Deed of Assignment of Debt

An agreement that transfers one party’s rights in a contract but not its obligation or liabilities to a third party is called an assignment.
When completing this document, it is important to:

•        have a clear understanding of the laws relating to assignment; and

•        review the initial agreement to consider whether the assignor is entitled to assign their rights. If they are, whether these assignment rights are unfettered or restricted. For example, in many contracts a party is required to obtain the written consent of the third party in order to assign rights created under the contract.

Deed or agreement

An assignment of rights does not need to be set out in the form of a deed like this precedent. However, in order for any undertakings in the instrument to be enforceable against the assignor, the assignee will either have to:

•        provide valuable consideration to the assignor in which case the assignment of rights can be recorded in the form of an agreement; or

•        if the assignee does not provide valuable consideration then the assignment must be recorded in a deed.

Notice to the debtor

Notice of the assignment should be given to the debtor and, where the benefit of a guarantee securing payment of the debt is also being assigned, to the guarantor as soon as possible.

Power of attorney

The power of attorney in clause 3 is desirable where:

•        part of a debt is being assigned: except in Western Australia, a statutory assignment of part of a debt is not possible with the result that the assignee is unable to sue for the debt in his or her own name; and

•        a judgment debt is being assigned: while a statutory assignment of a judgment debt carries with it the right to enforce the judgment debt, it does not, of itself, give the assignee the right to control the proceedings relating to any appeal from the judgment giving rise to the judgment debt. If the assignee wishes to be able to bring proceeding to enforce payment of debt in the assignees name then the assignment deed must in express terms confer on the assignee powers of suing and enforcing payment, ie the assignment must include assignment of the cause or right of action rather than the fruits of action.

Stamp duty

The stamp duty implications of the assignment should be considered.