Agency, Assignation, and Third Party Rights (L22)

Question 1

Who possesses contractual rights?

Answer 1

Rule: only the parties can sue on and exercise rights under the contract (‘privity of contract’).

Qualified in certain contexts:

• Transfer of rights.
  
  • Assignation.
• Conferring a right on a third party.
  
  • Acquiring.
    
    • Contract (Third Party Rights) (Scotland) Act 2017.
    • Replacing common law rules of jus quaesitum terti.
• Making a contract on behalf of a third party.
  
  • Agency.

Question 2

What is the terminology involved in assignation?

Answer 2

A contract may contain rights which can be transferred to a third party: the transfer is called assignation (or cession).

Asignor (or cedent) is contracting party who is transferring a right under contract (i.e. as creditor who can demand performance).

Third party to whom right is transferred becomes creditor in right, and is assignee (or cessionary).

Once completed, assignation entitles assignee to enforce contractual right against remaining party to contract: debtor.

Question 3

What are the stages of assignation?

Answer 3

1. Agreement to assign (i.e. a contract).
2. Assignation (i.e. conveyance, e.g. deed of transfer + delivery of deed to assignee).
3. Intimation to debtor (makes transfer of right effective and “perfects the right”).

Question 4

What did the case of Aurdal v Estrella 1916 SC 882 tell us about assignation?

Answer 4

Consent of debtor = NOT REQUIRED.

Lord Dundas (Inner House):
“I do not see why the contract may not lawfully be implemented, and the personal disability of the pursuers avoided, by the substitution of their transferee for themselves in the bill of sale…
The defenders … run no risk, as they will receive payment of the price before parting with the vessel, and they appear to me to have no legitimate interest at all to object to such substitution. I do not see that, in these circumstances, they have right or title to do so.”

Question 5

Assignation is not effective until intimation to the debtor.

Answer 5

Prior to intimation, obligation still discharged by performance to original creditor.
Notice: intimation ‘a formal process’.
- Private knowledge is not enough.
- Delivery by post of a certified copy of the assignation - Transmission of Moveable Property Act 1862.
- Less formal notice by letter with our without copy of assignation may be competent: validity not without doubt.
- Will usually be requested that the debtor responds confirming that they have received the intimation.
- Raising legal action counts as intimation.
- A public matter so does count.

Question 6

What is the defence of assignatus utitur jure auctoris?

Answer 6

Definition: all defences available against the assignor are available against the assignee.
Assignee’s right cannot be superior to the assignor’s.
Debtor can raise any defence which could have raised against assignor at the date of intimation.

Question 7

What does the case of Scottish Widows Fund v Buist 1876 5 R 64 tell us about the defence of assignatus utter jure auctoris?

Answer 7

Untrue statements were alleged to have been made:
“It is pleaded that the declaration contained several very important false statements, and upon that ground the policy is, under the special provision of the contract, necessarily void” (Lord President, Inner House).

The assignatus rule applied.

Argued:
“Any mis-statement or omission on the part of the assured, even if made, although it might have furnished a good objection against him, cannot affect the policy in the hands of onerous assignees”.

Decided (Inner House):
“If the creditor’s right is so sold to an assignee for value, and the assignee purchases in good faith, he is nevertheless subject to all the exceptions and pleas pleadable against the original creditor”.

Result:
Mr Buist’s claim invalid: insurer’s defence against claim valid against assignees in 1975 because already pleadable prior to assignation in 1872.

Question 8

When may a bar be placed on assignation?

Answer 8

• Express term.
• Delectus personae (an implied term).

Question 9

Bar on assignation: express term.

Answer 9

James Scott Ld v Apollo Engineering Ltd.

‘The sub-contractor shall not assign the benefit of the sub-contract nor sublet the whole or party of the sub-contract works without the prior written consent of [the pursuers]’.

Question 10

Bar on assignation: implied term.

Answer 10

Berlitz School of Languages v Duchêne.

Lord Kinnear:
“By our law contracts involving delectus personae are not assignable”.
This was a contract “involving relations of personable confidence”.
“The agreement in question brings out the personal character of the undertaking on both sides with very great clearness”.

Lord Maclaren:
“In fair construction the engagement is not to teach in any town where there is for the time being a branch of the business carried on by Mr Abraham.”
“But Mr Abraham is no longer the proprietor of these schools, and I am not unable to admit that an obligation not to teach where the other contracting party has a school can be extended to the case of schools carried on by a company which has acquired the school business by purchase.”
“It rather appears to me that such an obligation is personal to the employer, and can only be enforced in so far as he can shew an interest to enforce it.”