What is an assignment of contract?
In a contract assignment, the entire legal position of the debtor or creditor is transferred to a third party. The entire legal position comprises the sum of all claims and debts. Contract assignment involves a combination of the rules regarding assignment (for the active components of the agreement) and assumption of debt in the broad sense (for the passive side). In the theory developed by legal scholarship, a distinction is made between complete and imperfect contract assignment.
The legal basis for assignment of contract
The old Civil Code did not provide for a general statutory regime governing assignment of contract. Legal doctrine nevertheless argued that assignment of contract should be an independent legal concept, distinguishing between complete and incomplete assignment of contract.
On the other hand, a number of applications of assignment of contract could be found in the old Civil Code and elsewhere. These provisions sometimes also depart from general law.
Examples of applications of assignment of contract include the transfer of a commercial lease upon sale of the leased property (Article 10 of the Commercial Lease Act), the transfer of a lease agreement (Article 1717 of the old Civil Code), and the transfer of a farm lease (Articles 30 and 34 of the Farm Lease Act), … Different statutory rules may apply to such specific agreements.
Complete assignment of contract
In a complete assignment of contract, the other contracting party gives its consent and agrees that its contracting party is replaced by a third party. A complete assignment of contract means that all rights and obligations under the agreement are transferred. The transferor is, unless the contract provides otherwise, released from debts that become due after the assignment. This is generally an agreement involving three parties.
Incomplete assignment of contract
In an incomplete assignment of contract, the other contracting party has not given its consent: only the transferee may exercise the rights arising from that contractual position. The transferor nevertheless remains jointly and severally liable for the consequences of exercising those rights. If the other contracting party subsequently accepts the assignment, the rules governing complete assignment of contract apply.
The new Book 5 of the Civil Code
The Act of 28 April 2022 remedied this gap in the law. It created a general statutory regime for assignment of contract in new Article 5.193 of the Civil Code. This article adopts the theory developed in legal doctrine. It also distinguishes between cases where consent has been given (= complete assignment) and cases where consent has not been given (= incomplete assignment).
The Act of 28 April 2022 inserting Book 5 ‘Obligations’, including Article 5.193 of the Civil Code, entered into force on 1 January 2023.
The current statutory regime is set out in Article 5.193 of the Civil Code.