a right to continue in the stead of the assignor in respect of that chose and nothing better.Claims of equities that arise after notice of the assignment has been given to the debtor would not affect the assignee, except where the claim is very closely related to the original transaction upon which the chose came into existence. The rule that the assignee takes subject to equities will not apply where the trustee is estopped, either by conduct or deed, from setting up equities against the assignee. It would not also apply where the agreement occasioning the original transaction includes a clause that the assignees of the assignor would take free from all equities.
• The date of notice establishes the order of priority as between successive assignees. Thus, where there are two or more assignees of the same chose in action, the first to give notice has priority over the other assignees even if they were first in time.

Assignment of choses in action provides a veritable avenue for the exchange of contractual rights, especially when the assignor does not have the wherewithal to enforce the right in court. This creates a win-win situation for the assignor and the assignee, as the assignor is immediately able to receive value for his rights and the assignee is able to enforce the right to receive whatever benefit he has contracted for whilst the debtor’s position is not adversely affected. The parties, however, need to understand the applicable principles so that they would know the extent of any rights that they acquire in any given transaction.

______________________________

For further information on this article and area of law, please contact Emmanuel Bassey  at: S. P. A. Ajibade & Co., Lagos by Telephone (+234 1 472 9890), Fax (+234 1 4605092) Mobile (+234.703.805.9736, +234.815.088.2839) Email: [email protected] www.spaajibade.com

• Emmanuel Abasiubong Bassey, Senior Associate in the Dispute Resolution Department of S.P.A. Ajibade & Co., Lagos, Nigeria.
• Makwe v. Nwukor & Anor (2001) LPELR-1830(SC) (pp 25 – 25 paras D – E). See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors. (2013) LPELR-20870(CA) (pp 62 – 98 paras A – E). It was however, held that the benefit of a contract is only assignable in cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it. See, Tolhurst v. Associated Portland Cement Manufacturers Ltd (1902) 2 K.B. 660 at 668, (1903) A.C. 414 cited in Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 24 – 25 paras E – C).
• I. E. Sagay, Nigerian Law of Contract (first published 1985, 2nd Edn, Spectrum Books Limited, Ibadan, 2000) 516.
• See, https://mcmahonsolicitors.ie/choses-in-action/ [accessed on 14th December 2023.] Supra.
• See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors (supra).
• See, FCMB v. Essien (2022) LPELR-58699(CA) (pp 6 – 6 paras E – F).
• See, FCMB v. Essien (supra).
• Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 24 – 25 paras E – C).
• The following choses are however not assignable: (1) Salaries of public officials. This is because it is perceived that if allowed to assign their salaries, they may deprive themselves of their means of sustenance and thereby impair the efficiency which is most desirable for the public service; (2) Alimony- because the money is meant for the maintenance of the spouse and (3) Rights arising out of a contract for personal service.
• Maintenance occurs when a third-party provides support for litigation without a just cause, by providing, for example, financial assistance. Champerty is an aggravated form of maintenance, where a third-party pays some or all of the litigation costs in return for a share of the proceeds.
• (36 & 37 Vict.) CHAPTER 66.
• In Nigeria, a statute of general application refers to refers to statutes which were in force in England on the 1st of January, 1900. They were to be applied by the courts in Nigeria as far as local circumstances permit. However, the Western Region is now exempted by virtue of Law of England (Application) Law of 1959. The West African Court of Appeal stated in Young v. Abina that it was not necessary for the statute to be in force in all of the United Kingdom, but it only had to be in force in England. See, https://www.learnnigerianlaw.com/learn/legal-system/englishlaw accessed on 12th December 2023.
• Section 25 (6) of the Judicature Act i873 which has now been repealed and replaced substantially by Section 136 of the English Law of Property Act, 1925, in England.
• See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors. (supra). It has been held that the benefit of a contract is only assignable in cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it. See, Tolhurst v. Associated Portland Cement Manufacturers Ltd (1902) 2 K.B. 660 at 668, (1903) A.C. 414 cited in Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 24 – 25 paras E – C).
• See, https://www.designingbuildings.co.uk/wiki/Legal_and_equitable_assignment [accessed on 14th December 2023].
• See, Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 25 – 26 paras D – D).
• See, Bateman v. Hunt, 20 T. L. R. 628.
• See, Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (supra).
• See, William Brandt’s Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454.
• If it is incomplete, consideration may be required. Consideration will also be required where the assignment concerns some future chose as the agreement in such instance can only be a contract to assign and all contracts must be backed by consideration. See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors (2013) LPELR-20870(CA) (pp 62 – 98 paras A – E).
• The notice may be written or oral and the wording of the notice may be informal. A newspaper article may be a sufficient notice to the debtor. See, Lloyd v Banks (1868) LR 3. Ch App 488.
• Re Knapman (1881) 18 Ch. D 300.
• https://djetlawyer.com/assignment-of-choses-in-action/#:~:text=An%20assignment%20of%20a%20chose,legal%20(statutory)%20or%20equitable [accessed on 5 December 2023].
• See, the rule in Dearle v Hall 3 Russell 1, 38 ER 475.

Subscribe To Our Newsletter

Get updates and learn from the best, more to explore.

Can The Factors Responsible For The Recent Improvement In Electricity Supply In Nigeria Sustainably Keep The Light On?

INTRODUCTION Inadequate supply of electricity in Nigeria has been rightly regarded as the singular most pervasive and debilitating cause of lack of adequate economic growth

THE IKOYI MARRIAGE REGISTRY FIASCO: AN ANALYSIS OF THE FEDERAL HIGH COURT’S DECISION

Introduction Recently, the media went abuzz with the news that a Federal High Court sitting in Lagos had declared marriages conducted at Federal Marriage registries

Privacy Overview

Remember me Lost your password?

Your Cart (0)

Your cart is empty Continue Shopping

Online Access

Trusting the signs to assign: assigning causes of action of trustee companies.

By Sam Kingston , Mathew Gashi

When a corporate trustee goes into liquidation, there is often uncertainty about how it is to be wound up which requires Court intervention. On 15 October 2021, the Federal Government initiated a consultation process relating to trusts and insolvency, which looks to consider, amongst other things, what powers an external administrator has to administer trust property.

Relevantly, liquidators generally have the power to assign causes of action belonging to a company, or claims conferred on the liquidator by the Corporations Act 2001 (Cth) ( Act ). However, a liquidator’s power to sell or assign causes of action has certain limitations which were recently considered in Anderson v Canaccord Genuity Financial Limited [2022] NSWSC 58 ( Anderson Judgment ). In particular, limitations may arise in circumstances where the company acted in a capacity as trustee of a trust, which highlights the complexities that arise when a corporate trustee is placed in liquidation.

