Assignment Agreement

SHORT ANSWER TO THE MAIN QUESTION

Under an assignment agreement, the existing creditor – the assignor – transfers a receivable to a new creditor – the assignee. As a general rule, the debtor’s consent is not required.

The accessories of the receivable and the rights connected with it, including security, generally transfer together with the receivable.

However, not every receivable can be assigned, and the transaction should also address the relationship with the debtor, transfer of documentation, and liability between the assignor and assignee.

The key question is therefore not only “for what price is the receivable being assigned?”, but also “what exactly is the new creditor acquiring in legal and economic terms?”

YOU MAY BE THINKING…

“Do I need the debtor’s consent to assign the receivable?”

“Do I have to notify the debtor that there is a new creditor?”

“Can I assign a receivable that is not yet due?”

“What if the debtor says that no debt exists?”

“Do interest and security transfer to the new creditor as well?”

“And what if the assignee purchases the receivable and later discovers that it is practically unenforceable?”

The last question is particularly important.

The nominal value of a receivable and its real economic value are not the same thing.

THE REAL PROBLEM IN PRACTICE: THEORY VS REALITY

The theoretical principle is straightforward.

Creditor A has a receivable against the debtor.

Creditor A assigns it to Creditor B.

The debtor remains the same.

The debt itself does not change merely because of the assignment.

What changes is the person entitled to receive performance.

In practice, however, you need to know:

• what legal relationship gave rise to the receivable,
• whether the receivable actually exists,
• its current amount,
• whether it is due,
• whether it is disputed,
• whether it is time-barred or close to limitation,
• whether assignment is restricted,
• whether it is secured,
• which ancillary claims are connected with it,
• whether the debtor has already paid part of the debt,
• whether the debtor has defences against the original creditor,
• which documents the new creditor needs,
• who will notify the debtor and how,
• what the assignor is liable for towards the assignee.

There is also one important practical distinction:

The debtor is not a party to the assignment agreement.

But that does not mean the debtor can simply be ignored.

The transaction needs to ensure that the debtor knows whom to pay and that the new creditor can properly establish its entitlement.

BIGGEST RISKS AND COMMON MISTAKES

With assignment of receivables, I would pay particular attention to:

• inaccurate identification of the assigned receivable,
• inconsistencies between the agreement and the actual state of the debt,
• assigning a receivable whose transfer is restricted or excluded,
• failing to review the underlying agreement,
• overlooking the debtor’s objections or defences,
• confusing nominal value with real enforceability,
• unclear assignment price,
• unclear due date for the assignment price,
• inadequate regulation of the assignor’s liability,
• failure to transfer contracts, invoices, correspondence and other evidence,
• failure to address security connected with the receivable,
• poorly handled notification of the debtor,
• assigning a receivable shortly before limitation without proper review.

A typical mistake?

“The receivable is worth CZK 1 million, so I am buying a CZK 1 million receivable.”

Not necessarily.

The principal amount may indeed be CZK 1 million on paper.

But if the debtor claims defective performance, the receivable is difficult to prove, the debtor has no assets, or limitation is imminent, its real economic value may be very different.

HOW TO APPROACH IT: REALITY, NOT THEORY

With assignment of a receivable, I recommend not starting with the question:

“Do we have a template?”

Start with the receivable itself.

1. Identify the receivable

Who is the debtor?

What legal relationship gave rise to it?

What is the amount?

When is it due?

2. Review its legal status

Does it exist?

Has part of it already been paid?

Is it disputed?

Are there known defences?

Can it legally be assigned?

3. Assess its practical value

Does the debtor have assets?

Is the receivable secured?

Is enforcement already underway?

Is the receivable properly documented?

For the assignee, these questions may matter more than the nominal amount itself.

4. Structure the economics of the assignment

Is the assignment for consideration?

At what price?

When is the price payable?

Should part of the price depend on actual recovery?

5. Arrange the transfer of documentation

The new creditor needs more than just the assignment agreement.

They also need the documents and evidence necessary to prove the existence and amount of the receivable.

6. Address the debtor

Who will notify the debtor?

When?

How will it be possible to prove that the debtor was informed?

This is not a minor administrative detail.

It is part of making the assignment work in practice.

PRACTICAL EXAMPLES

👉 “I’m selling an invoice for CZK 500,000”

A business has an unpaid invoice.

