Transfer of the right to demand and transfer of obligations in civil transactions
Normally, in an obligation relations, the obligor will have to perform the obligation to the party with the right and the party with the right will have the right to request the obligor to perform the obligation. However, in fact, the party with the right and the obligor can transfer the right to demand and obligations to a third party according to the agreement. In this article, TNTP’s lawyers will analyze the provisions of the Civil Code 2015 on transfer of the right to demand and transfer of obligations.
1. Transfer of the right to demand
• Transfer of the right to demand means the right-holder transferring the right to demand to a a third party under an agreement. Concurrently, the transfer of the right to demand is not subject to the consent of the obligor (Regulations on the transfer of the right to demand are specified in Articles 365, 366, 367, 368, and 369 of The Civil Code 2015).
• Cases in which the right to demand is not transferable include: (1) The right to demand support money and to claim compensation for damage caused by infringement upon his/her/its life, health, honor, dignity, or reputation; and (2) The party with the right and the obligor have agreed on the non-transfer or the transfer is not permitted by law.
Basically, non-transferable rights are rights that only the person who has the right to enjoy them has practical value. For example, the right to claim support money is only meaningful for the person who is supported, and the right to claim compensation for damage caused by health infringement is only meaningful for the person whose health has been violated to compensate for the health losses they have suffered.
Moreover, in principle, the transfer of rights must neither violate the provisions of law nor contravene social morality.
• Regarding the legal consequences of the transfer of the right to demand: In principle and legal provisions, after the right to demand is transferred, the transferee becomes the party with the right to demand. At that time, the transferee will have the right to demand the obligor to perform the obligation. Concurrently, the transferee shall assume no liability for the obligor’s ability to perform the obligation after transferring the right to demand, unless otherwise agreed upon.
Note: In case the right to demand the performance of an obligation is accompanied by a security measure, the transfer of the right to demand must also include such security measures.
• Regarding the obligations of the transferor of the right to demand, the transferor of the right to demand has the following obligations:
– The obligation to notify: The transferor of the right to demand shall notify in writing the obligor of the transfer unless otherwise agreed upon. In case the transferor of the right to demand fails to notify such transfer, thus making the obligor incur expenses, the transferor shall pay these expenses.
– The obligation to provide information and transfer papers: The transferor of the right shall provide necessary information and transfer relevant papers to the transferee.
• Regarding the obligor’s right of refusal:
After the party with the right to transfer the right to demand to the transferee, the obligor shall perform the obligation to the trasferee instead of performing the obligation to the transferor. However, because the transfer of rights is a transaction of the transferor and the transferee, the obligor does not have the right to participate. Therefore, in order to protect the legitimate interests of the obligor, the law stipulates that the obligor may refuse the demand of the transferee in the following cases:
Firstly, in case the obligor is not informed of the transfer of the right to demand and the transferee fails to prove the validity of the transfer of the right to demand, the obligor may refuse to perform the obligation toward the transferee.
Secondly, in case the obligor, due to not being informed of the transfer of the right to demand, and has already performed the obligation toward the transferor, the transferee will not be able to request the obligor to perform the obligation toward them. In this case, when the transferee demands the obligor to perform the obligations, the obligor has the right to refuse.
2. Transfer of obligations
• Transfer of obligations means the act of the obligor to transfer the obligation to a third party base on the consent of the right-holder. This is the fundamental difference between the transfer of rights and the transfer of obligations. Since for the transfer of obligations, after the transfer, the obligation transferee performs the obligation on behalf of the obligor, thus the ability of the obligation transferee to perform the obligations is a factor that directly affects the legitimate interests of the party with the right. Therefore, the law stipulates that the transfer of obligations must have the consent of the party with the right (The legal provisions on the transfer of obligations are specified in Articles 370 and 371 of The Civil Code 2015).
• Regarding the conditions for transfer of obligations: The obligor may only transfer the obligation to a third party when the party with the right consent with such transfer.
• Regarding cases in which the obligation is not transferred: in case the obligation is associated with the personal identity of the obligor or the transfer of the obligation is prohibited by law.
Just like in the case of the transfer of the right to demand, obligations that only certain individuals and organizations perform have practical value shall not be transferred. According to the current law, these are obligations associated with the personal identity of the obligor.
• Regarding legal consequences of the transfer of obligations:
– After the transfer of the obligation, the transferee becomes the obligor. In this case, the transferee shall perform the obligation to the party with the right when it becomes due or when the party with the right demands so.
– In case a secured obligation is transferred, the security measure shall terminate, unless otherwise agreed upon.
This is completely reasonable because the security measure is a legal measure that requires the transferor to ensure its ability to perform the obligations to the party with the right. Therefore, when the obligor has transferred the obligation to the transferee, this security measure is no longer meaningful. In this case, the party with the right may request the transferee to establish other security measures to secure the performance of obligations.
The above is the article “Transfer of the right to demand and transfer of obligations in civil transactions” that TNTP sends to our readers. Hope the article is useful for those who are interested in this issue.
Best regards,