In the Anderson Judgment, the Court found that where the causes of action arose from breaches of duty owed to a company in its capacity as a trustee of a trust, and the company in liquidation ceased to act as trustee (as is often the case), the proper plaintiff was the new trustee of the trust.

Contrary to some previous cases, the Court also seems to suggest that liquidators can assign rights which are proprietary in nature (such as, for example, judgment debts) and personal rights (such as, for example, claims for misleading and deceptive conduct).

The Court's judgment creates some uncertainty about whether personal rights to sue which are held by a company are also capable of assignment, and if so what rights can be assigned. In circumstances where there are conflicting judgments, practitioners should seek legal advice prior to negotiating the assignment of claims which might be considered 'personal' to the company.

In general, when considering whether to assign any claims or rights to sue, practitioners should carefully consider the nature and merits of the claims sought to be assigned. Practitioners should also be wary if any complicating factors might arise in the purported assignment, such as if the claims are those of the company itself or if they are claims only available to the trustee of a trust.

How does an assignment of a cause of action work?

A liquidator has the power to sell or dispose of a company’s property, which relevantly includes a ‘chose in action’ (such as potential claims). This is a useful power as assigning a cause of action may realise funds in circumstance where a liquidator might not be able to fund potentially valuable pieces of litigation. Additionally, a liquidator may assign any right to sue which is conferred on them under the Act provided the following conditions are met:

• If legal proceedings have already commenced, the right to sue cannot be assigned without the approval of the Court.
• Before assigning any right to sue, the liquidator must give written notice to the creditors of the proposed assignment.

The assignment of a cause of action is usually documented in a Deed of Assignment. Depending on the terms of the deed, the assignment might also be subject to additional conditions such as approval of creditors or the Court. This is particularly the case if the assignment is intended to last more than three months.

Once a cause of action has been assigned, the liquidator should generally issue a notice of assignment that complies with the relevant State property law acts [1] ( Assignment Notice ). It is worth noting that in the Anderson Judgment, an Assignment Notice was not issued. This was not fatal as the assignors of the causes of action were joined as parties to the proceeding, binding them to any judgment.

Assignment of claims of a trustee company

The key issue in the Anderson Judgment was whether there was a valid assignment of claims broadly described as ‘Conspiracy Claims’ made up of claims for breach of fiduciary duties and breach of the obligations of good faith and honesty arising from employment contracts.

The key considerations addressed in the Anderson Judgment on the assignment of causes of action are briefly summarised below.

Were the ‘Conspiracy Claims’ claims of the company or of the trust?

The Court held the assignee had standing to sue for any breach of obligation owed to the companies in liquidation, but only to the extent that the claims related to each company in its own right. Where the company entered into any agreement in its own capacity, and not as trustee of any trust, the assignment of any rights and obligations arising under those agreements was effective.

Conversely, the assignee could not sue for any breaches of obligations which were owed to a company in its capacity as trustee. The liquidator could not assign these rights because the company was not the proper plaintiff (it was the trustee of the trusts at the time claims were sought to be made).

Could a bare right to litigate or personal chose in action by assigned?

Many statutory causes of action are incapable of assignment, because they are personal to the company rather than proprietary in nature. Personal claims are claims which are only available to the person who suffered the relevant loss or damage. Common examples are claims for misleading and deceptive conduct under the Australian Consumer Law and breaches of director duties under the Act.

Relying on past judgments of the Supreme Courts of New South Wales and Western Australia, the Court:

• found breaches of fiduciary duty are claims capable of assignment under the Act [2]
• seemed to suggest that there is no reason to limit the assignment of claims to only those which are proprietary in nature in view of the wording of the Act. [3]

This approach conflicts with judgments of the Supreme Court of Victoria and the Supreme Court of New South Wales. Relevantly in:

• Pentridge, the Court found that statutory causes of action for misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) were unassignable [4]
• Re Colorado Products, the Court found that statutory causes of action for breaches of directors duties under the Act were not assignable. [5]

Implications

The Court’s judgment leads to some uncertainty about the extent to which personal rights to sue, which are held by a company, are capable of assignment. In general, when considering whether to assign any legal claims or rights to sue proceedings, practitioners should carefully consider the nature of the claims sought to be assigned. Practitioners should be wary if any complicating factors might arise in the purported assignment, such as if the claims are those of the company itself or if they are claims only available to the trustee of a trust.

[1] See for example section 134 of the Property Law Act 1958 (Vic), section 12 of the Conveyancing Act 1919 (NSW), Civil Law (Property) Act 2006 (ACT) s 205, Law of Property Act 2000 (NT) s 182, Property Law Act 1974 (Qld) ss 199, 200, Law of Property Act 1936 (SA) s 15, Conveyancing and Law of Property Act 1884 (Tas) s 86 and Property Law Act 1969 (WA) s 20. [2] Re Colorado Products Pty Ltd (In Prov Liq) (2014) 101 ACSR 233; [2014] NSWSC 789 ( Re Colorado Products ). [3] EC Dawson Investments Pty Ltd v Crystal Finance Pty Ltd (No 3) [2013] WASC 183. [4] Pentridge Village Pty Ltd (in liq) v Capital finance Australia Ltd [2018] VSC 633 ( Pentridge ). [5] Re Colorado Products.

Key contacts

Sam kingston, mathew gashi.

Senior Associate

Keep up to date with our legal insights and events

Related capabilities

Related services, recent articles.

How important is wording when it comes to a reasonable opportunity to respond?

By Catherine Dunlop , Taboka Finn

The High Court provides guidance on what is required when a party is invited to respond to ‘adverse material’

Truth and the public interest: defending defamation claims in 2024

By Rebecca Griffiths , Shaun Temby

We delve into defences a publisher of an allegedly defamatory statement may raise in defence of a defamation action.

Preparing for... the "Right to Disconnect"

By Vanessa Andersen , Michael Nicolazzo , Emma Short , and Michaela Biggins

We outline what employers can expect, and practical steps to take now to prepare for these changes.

Impact of Latest OAIC Data Breach Report on Victorian agencies and councils

By Melanie Olynyk

Key statistics identified in the latest Report, and key takeaways for Victorian government agencies and councils.

Maddocks Digital

A gateway for clients to interact and share documents.

Transparent live access to your complete conveyancing portfolio.

Maddocks Recoveries

Check progress, manage cases and respond.

Delegations & Authorisations

Delegations & Authorisations Service for Victorian Local Government.

Employment Contracts

Suitable, legally compliant, effective employment contracts.

What constitutes a valid assignment of a contract?