The receivable is assigned to another entity at a discount because the original creditor no longer wants to wait for payment.

During due diligence, however, it becomes clear that the debtor has been claiming for several months that the supplied work was defective.

The assignee is therefore not simply buying:

“A CZK 500,000 receivable.”

They are buying:

“A CZK 500,000 receivable whose existence or amount may be disputed by the debtor.”

Economically, that is a very different transaction.

👉 The debtor pays the original creditor

The receivable is assigned.

The new creditor expects payment.

But the debtor does not know about the change and pays the original creditor.

The issue is then no longer limited to the relationship between the debtor and the assignee.

It also becomes necessary to examine whether the assignment was notified to the debtor or otherwise proven to them.

That is why communication with the debtor is not an insignificant final step.

👉 The agreement is signed, but the evidence stays with the original creditor

The assignee acquires the receivable.

When enforcement begins, they discover that they do not have the original order, acceptance protocol, or key correspondence with the debtor.

Legally, the receivable has been acquired.

Practically, however, the new creditor does not have everything needed to enforce it successfully.

A receivable without evidence may be worth significantly less than one whose existence and amount can be clearly proven.

WHY YOU SHOULD BE CAREFUL WITH “I’LL DO IT MYSELF”

An assignment agreement may look simple.

Assignor.

Assignee.

Debtor.

Amount.

Price.

Signatures.

But a generic template does not know:

• how the receivable arose,
• whether it is disputed,
• whether assignment is permitted,
• whether security exists,
• whether the debtor has raised defences,
• whether part of the receivable has already been paid,
• what documentation exists,
• who should bear which risks,
• whether this is a one-off assignment or part of a broader commercial model.

Most importantly, it does not know what the parties are actually guaranteeing to each other about the quality of the assigned receivable.

Assignment is therefore not only about transferring a legal right.

It is also about allocating the risk that the right may not have the value the parties expected when entering into the transaction.

LAWYER’S RECOMMENDATION + CHECKLIST

With assignment of receivables, I recommend one simple test:

If I had to sue on this receivable tomorrow, would I have everything I need to explain and prove its origin, amount, due date and current status?

If not, the assignment agreement alone will not solve the problem.

Quick checklist

• The receivable is clearly identified.
• Its legal basis is known.
• Its current amount has been verified.
• Its due date is clear.
• It has been verified that the receivable is assignable.
• The underlying contractual documentation has been reviewed.
• Known debtor defences have been identified.
• Limitation has been checked.
• Existing security has been identified.
• It is clear what transfers together with the receivable.
• The assignment price and its due date are defined.
• Liability between the assignor and assignee is regulated.
• All necessary documentation will be handed over.
• Notification or proof of assignment to the debtor is addressed.
• The assignee has assessed not only the nominal amount but also the real enforceability of the receivable.

FAQ

What is an assignment of receivables agreement under Czech law?

It is an agreement under which the existing creditor – the assignor – transfers a receivable to a new creditor – the assignee.

The debtor remains the same, but the identity of the creditor changes.

Is the debtor’s consent required?

As a general rule, no.

A creditor may assign all or part of a receivable without the debtor’s consent.

However, it is still necessary to check whether the specific receivable is assignable and whether assignment is restricted by law, agreement, or the nature of the receivable.

Does the debtor have to be notified?

The assignment has important practical consequences for the debtor.

Until the assignment is notified by the assignor or otherwise proven by the assignee, the debtor may, subject to the applicable statutory rules, still discharge the debt by paying the original creditor.

For that reason, I would not treat notification as mere administration.

What transfers together with the receivable?

The accessories of the assigned receivable and the rights connected with it, including security, generally transfer together with the receivable.

For a specific transaction, however, it is worth checking exactly which related rights exist and how their transfer works in practice.

Can the debtor raise defences against the new creditor?

A change of creditor does not in itself deprive the debtor of legal defences.

Defences that the debtor is entitled to raise under the applicable rules may therefore remain relevant against the assignee.

This is why the new creditor should review not only the creditor’s documents but also the debtor’s known position before acquiring the receivable.

Can future receivables be assigned?

Yes, subject to the applicable legal requirements, future receivables may also be assigned if they are sufficiently identifiable.

For future receivables, precise contractual drafting is particularly important.