Notice of assignment and discharge by performance

Citation data:

Lloyd's Maritime and Commercial Law Quarterly, Vol: 2010, Issue: 1, Page: 38-80

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THAM, Chee Ho
Not Applicable; Commercial Law
article description
Notice plays an important role in the equitable assignment of legal choses in action, such as a contractual debt. As noted in a recent treatise, once the debtor is given notice of the equitable assignment: (i) should she pay the sum owed to her creditor, she is not discharged from her obligation but will have to make payment again to the assignee [the 'no discharge after notice' rule]; (ii) the assignee’s right against the debtor has priority against subsequent assignments by the assignor, in order of precedence of notice [the rule as to priorities]; and (iii) the debtor is no longer entitled to assert such equities as may arise between herself and the creditor postnotice to reduce her liability to the assignee by way of setoff [the rule as to equities]. Leaving aside discussion of the second and third of these rules for another day, this paper will focus on an examination of the 'no discharge after notice' rule. This is prompted because the rule as applied in the context of equitable assignment of a debt presents a contradiction: it does not explain how it is that the common law rules as to discharge by precise performance and the invariability of contractual obligations are displaced by what appear to be equitable doctrines relating to assignment and notice thereof. By examining the mechanics and subject matter of an equitable assignment of a chose in action, this paper will demonstrate that the rule may, perhaps, have been too broadly stated and that the true position is quite otherwise: that a debtor is discharged from her obligation to make payment so long as she precisely performs her obligations as set out in the contract, even if the rights under that contract have been assigned to a third party to that contract, the equitable assignee, and even if she has been notified of such assignment. The paper will then examine whether the same may be true in the case of a statutory assignment.