Published by a lexisnexis dispute resolution expert.

This Practice Note identifies what can be transferred when assigning rights under a contract and how to effect a valid assignment of a contract.

For guidance on common contract assignment scenarios, see Practice Note: Assigning contracts—common scenarios and considerations.

For guidance on the key practical and commercial considerations when assigning contracts, see Practice Note: How to assign rights under a contract.

Note also that when discussing assigning contractual rights, reference may also be made to assigning ‘ chose in action ’ in the sense that the benefit of a contract has been held to be a chose in action.

When is assignment of contracts relevant for consideration?

Contracts, or rather, rights under contracts, are frequently assigned as part of the way companies run their businesses. When advising a party in relation to a proposed or purported assignment (transfer) of a contractual right where there may be a dispute, you will need to consider:

what, when and how rights can be assigned

how an assignment can be challenged

Access this content for free with a 7 day trial of LexisNexis and benefit from:

• Instant clarification on points of law
• Smart search
• Workflow tools
• 41 practice areas

** Trials are provided to all LexisNexis content, excluding Practice Compliance, Practice Management and Risk and Compliance, subscription packages are tailored to your specific needs. To discuss trialling these LexisNexis services please email customer service via our online form. Free trials are only available to individuals based in the UK, Ireland and selected UK overseas territories and Caribbean countries. We may terminate this trial at any time or decide not to give a trial, for any reason. Trial includes one question to LexisAsk during the length of the trial.

Get your quote today and take step closer to being able to benefit from:

• 36 practice areas

Get a LexisNexis quote

* denotes a required field

To view the latest version of this document and thousands of others like it, sign-in with LexisNexis or register for a free trial.

Existing user? Sign-in CONTINUE READING GET A QUOTE

Key definition:

Chose in action definition, what does chose in action mean.

A right to something such as a payment of a debt or other contractual right that can be recovered through legal action

Popular documents

Forming enforceable contracts—consideration.

Forming enforceable contracts—considerationThis Practice Note examines the doctrine of consideration and the key role it plays in English law in determining whether a contract is enforceable.A promise will only be capable of being contractually enforced if it is either made in a deed or made in

The doctrine of res judicata

The doctrine of res judicataWhat is a res judicata?A res judicata is a decision given by a judge or tribunal with jurisdiction over the cause of action and the parties, which disposes, with finality, of a matter decided so that it cannot be re-litigated by those bound by the judgment, except on

Void contracts

Void contractsThis Practice Note summarises the circumstances in which a contract may be declared void and the consequences when that happens. It distinguishes between void, voidable and unenforceable contracts and considers when a contract may be void due to: common mistake, unilateral mistake as

What is a tort?

What is a tort?This Practice Note provides an introduction to tort law by addressing three questions:•what does the concept of being liable in tort mean? And how does tort relate to contract and criminal law•how has the law of tort developed?•what is the scope of tort, ie what interests does it

0330 161 1234

• International Sales(Includes Middle East)
• Latin America and the Caribbean
• Netherlands
• New Zealand
• Philippines
• South Africa
• Switzerland
• United States

Popular Links

• Supplier Payment Terms
• Partner Alliance Programme

HELP & SUPPORT

• Legal Help and Support
• Tolley Tax Help and Support

LEGAL SOLUTIONS

• Compliance and Risk
• Forms and Documents
• Legal Drafting
• Legal Research
• Magazines and Journals
• News and Media Analysis
• Practice Management
• Privacy Policy
• Cookie Settings
• Terms & Conditions
• Data Protection Inquiry
• Protecting Human Rights: Our Modern Slavery Agreement

03 Dec 2018

The practical issues of assigning a right to sue

Selling the ‘chose in action’—will it be a game changer.

• What rights to sue can be sold?
• How to determine the value of the claim/prospective claim and how much to sell it for?
• What information can be provided?
• How long will the assigned action take to conclude?
• Are there risks that cannot be assigned?

Business can be tough

Our team is focused and ready to help

Subscribe for all the latest help and news

Positive options start by having a conversation

For a no obligation and confidential chat, fill in your details and our team will reach out to you.

Subscribe Now

Get all the latest updates from Worrells

Nigeria: Assignment Of Choses In Action

• INTRODUCTION

As a general rule and based on the doctrine of privity a contract cannot confer rights or impose obligations on any person except the parties to the contract. Accordingly, a contract cannot be enforced by or against a person who is a stranger to it even if the contract is made for his benefit and purports to give him the right to sue or to make him liable upon it. The main reason for this is that it is the parties' contract, and they are always free to vary or discharge it by agreement. The creation of a third party right would impede this freedom unless an agreement for such third party involvement has been made part of the agreement. 2

As with every general rule, there is always an exception. One of the exceptions to the doctrine of privity of contract arises in the assignment of choses in action where the owner of a contractual right can transfer same to a third party without the consent of the debtor (the counter-party to the contract), thereby enabling the third party to enforce the right against the debtor. The process of transfer of such a right is known as "assignment" and the types of property which are susceptible to this type of transfer are known as "choses in action." 3

This article sets out to trace the evolution, incidence, and the conditions precedent for a valid assignment of choses in action under Nigerian law.

• WHAT ARE CHOSES IN ACTION?

Choses in action is a legal expression used to describe all personal rights of property which can only be claimed or enforced by action and not by taking physical possession of them. They are also called "things in action" because they are things which a person is not possessed but has to bring an action in court in order to recover them. 4 Choses in action may be legal or equitable. Legal choses in action are those which could historically only be enforced by an action at common law whilst equitable choses in action are choses in action which could only be enforced in the courts of equity- they arose out of property rights over which the Chancery Court formerly had exclusive jurisdiction. 5 Examples of choses in action include debts, shares, negotiable instruments, policies of insurance, bills of lading, patents, copyrights, rights under trusts and legacies, 6 benefit of a contract for sale of reversionary interest, rights to claim indefinite sums of money, as for compensation under Statute; damages for loss in which the assignee was the assignor's insurer, a debt or benefit arising out of an existing contract, but payable at a future time 7 and a claim for damages in tort. 8 All these are intangible rights which cannot be physically possessed but only claimed or enforced by an action in court. They are in law permitted to be assigned by the holders (though they can neither be seen nor possessed) to third parties who would be able to enforce the rights against the debtors even though they were not parties to the original contract.

• ASSIGNMENT OF CHOSES IN ACTION

The term "assignment" refers to the act of transferring to another all or part of one's property, interest, or rights. The term denotes not only the act of transfer, but also the instrument by which it is effected. 9 In Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd 10 the Court of Appeal held that "assignment means to give something to some body for their use or benefit. It also may mean to transfer right, property or title from the persons legally entitled to them to some body else for their benefit."

