(1) The obligor may assert against the assignee all defences that the obligor could assert against the assignor.
(2) The obligor may exercise against the assignee any right of set-off available to the obligor against the assignor up to the time notice of assignment was received.
1. Assertion of defences
A right can in principle be assigned without the obligor’s consent (see Article 9.1.7(2)). This solution rests on the assumption that the assignment will not adversely affect the obligor’s legal situation.
It can happen that the obligor would have been able to withhold or refuse payment to the original obligee on the basis of a defence such as the defective performance of that obligee’s obligations vis-à-vis the obligor. To determine whether such defences can be asserted also against the assignee, the respective interests of the parties have to be weighed: the obligor’s situation should not deteriorate as a result of the assignment, while the assignee has an interest in the integrity of the right it has acquired.
According to paragraph (1) of this Article, the obligor may assert against the assignee all the defences that it would have been able to assert if the claim had been made by the assignor. In this case, however, the assignee will have a claim against the assignor under Article 9.1.15(d).
1. Software company A promises customer X to install a new accounting application before the end of the year. The main payment is to take place one month after completion. A immediately assigns the right to bank B. When the payment is due, B wants to claim it from X, but the latter explains that the new software is not working properly and that the accounting department is in chaos. X refuses to pay until this catastrophic situation has been remedied. X is justified in asserting this defence against B, which can then claim against A under Article 9.1.15(d).
The same solution applies to defences of a procedural nature.
2. Company X sells a gas turbine to contractor A, to be incorporated into a plant built for customer B. When the work has been completed, A assigns the guarantee of satisfactory performance to B. When the turbine does not work properly, B sues X before a court at its place of business. X will successfully invoke the arbitration clause included in its contract with A.
According to paragraph (2), the obligor may exercise against the assignee any right of set-off provided that the right of set-off was available to the obligor under Article 8.1 before the notice of the assignment was given.
This solution is in accord with the principle that the obligor’s situation should not deteriorate as a result of the assignment. The assignee’s interests are protected by the claim it may then have against the assignor under Article 9.1.15(e).
3. Company A assigns to company B the right to the payment of EUR 100,000 that it has against company X. X however has a claim of EUR 60,000 against A. The two claims have not yet been set off by notice given under Article 8.3 of the Principles, but the required conditions for set-off were satisfied before the assignment was notified. X may still exercise its right of set-off by giving notice to the assignee. B can then only claim EUR 40,000 from X. B can recover the difference from A which had undertaken under Article 9.1.15(e) that the obligor would not give notice of set-off as regards the assigned right.