Assignment of Debt: Why the Debtor's Failure to Accept Exposes You to Challenge

Imagine you are the owner of a flat in Hérouville-Saint-Clair. You let it to a tradesman who, to pay his rent, assigns to you the debt he holds against a customer. You notify this assignment to the customer, but the customer has never formally accepted. Later, the customer refuses to pay, arguing that the tradesman's work was defective. Can you still demand payment? The question every property owner faced with an assignment of debt asks is simple: am I protected if the debtor has not accepted the assignment?

The French Supreme Court, in a judgment of 9 February 1993, answered unambiguously: without the debtor's acceptance, the assignee (the person who receives the debt) cannot rely against the debtor on the principle of the non-opposability of defences — in other words, the debtor retains the right to refuse payment by invoking problems with the assignor. This decision, rendered under number 91-13.601, has become a reference for all professionals in property and banking law.

So, concretely, what does this judgment mean for you, owner, tenant or developer? Let us delve into the facts and the judges' reasoning to understand how to avoid a costly dispute.

The Facts: An Everyday Story

We are in 1988. SCI Languedoc, owner of a building in Ifs, entrusts renovation work to a company. To finance this work, the company assigns its debt against SCI to a bank, in accordance with the Dailly Law of 2 January 1981 — a mechanism that allows companies to obtain quick financing by assigning their invoices to a credit institution. The bank notifies the assignment to SCI Languedoc, but SCI never gives its formal acceptance.

A few months later, the works are terminated for non-performance: the company has poorly carried out certain services. At maturity, the bank demands payment from SCI. SCI refuses, invoking the termination of the works contract. The bank sues SCI for payment. Before the Court of Appeal, the bank argues that, as assignee, it is protected by Article L. 313-29 of the Monetary and Financial Code (which prohibits the debtor from raising defences arising after notification of the assignment). But the Court of Appeal rules in favour of SCI: the bank cannot rely on this protection because SCI did not accept the assignment in the forms prescribed by law.

The bank appeals to the Supreme Court. It argues that the defence of non-performance arose after notification and should therefore be non-opposable. The Supreme Court dismisses the appeal. It confirms that, without the debtor's acceptance, the assignee cannot benefit from the non-opposability of defences. The debtor may therefore raise all defences that could have been raised against the assignor, regardless of when they arose.

The Reasoning of the Court — Dissected

The heart of the dispute lies in the interpretation of the Dailly Law (Law No 81-1 of 2 January 1981), now codified in Articles L. 313-23 et seq. of the Monetary and Financial Code. This text allows the assignment of professional debts to a credit institution, with a protective regime for the assignee: if the assignment is notified to the debtor, the debtor can no longer raise against the assignee defences that could have been raised against the assignor, unless they arose before notification. But this protective regime assumes that the debtor has accepted the assignment in the forms prescribed by law. Without such acceptance, the debtor retains all defences.

The Supreme Court recalls this fundamental principle: the debtor's acceptance is an essential condition for the assignee to be able to rely on the non-opposability of defences. It specifies that this acceptance must be given in the forms prescribed by law — that is, by a specific written document, often an assignment form signed by the debtor. Failing that, the debtor remains free to raise all defences, even those arising after notification.

In this case, SCI Languedoc had not signed an acceptance. The bank could therefore not invoke the lateness of the defence of non-performance. The Court of Appeal had found that the termination of the works contract occurred after notification, but that was irrelevant: without acceptance, the bank was treated as an ordinary law assignee, subject to classical civil law. The Supreme Court validates this reasoning and dismisses the appeal.

This decision is neither a reversal nor an innovation: it confirms a strict reading of the Dailly Law. The judges insist on legal certainty: to benefit from a derogatory regime, its conditions must be respected. The bank, a credit professional, could not ignore this requirement.

What This Changes for You — Concretely

If you are a landlord-owner in Hérouville-Saint-Clair or Ifs: if your tenant assigns a debt to you to pay his rent, you must demand his written acceptance of the assignment. Without it, you risk being in the same situation as the bank: the debtor (the tenant's customer) may refuse to pay by invoking a defect of your tenant. For example, if you let a commercial unit to a tradesman in Hérouville-Saint-Clair for €800/month, and he assigns to you a debt of €5,000 against a customer, ensure that the customer signs an acceptance form. Otherwise, if the customer challenges the quality of the work, you will not be able to demand payment.

If you are a tenant or professional debtor: this decision protects you. If you are notified of an assignment of debt without having formally accepted, you retain all your defences. For example, if you are a tenant of a flat in Ifs and your landlord assigns his rent debt to a bank, you can raise against the bank the unresolved dampness problems, even if the assignment was notified before.

If you are an assignee (bank, factor, etc.): the lesson is clear: do not be satisfied with merely notifying the assignment. Demand the debtor's written acceptance, at the risk of losing the protection of the Dailly Law. This can involve considerable sums: imagine an assignment of €100,000 for a construction site in Ifs. Without acceptance, the debtor can raise a latent defect or non-performance, and you will not be able to recover the funds.

Four Tips to Avoid This Type of Dispute

• Demand a written acceptance signed by the debtor: do not rely on a simple notification. The debtor must sign a specific document, often an acceptance form, compliant with the requirements of the Dailly Law. Keep this original carefully.
• Check the regularity of the assignment in advance: before financing a debt, ask the assignor to provide proof of the debtor's acceptance. Without it, the risk of non-payment is high.
• In case of doubt, consult a specialised lawyer: if you are a debtor and an assignment is notified to you without acceptance, you can legitimately challenge payment. A lawyer will help you structure your arguments.
• Anticipate disputes: if you are an assignor (for example, a tradesman), ensure that your customer accepts the assignment in writing. This protects your bank and facilitates the financing of your activity.

Further Details: Related Case Law and Developments

This 1993 decision is part of a consistent line of the French Supreme Court. Already, in a judgment of 10 March 1987 (No 85-14.567), the Court had held that the debtor's acceptance conditions the opposability of defences. More recently, in a judgment of 14 December 2010 (No 09-70.565), the Commercial Chamber specified that acceptance may be tacit, but it must be certain and unequivocal. The trend of the courts is therefore to maintain a strict requirement of formal acceptance, while admitting indirect proof. This means that, to be safe, it is better to obtain a written document.

For the future, digitalisation of procedures may relax the form of acceptance, but current case law remains protective of the debtor. Banks and professionals must therefore be doubly vigilant.

What You Absolutely Must Remember

Checklist: What to do if you receive a notification of assignment of debt?

1. Check if you have signed a formal acceptance. If yes, you can only raise defences that arose before notification.
2. If you have not accepted, you may raise all defences (non-performance, latent defect, etc.), even those arising after notification.
3. Keep all documents: initial contract, notification, correspondence.
4. Consult a lawyer if the debt is significant (over €5,000) or if the dispute is complex.

Are you in a similar situation? A 30-minute initial consultation with Maître Zakine (€45) can save you months of proceedings — and often more. Book an appointment →