The assignment of choses in action may be legal or equitable. Due to the vagaries of the historical evolution of law and equity, different considerations apply to the assignment of choses in action at law and in equity. 11

• ASSIGNMENT AT COMMON LAW

Historically, under common law contractual rights were hitherto not assignable without the consent of both contracting parties since they were things in action as opposed to things in possession. This common law rule stemmed from the difficulty of conceiving of transfer of an intangible, and the desire to avoid maintenance and champerty. 12 The only methods of assigning contractual rights at common law were by novation and by procuring the debtor's acknowledgment that he held for the assignee, both of which required the consent of the debtor, unless the assignment was done by the king or it involved the assignment of a mercantile chose in action like a negotiable instrument which are transferrable by mere delivery. Accordingly, legal choses in action could only be assigned at law with the consent of the debtor. The assignor was however, required to be joined as a party to any action to enforce the assignment (either as a plaintiff if he consented or as a defendant in the absence of consent) since there was no privity of contract between the debtor and the assignee.

Given the rigors of assignment of legal choses in action under the common law, the courts of equity developed more flexible requirements for the assignment of equitable choses in action. However, the most significant intervention was introduced by the enactment of the English Judicature Act of 1873 13 which introduced the concept of statutory assignment.

• STATUTORY ASSIGNMENT

The enactment of the Judicature Act, 1873 (a statute of general application in Nigeria) 14 created an exception to the doctrine of privity of contract by introducing the concept of trust of a chose in action in section 25(6) 15 of the Act, which provides as follows:

Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice;- (a) The legal right to such debt or thing in action (b) All legal and other remedies for the same and (c) The power to give a good discharge for the same without the concurrence of the assignor; Provided that if the debtor, trustee or other person liable in respect of such debt or thing in action has notice:- i. That the assignment is disputed by the Assignor or any person under him or; ii. Of any other opposing or conflicting claim to such debt or thing in action, he may if he thinks fit either call upon the person making claim hereto to inter plead concerning the same, or pay the debt or other in action in Court.

By section 25(6) of the Judicature Act, a contractual party could assign his rights under the contract subject to the conditions stated in the Act without any need for a novation or acknowledgment by the debtor.

• CONDITIONS FOR A VALID ASSIGNMENT OF CHOSES IN ACTION

In order for Section 25(6) of the Judicature Act 1873 to apply, three conditions must be fulfilled:

• The assignment must be absolute and not purport to be by way of charge only

An absolute transfer is a transfer of the whole not a part of the chose in action. The test to be applied in determining whether an assignment is absolute is whether the assignor has unconditionally transferred to the assignee for the time being, the sole right to the debt in question as against the debtor in which case the assignment is absolute. The fact that the assignee is to hold proceeds of the debts or the surplus proceeds beyond the stated amount, on trust for the assignor does not prevent the assignment from being absolute. 16

An assignment that purports to be by way of charge only is not an absolute assignment. The relevant test is to decide whether the assignment merely gives a right to the assignee to payment out of a particular fund by way of security rather than an unconditional transfer of the fund to the assignee. The judicial reasoning behind the requirement for an absolute assignment is that the debtor should not be put in doubt or jeopardy by the arrangements between the assignor and the assignee as to whom he is to discharge his obligations. 17

No particular form or mode is prescribed or required by law for a legal assignment as long as the assignor absolutely and unequivocally indicates the transfer of the benefit, interest or title to the assignee. 18

• It must be in writing under the hand of the assignor

No particular mode or form is necessary as the writing can be informal, as for instance, a direction in writing by a creditor to his debtor to pay the assignee, handed to the assignee, may amount to an assignment but such a direction handed to the debtor may not by itself constitute an assignment unless there is evidence that the assignee has requested or consented to it. It is also the law that even if the debtor has the direction, it may not constitute more than authority to pay, and gives the assignee no rights unless the instructions can be said to amount to an irrevocable mandate to the debtor. 19

• Express notice in writing thereof must be given to the debtor or trustee

This notice is not required to be in a separate document purposely prepared as a notice and described as such. What is needed is that information relative to the assignment shall be conveyed to the debtor, and that it shall be conveyed in writing. A written demand for payment sent by the assignee to the debtor has been held to be sufficient once the notice is unconditional and given to the debtor personally before the assignee commences his action. It has also been held that since a creditor can assign by directing his debtor to pay the assignee, a single written document would suffice to constitute both the Assignment as well as the notice envisaged by the Act. 20 Furthermore, it is not necessary for the notice to the debtor to be given by the assignor or the assignee; it may be given by a third party. 21

• LEGAL EFFECT OF A STATUTORY ASSIGNMENT

Once the above conditions have been fulfilled, certain legal consequences immediately follow:

• The assignee can sue the debtor in his own name instead of having to sue in the name of the assignor and perhaps to go to the Court of equity to compel his joinder in the action. 22
• Consideration is not required for the assignment. 23
• The consent of the assignee is not required for the assignment. However, where it is the liabilities or the burdens under a contract that are to be assigned to a debtor, the consent of the assignee is required. 24
• EQUITABLE ASSIGNMENT OF CHOSES IN ACTION

An equitable assignment of a chose in action arises in the event of an assignment of an equitable chose in action and where there has been a failure to comply with the statutory conditions for a valid assignment of a legal chose in action. Such an assignment which fails to comply with the requirements of the statute will not become invalid but will operate as an equitable assignment.

An equitable assignment may be in writing or oral. It may operate by way of a charge only or be part of the debt or chose. If there is an equitable assignment of an equitable chose in action the assignment being absolute, then the assignee is entitled to sue in his own name. 25

Any words will suffice provided they are unambiguous to the effect that an identifiable debt has been made over by the creditor to some third person. 26 No privity of contract or consideration is required for equitable assignment provided that the assignor has, at the material time, done all that he can to perfect the gift. 27

An equitable assignment is binding even without notice to the debtor. However, as a matter of practice, notice to the debtor is very important for three reasons: 28

• In the absence of notice the debtor is entitled to discharge his obligations to the assignor and not to the assignee, whereas if he has notice he does so at his own peril and he may well be required to discharge the obligation a second time to the assignee with no entitlement to recovery from the assignor.
• The giving of notice to the debtor has an effect on prior equities. The general rule as regards assignment of choses in action is that an assignee takes subject to the equities that already apply to the property in question. Thus, anyone who has a prior interest (legal or equitable) in an assigned chose is entitled to a higher priority than that of the assignee. The reason for this is that the assignee cannot acquire a better title than that of the assignor. What he essentially gains by virtue of the assignment is a right to continue in the stead of the assignor in respect of that chose and nothing better. 29 Claims of equities that arise after notice of the assignment has been given to the debtor would not affect the assignee, except where the claim is very closely related to the original transaction upon which the chose came into existence. The rule that the assignee takes subject to equities will not apply where the trustee is estopped, either by conduct or deed, from setting up equities against the assignee. It would not also apply where the agreement occasioning the original transaction includes a clause that the assignees of the assignor would take free from all equities. 30
• The date of notice establishes the order of priority as between successive assignees. Thus, where there are two or more assignees of the same chose in action, the first to give notice has priority over the other assignees even if they were first in time. 31

Assignment of choses in action provides a veritable avenue for the exchange of contractual rights, especially when the assignor does not have the wherewithal to enforce the right in court. This creates a win-win situation for the assignor and the assignee, as the assignor is immediately able to receive value for his rights and the assignee is able to enforce the right to receive whatever benefit he has contracted for whilst the debtor's position is not adversely affected. The parties, however, need to understand the applicable principles so that they would know the extent of any rights that they acquire in any given transaction.

1 Emmanuel Abasiubong Bassey, Senior Associate in the Dispute Resolution Department of S.P.A. Ajibade & Co., Lagos, Nigeria.

2 Makwe v. Nwukor & Anor (2001) LPELR-1830(SC) (pp 25 - 25 paras D - E).

3 See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors. (2013) LPELR-20870(CA) (pp 62 - 98 paras A - E). It was however, held that the benefit of a contract is only assignable in cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it. See, Tolhurst v. Associated Portland Cement Manufacturers Ltd (1902) 2 K.B. 660 at 668, (1903) A.C. 414 cited in Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 24 - 25 paras E - C).

4 I. E. Sagay, Nigerian Law of Contract (first published 1985, 2nd Edn, Spectrum Books Limited, Ibadan, 2000) 516.

5 See, https://mcmahonsolicitors.ie/choses-in-action/ [accessed on 14th December 2023.]

7 See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors ( supra ).

8 See, FCMB v. Essien (2022) LPELR-58699(CA) (pp 6 - 6 paras E - F).

9 See, FCMB v. Essien ( supra ).

10 Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 24 - 25 paras E - C).

11 The following choses are however not assignable: (1) Salaries of public officials. This is because it is perceived that if allowed to assign their salaries, they may deprive themselves of their means of sustenance and thereby impair the efficiency which is most desirable for the public service; (2) Alimony- because the money is meant for the maintenance of the spouse and (3) Rights arising out of a contract for personal service.

12 Maintenance occurs when a third-party provides support for litigation without a just cause, by providing, for example, financial assistance. Champerty is an aggravated form of maintenance, where a third-party pays some or all of the litigation costs in return for a share of the proceeds.

13 (36 & 37 Vict.) CHAPTER 66.

14 In Nigeria, a statute of general application refers to refers to statutes which were in force in England on the 1st of January, 1900. They were to be applied by the courts in Nigeria as far as local circumstances permit. However, the Western Region is now exempted by virtue of Law of England (Application) Law of 1959. The West African Court of Appeal stated in Young v. Abina that it was not necessary for the statute to be in force in all of the United Kingdom, but it only had to be in force in England. See, https://www.learnnigerianlaw.com/learn/legal-system/englishlaw accessed on 12th December 2023.

15 Section 25 (6) of the Judicature Act i873 which has now been repealed and replaced substantially by Section 136 of the English Law of Property Act, 1925, in England.

16 See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors. ( supra ). It has been held that the benefit of a contract is only assignable in cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it. See, Tolhurst v. Associated Portland Cement Manufacturers Ltd (1902) 2 K.B. 660 at 668, (1903) A.C. 414 cited in Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 24 - 25 paras E - C).

17 See, https://www.designingbuildings.co.uk/wiki/Legal_and_equitable_assignment [accessed on 14th December 2023].

18 See, Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd (2009) LPELR-4381(CA) (pp 25 - 26 paras D - D).

19 See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors ( supra ).

21 See, Bateman v. Hunt, 20 T. L. R. 628.

22 See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors ( supra ).

24 See, Julius Berger (Nig) Plc & Anor v. Toki Rainbow Community Bank Ltd ( supra ).

25 See, https://www.designingbuildings.co.uk/wiki/Legal_and_equitable_assignment [accessed on 14th December 2023].

26 See, William Brandt's Sons & Co v Dunlop Rubber Co Ltd [1905] AC 454.

27 If it is incomplete, consideration may be required. Consideration will also be required where the assignment concerns some future chose as the agreement in such instance can only be a contract to assign and all contracts must be backed by consideration. See, Ben Electronic Co. (Nig) Ltd v. ATS & Sons & Ors (2013) LPELR-20870(CA) (pp 62 - 98 paras A - E).

28 The notice may be written or oral and the wording of the notice may be informal. A newspaper article may be a sufficient notice to the debtor. See, Lloyd v Banks (1868) LR 3. Ch App 488.

29 Re Knapman (1881) 18 Ch. D 300.

30 https://djetlawyer.com/assignment-of-choses-in-action/#:~:text=An%20assignment%20of%20a%20chose,legal%20(statutory)%20or%20equitable [accessed on 5 December 2023].

31 See, the rule in Dearle v Hall 3 Russell 1, 38 ER 475.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

  © Mondaq® Ltd 1994 - 2024. All Rights Reserved .

Login to Mondaq.com

Password Passwords are Case Sensitive

Forgot your password?

Why Register with Mondaq

Free, unlimited access to more than half a million articles (one-article limit removed) from the diverse perspectives of 5,000 leading law, accountancy and advisory firms

Articles tailored to your interests and optional alerts about important changes

Receive priority invitations to relevant webinars and events

You’ll only need to do it once, and readership information is just for authors and is never sold to third parties.

Your Organisation

We need this to enable us to match you with other users from the same organisation. It is also part of the information that we share to our content providers ("Contributors") who contribute Content for free for your use.

Chapter 23. Assignment of Choses in Action.

Azmi & Associates

Legal Consulting : Conception to Completion

Statutory Assignment vs Equitable Assignment

This article attempts to provide a brief overview of the differences between statutory assignment and equitable assignment. The actual application of the general rules described here would be subject to the applicable distinct facts and circumstances.

What is Assignment?

An assignment is a transfer of rights or liabilities such as those that arise under an instrument, chose in action 1 , or debt. An assignment can either be a statutory assignment or an equitable assignment.

In Malaysia, an assignment complying with Section 4(3) of the Civil Law Act 1956 was described as a ‘statutory assignment’ and an assignment not complying with Section 4(3) of the Civil Law Act 1956 was a ‘non-statutory assignment’ i.e., an equitable assignment. 2 The conditions of a statutory assignment are as follows: 3

(a) it must be absolute and did not purport to be by way of charge only;

(b) the assignment was in writing under the hand of the assignor; and

(c) express notice in writing thereof had been given to the debtor or trustee.

Meanwhile, an equitable assignment gives the assignee a right enforceable only in equity. The mode or form of assignment is absolutely immaterial provided the intention of the parties is clear. 4

Rules that Govern Assignments

Written notice is an essential part of a statutory assignment. Therefore, it is ineffective unless strictly accurate – accurate, for instance, as regards the date of the assignment and the amount due from the debtor. 5

However, notice is not necessary to perfect an equitable assignment. Even without notice to the debtor the title to the assignee is complete, not only against the assignor personally, but also against the persons who stand in the same position as the assignor, as, for instance, his trustee in bankruptcy, a judgement creditor or a person claiming under a later assignment made without consideration. 6

In regard to the form of notice, as mentioned earlier, a statutory assignment must comply with the form of notice required under Section 4(3) of the Civil Law Act 1956, whilst for an equitable assignment, no particular form is required to constitute a valid equitable assignment.

Additionally, it must be noted that although notice is not required for equitable assignments, an assignee must give notice to the debtor in order to get priority over other assignee(s). In this regard, the Federal Court in Public Finance Bhd v Scotch Leasing Sdn Bhd (In Receivership) (Perwira Habib Bank Malaysia, Intervener) [1996] 2 MLJ 369 explained in detail about the importance of notice:

“ We need to say a few words more about the great desirability of giving notice of assignment of a debt by an assignee to the debtor, even though absence of such notice does not affect the validity of the equitable assignment as between the assignor and the assignee. If notice is not given, the assignee must give credit for any payment made to the assignor by the debtor. This rule means that, by extension, even if the assignor assigns once more the debt to another person in fraud or otherwise on the earlier assignee, and that other person gives notice to the debtor; and if the debtor pays that other person or the second assignee, then the earlier assignee must still give credit to the debtor for his payment thus, for the debtor cannot be blamed for doing lawfully in ignorance of the title of the earlier assignee who has failed to give notice of the assignment to the debtor. Notice to debtor is for the protection of the assignee himself. It is this effect of what the debtor does lawfully as described that dims the view of the true role of the nemo dat rule in the resolution of disputed claims to a same debt. The money paid to the ‘second assignee’ can, of course, be recovered by the earlier assignee on the nemo dat principle. ”

(b) An assignee takes subject to equities

For both statutory assignment and equitable assignment, the assignee takes ‘subject to equities’, that is, subject to all such defences as might have prevailed against the assignor.

The general rule, both at law and in equity, is that no person can acquire title to a chose in action…from one who has himself no title to it. 7 In other words, the assignee can be in a no better position than the assignor was prior to the assignment. 8

(c) Rights incapable of assignment

Some choses in action are not assignable, and not every right which arises under or out of a contract can be assigned. 9 An example of rights incapable of assignment is where the nature of the contract is intended to be personal, therefore, it will be meaningless if it is assigned to another person.

Effect of Assignment

A statutory assignment has the sole intended effect of facilitating an assignee to sue in his own name directly irrespective of whether the chose in action is an equitable chose in action or a legal chose in action. 10

Meanwhile, the effect of an equitable assignment depends on whether the assignment is absolute or not. An absolute assignment of an equitable chose in action entitles the assignee to bring an action in his own name. 11 But a non-absolute assignment of an equitable chose in action does not entitle the assignee to sue in his own name but requires him to join the assignor as a party. 12

• ‘Chose in action’ is a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession (Associated Tractors Sdn Bhd v Woo Sai Wa [1997] 5 MLJ 441 (High Court)).
• MBF Factors Sdn Bhd v Tay Hing Ju (T/A New General Trading) [2002] 5 MLJ 536 (High Court).
• Williams Brandt Sons & Co v Dunlop Rubber Co [1905] AC 454 (House of Lords).
• Leong, A. P. B. (1998). Cheshire, Fifoot and Furmston’s Law of Contract (2nd ed.). Butterworths Asia, at page 861.
• Guest, A. G. (1984). Anson’s law of contract, at page 400.
• Meagher, R. P., Heydon, J. D., & Leeming, M. J. (2022). Meagher, Gummow and Lehane’s Equity Doctrine and Remedies (4th ed., p. 284). Butterworths LexisNexis.
• Guest, A. G. (1984). Anson’s law of contract, at page 402.
• Lim Chon Jet @ Lim Chon Jat & Ors v Wee Ai Hua & Anor [2022] 6 MLJ 243 (Court of Appeal).

Written by:

Nur Izzatie Azlan & Narina Aireen Hilmy Zaini  ( [email protected] )

Corporate Communications Azmi & Associates 28 November 2023

Related Articles

Corporate liabilities of directors under section 64 of the malaysian anti-trafficking in persons and anti-smuggling of migrants act 2007, the cost of going viral – intellectual property perspectives, government’s latest incentives for semiconductor industry in malaysia, selecting an arbitration seat: the art of being specific, adjudicators’ jurisdiction in construction industry payment and adjudication (cipa), privacy overview.

Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.

Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.

Dear Valued Clients,

Following the national fiscal (Budget 2024) announcement, the proposed Service Tax (ST) rate will be increased from the current rate of 6% to 8% with effect from 1 March 2024, on selected taxable services including the legal services sector.

At this point, Azmi & Associates (“ the Firm ”) has outlined a tentative approach to the proposed increase in ST, pending further clarifications and implementation guidelines from the relevant Ministry and the Royal Malaysian Customs Department.

During this period, the Firm reserves the right to update or modify the information as deemed necessary.

1. Effective Date The anticipated effective date for the implementation of the new tax rate (8%) is set for 1 March 2024.

2. Transitional rules for the proposed increase in Service Tax rate a. Service Tax at 6% is applicable on taxable services provided before 1 March 2024; Service Tax at 8% is applicable on taxable services provided post 1 March 2024. b. Taxable services spanning 1 March 2024: • Service Tax at 6% for the portion of taxable services provided before 1 March 2024 • Service Tax at 8% for the portion of taxable services provided post 1 March 2024

Should you have any queries or require further clarification on this matter, please feel free to reach out to us. We highly value our client relationships and are dedicated to ensuring a seamless transition through these changes.

Corporate Communications, Azmi & Associates – 16 February 2024

Powered by WhatsApp Chat

WhatsApp Chat is free, download and try it now here!

Chose in Action

Practical law canada glossary 0-621-0054  (approx. 2 pages).

• Canada (Common Law)

• Our partners
• Join the team
• Litigation & Dispute Resolution
• Commercial Law
• Employment Law
• Professional Negligence
• Data Breach & Cyber
• White Collar Crime
• Private Client
• Business owners
• High-net worth individuals
• Individuals impacted by professional negligence 
• Group actions & professional negligence
• Individuals impacted by data breaches
• Case studies
• Testimonials

Deed of Assignment and the Notice of Assignment -What is the Difference?

In this article, Richard Gray barrister takes a brief look at the differences between a Deed of Assignment and a Notice of Assignment and the effect of the assignment on the contracting party

At the end of 2020, Elysium Law were instructed to act for a significant number of clients in relation to claims made by a company known as Felicitas Solutions Ltd (an Isle of Man Company) for recovery of loans which had been assigned out of various trust companies following loan planning entered into by various employees/contractors.

Following our detailed response, as to which please see the article on our website written by my colleague Ruby Keeler-Williams , the threatened litigation by way of debt claims seem to disappear. It is important to note that the original loans had been assigned by various Trustees to Felicitas, by reason of which, Felicitas stood in the shoes of the original creditor, which allowed the threatened action to be pursued.

After a period of inertia, Our Clients, as well as others, have been served with demand letters by a new assignee known as West 28 th Street Ltd . Accompanying the demand letters is a Notice of Assignment, by reason of which the Assignee has informed the alleged debtor of the Assignees right to enforce the debt.

Following two conferences we held last week and a number of phone call enquiries which we have received, we have been asked to comment upon the purport and effect of the Notice of Assignment, which the alleged debtors have received. Questions such as what does this mean (relating to the content) but more importantly is the ‘Notice’ valid?

Here I want to look briefly at the differences between the two documents.

There is no need for payment to make the assignment valid and therefore it is normally created by Deed.

 The creation of a legal assignment is governed by Section 136 of the Law of Property Act 1925:

136 Legal assignments of things in action.

(1)Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice—

(a) the legal right to such debt or thing in action;

(b) all legal and other remedies for the same; and

(c) the power to give a good discharge for the same without the concurrence of the assignor:

Some of the basic requirements for a legal assignment are;

• The assignment must not be subject to conditions.
• The rights to be assigned must not relate to only part of a debt, or other legal chose in action.
• The assignment must be in writing and signed by the assignor.
• The other party or parties to the agreement must be given notice of the assignment.

Notice of assignment

To create a legal assignment, section 136 requires that express notice in writing of the assignment must be given to the other contracting party (the debtor).

Notice must be in writing

Section 136 of the LPA 1925 requires “express notice in writing” to be given to the other original contracting party (or parties).

 Must the notice take any particular form?

The short answer is no. Other than the requirement that it is in writing, there is no prescribed form for the notice of assignment or its contents. However, common sense suggests that the notice must clearly identify the agreement concerned.

Can we  challenge the Notice?

No. You can challenge the validity of the assignment assignment by ‘attacking the Deed, which must conform with Section 136. In this specific case, the Notice sent by West 28 th Street in itself is valid. Clearly, any claims made must be effected by a compliant Deed and it is that which will require detailed consideration before any right to claim under the alleged debt is considered.

Can I demand sight of the assignment agreement

On receiving a notice of assignment, you may seek to satisfy yourself that the assignment has in fact taken place. The Court of Appeal has confirmed that this is a valid concern, but that does not give an automatic right to require sight of the assignment agreement.

In Van Lynn Developments Limited v Pelias Construction Co [1969]1QB 607  Lord  Denning said:

“After receiving the notice, the debtor will be entitled, of course, to require a sight of the assignment so as to be satisfied that it is valid…”

The Court of Appeal subsequently confirmed this  stating the contracting party is entitled to satisfy itself that a valid absolute assignment has taken place, so that it can be confident the assignee can give it a good discharge of its obligations

The important document is the Deed of Assignment, which sets out the rights assigned by the Assignor. The Notice of Assignment is simply a communication that there has been an assignment. The deed is governed by Section 136 of the LP 1925. It should be possible to obtain a copy of the Deed prior to any action taken in respect of it.

For more information on the claims by West 28 th Street or if advice is needed on the drafting of a Deed, then please call us on 0151-328-1968 or visit www.elysium-law.com .

Related news

Get in touch.

Hall Ellis Solicitors

chose in action

Chose in action: meaning.

A chose in action is:

• an intangible property right or property
• which is legally not in a person's possession
• but is only enforceable by legal process.

The legal process begins with a chose in action and ends with a judgment or court order.

Therefore, a chose in action is a right to sue : a legal right. It's a property right. It's more often referred to as a cause of action .

A person owns a chose in action in the same way as someone owns the device you are using right now.

Choses in action comprise all personal rights of property which cannot be taken by possession of a physical object (ie a chose in possession). 

Depending on the cause of action, a person would be:

• owed a sum of money (ie a creditor owed a debt), and the debtor must pay the money
• entitled to performance of a contract
• the owner of intellectual property rights and entitled to sue for infringement
• entitled to a licence to use intellectual property rights

In turn, the remedy leads to the entitlement to enforce (aka "enjoy") the legal rights which flow from the chose in action, which is usually one or more of:

• an injunction
• specific performance

And suppose the debtor, did not pay the sum ordered to be paid, the creditor would be entitled to initiate action to enforce the judgment or order. 

For a chose in action to exist, there must be a remedy at common law or equity which recognises the chose.

So, if a remedy does not exist for the alleged chose in action, the chose in action cannot exist.

It's pronounced "ch-oh-se" in action.

Types of Choses in Action: Examples

Legal choses in action are enforceable in a court exercising its common law jurisdiction.

Well known forms of legal choses in action include:

• claims for debts
• patent rights
• trade marks
• design rights
• confidential information
• common design 
• interference with contractual rights

Equitable choses include:

• a share in a trust fund
• the share of proceeds of sale in the hands of a mortgagee.

Choses in action are also able to be established by reliance upon vicarious liability , apparent or ostensible authority and the law of agency, where the facts of the case permit.

Chose in Action Examples

• Chattels: One person can hand another a pen, and thereby pass possession of the pen. The pen is a physical object. In legal terminology, the pen is a chattel and a chose in possession, not a chose in action. 
• a chose in action
• which is personal property
• which is owned by you 
• which entitles you to sue the person for conversion
• for damages or delivery up of a chattel
• Copyright law: Suppose you own copyright in some software. The software is protected by copyright law. A person uses the software without your consent. As the person has not obtained a licence from you, it is an infringement of copyright law. Infringement entitles you to damages for your pecuniary loss and an injunction to restrain infringement (ie unlawful use of the software) in the future. The right to sue for infringement is a chose in action.
• Conspiracy: Continuing the copyright infringement example above, a series of people combine with an intention to infringe the copyright of your software. A separate, freestanding tort of conspiracy arises to render each of the participants in the conspiracy liable for the conspiracy.

Assignments

• Legal choses in action may be assigned in equity, at common law or by statute. 
• Equitable choses can be assigned in equity or by statute.

For an assignment of a legal chose in action to be effective by statute:

• it must be in writing,
• be absolute (the whole of the chose, unconditional and not a security interest),
• with notice to the debtor.

If an assignment is ineffective by statute (for instance, an assignment of part of a debt), it still may be effective in equity.

A deed of assignment or ordinary contract may be used to assign the property rights in a chose.

• Terms of Use
• Privacy Statement
• Cookie Policy

Legal Advice

• Software Legal Advice
• Business Contracts
• Intellectual Property Advice

Contact Information

89 Fleet Street London EC4Y 1DH

[email protected]

+44 20 7036 9282

To find out more about the Government’s amendments to the Bankruptcy Act please visit Bankruptcy amendment .

Choses in action

Official Trustee Practice Statement 6 explains the choses in action in bankruptcy.

On this page

Introduction, what is a chose.

• a chose in possession is a thing of which the owner has actual enjoyment
• a chose in action is a thing of which a person has not the present enjoyment, but merely a right to sue to recover it (if withheld) by commencing an action, and protected by the law.
• Examples of choses in action include money due on a bond, the right to recover money by legal action, the right of a beneficiary under a will to “due administration” with respect to the executor, the right to enforce a contract or recover damages for its breach and rights arising by reason of the commission of a tort (civil wrong) or other wrong.
• A common situation in bankrupt estates is where a person sells goods to another and then becomes bankrupt.  If, at the date of bankruptcy, the purchaser has not paid for the goods, the right to collect payment is an asset that vests in the trustee of the bankrupt estate.
• A chose in action may be assigned by written instrument signed by the assignor that is absolute in terms and by notice in writing being given to the debtor (see section 100-5 of the Insolvency Practice Schedule).  The Courts have confirmed the right of a trustee to sell a chose in action, including to a discharged bankrupt.  This is not possible in the case of an undischarged bankrupt as the “asset” would immediately revest in the trustee under paragraph 58(1)(b) of the Bankruptcy Act 1966 – see also the decision in Meriton Apartments Pty Limited v Industrial Court of New South Wales [2008] FCAFC 172 (13 October 2008) .

Actions where the official trustee commences proceedings

• Where a cause of action exists and the bankrupt has not commenced recovery as at the date of bankruptcy, if the cause of action has vested it is open to the Official Trustee to commence proceedings to enforce its rights – for example, to sue for a debt that was previously owed to the bankrupt.
• the probability of succeeding in the action
• the costs of pursuing the matter
• the attitude of the bankrupt’s creditors and whether they want to contribute towards any cost of recovery
• the ability of the other party to pay the amount awarded if the trustee is successful, and
• the possibility that the trustee could become liable for the defendant’s costs in the event the action is unsuccessful.
• Paragraph 19(1)(k) of the Bankruptcy Act affords a trustee protection in circumstances where such actions may be considered not cost-effective to recover.

Assignment of a cause of action

• A bankrupt who no longer has the ability to pursue a claim against another party may request that the trustee either pursue the action or sell that right back to the bankrupt (after discharge) or to an associated (third) party.  The trustee has a duty to the bankrupt as well as to the creditors in the estate and may consider either possibility.
• The potential defendants in the action may challenge any proposed assignment of the cause of action to the bankrupt or their associates.  The potential defendants may make a competing offer to purchase the cause of action from the trustee in order to ensure it does not proceed.  In any event, either party may challenge the trustee’s decision.

Section 60 of the Bankruptcy Act

• Where an action is on foot when bankruptcy occurs, the trustee is required to make an election under subsection 60(2) of the Bankruptcy Act to either abandon the proceedings or continue the action.  Subsection 60(3) provides the trustee with 28 days following service of notice of the action to make the election, otherwise it is deemed abandoned.
• However, under section 60, there are some types of action in which a trustee is not required to make an election.  Pursuant to subsection 60(4), any action involving a “personal injury or wrong” done to a bankrupt, to their spouse or de facto partner or to a member of their family is an action that can be continued by a bankrupt in their own name.  Likewise, an action in respect of the death of the bankrupt’s spouse or de facto partner or a member of their family may be continued by the bankrupt.  The fruits of any such action are not property a trustee would be entitled to recover as divisible property due to the exemption in paragraph 116(2)(g) of the Bankruptcy Act.
• The basic test to determine whether an action relates to a “personal injury or wrong” was set out in Cox v Journaux (No.2) [1935] HCA 48 and has been referred to in many subsequent cases, including Faulkner v Bluett [1981] FCA 3.  The test is that an action will be one for personal injury or wrong where the relief sought is to be assessed by immediate reference to the pain felt by the bankrupt in respect of their mind, body or character and without any reference to their rights to property.
• In some situations, it may not be immediately clear whether an action commenced by the bankrupt relates to a personal injury or wrong or is referrable to their property rights, and it is possible that an action may contain both elements.

Considerations

• A decision as to whether to pursue an action depends on several factors, including the potential amount to be realised in the estate and evidence of liability.
• advances and indemnities from creditors
• funding under section 305 of the Bankruptcy Act, and/or
• applying money in the estate.
• Where there is money in the estate that would in the normal course be available to creditors as a dividend, creditors’ views will be sought to ascertain whether they agree that the money being used to pursue the proceeding.  Creditors are presented with information to assist in making the decision.

Assignment of actions

• The Official Trustee may elect to assign a chose in action where a recovery is not a viable proposition within the administration of an estate.  There may be instances where the Official Trustee forms the view that prosecution of the action would not benefit the estate notwithstanding a bankrupt’s opposing opinion.
• The Official Trustee has several options for determining the value of the consideration that will depend on the action, the potential cost and benefit to the estate.  Creditors will be consulted during the process.
• The assignment of the action may be finalised by the Official Trustee and the assignee entering into a deed.  Usually, the assignee bears legal costs incurred in preparing the deed, with the trustee’s solicitor vetting the deed.

In sensitive situations, click or tap this bar to quickly exit this page.

We welcome your feedback to help us improve our website.

We are unable to respond to comments or suggestions. Alternatively, if you would like a response, you can  send us feedback  or  contact us .