Legal consequences of non-fulfillment or improper fulfillment of the claim that is the subject of the assignment. Legal consequences of non-fulfillment or improper fulfillment of the claim that is the subject of the assignment Failure by the debtor to fulfill the claim that is

New edition Art. 827 Civil Code of the Russian Federation

1. Unless otherwise provided by the factoring agreement, the client shall be liable to the financial agent for the invalidity monetary claim, which is the subject of the assignment.

3. The client is not responsible for non-fulfillment or improper fulfillment by the debtor of the claim that is the subject of the assignment if it is presented for execution by the financial agent, unless otherwise provided by the agreement between the client and the financial agent.

Commentary on Article 827 of the Civil Code of the Russian Federation

The comment is being finalized and is temporarily unavailable.

Another comment on Art. 827 of the Civil Code of the Russian Federation

1. To the financial agent when making a decision to purchase accounts receivable or providing a loan against these receivables, it is necessary to have certain data to determine its value.

He, in particular, must have information about whether the client (assignor) is a creditor in relation to the debtor, whether the client has the right to transfer the rights of claim; whether the client previously assigned this debt to another person, whether the debtor has objections to payment or the right to set-off in addition to those specified in the assignment agreement. To clarify these circumstances, the financial agent must bear additional costs, which in financing relationships entails an increase in the cost of the loan provided.

As a rule, in order to avoid these costs in an assignment relationship, the client (assignor) gives the financial agent (assignee) appropriate representations (guarantees) regarding the existence of the transferred (assigned) right, and is liable in the event of a violation of these contractual guarantees.

Availability of guarantees of existence (validity) transferred right from the client's side is implied. Based on this principle, the general provisions of the law of obligations stipulate that the original creditor who assigned the claim is liable to the new creditor for the invalidity of the claim transferred to him (Article 390 of the Civil Code of the Russian Federation). An agreement between the original creditor and the new creditor cannot exclude the assignor's liability for the invalidity of the assigned claim.

An invalid claim is understood, first of all, as a claim that has no valid basis; if the transaction concluded between the original creditor and the debtor is void or declared invalid, then there are no claims from this transaction.

The invalidity of a claim also occurs in cases where a claim is assigned that has already been terminated at the time of assignment by performance or other provided by law method (novation, compensation, offset, etc.). A demand that cannot be implemented due to the debtor’s objections (for example, about missing a deadline) is also invalid. limitation period, failure to fulfill an obligation by the assignor, offset, etc.).

If the transaction on the basis of which the right of claim was transferred is of a compensated nature, the original creditor is responsible for the validity of the claim, that is, for the fact that it is legally justified and not burdened with objections. The nature and conditions of liability are determined by the agreement on the basis of which the assignment is made. By general rule new creditor has the right to demand from the party that violated the obligation (assignor) compensation for losses caused. The amount of damages, as a rule, is determined by the amount that was paid to the assignor, or the value of the property that was transferred to him for the assigned right.

In relations regarding the assignment of a monetary claim carried out within the framework of financing agreements, paragraph one of the commented article establishes special rule on the distribution of risks relating to the assigned right between the original creditor (client) and the new creditor (financial agent).

The peculiarity of these agreements is, first of all, that the agreement may exclude the client’s liability for the validity of the assigned claim, both in general and in relation to individual guarantees. For example, the client may guarantee that the right is based on a valid transaction and that he is the person entitled to assign it, but not guarantee that the debtor does not or will have no objections to proper execution contract by the client.

2. The commented norm places responsibility on the client for the existence of the right. The client will be considered to be in breach of his obligations if the claim itself does not actually or legally exist, for example, if the original contract is invalid. The client must be legally capable and authorized to make the assignment, must be absent established by law prohibitions or restrictions on assignment. The client is also responsible for identifying facts of a previous assignment of the right of claim to another person. Within the meaning of this provision, the client is responsible for these circumstances, regardless of whether he knew about these circumstances or not.

Due to the lack of Russian law enforcement practice existing approaches to issues related to establishing the fact of ownership of the right, the financing agreement should establish a list of circumstances for the absence or presence of which the client assumes responsibility to the financial agent. The parties involved in the financing of receivables, in practice, when concluding transactions, define their rights and obligations in great detail.

3. With regard to the presence of the debtor’s objections about the client’s failure to fulfill the obligation, about offset, the commented norm establishes a subjective criterion, recognizing that for the purpose of determining the grounds for the client’s liability to the financial agent, the demand will be valid if the client at the time of the assignment did not know the circumstances due to which the debtor has the right not to fulfill obligations.

When assigning future claims, the moment at which the client assumes the guarantee for non-objection is determined by the moment of occurrence (and, accordingly, the transfer of the right) to the financial agent.

With the approach chosen by the Russian legislator, the risk of objections hidden at the time of assignment (for example, related to the subsequent improper performance by the client of the contract to the debtor) falls on the financial agent, which does not reflect modern commercial practice and negatively affects the cost of the loan provided by financial agents.

Taking these circumstances into account, the terms and conditions regarding the scope and nature of the client’s obligations, especially with regard to possible “hidden” objections, are regulated in detail in the financing agreement. Due to the dispositive nature of the provisions of the commented article, the parties, depending on the nature of the financing agreement, have the right to independently determine the burden of distributing possible risks.

4. Since the rules on assignment under financing agreements establish that contractual restrictions on assignment do not apply to the financial agent, it should be recognized that paragraph 2 of the commented article does not make the client liable to the financial agent for the presence in the original agreement with the debtor of conditions that exclude or limit possibility of assignment.

5. If the client violates the obligation to guarantee the existence of the assigned right of claim, he is liable to the financial agent in the form of compensation for losses in accordance with and.

The nature and extent of liability can be determined in the financing agreement, taking into account the relationships that underlay the transaction of assignment of the right of claim.

Sanctions may consist not only of establishing penalties; We are talking about the possibility of applying any measures of influence not prohibited by law against the violator (for example, establishing the right of the creditor to repay the loan amount ahead of schedule if it is revealed that the assignor has violated the obligation to guarantee the validity of the right transferred to the creditor as security).

The financing agreement may also define other consequences of the client’s violation of his representations about the validity of the assigned right.

Since the fate of an assigned right of claim, but realized due to objections, is not directly defined in the law, the agreement should determine the procedure for transferring to the client the unrealized rights of claim and the documents confirming them. In any case, it should be recognized that, demanding compensation from the client for losses or return of financing in connection with the transfer of an invalid right, the financial agent is obliged to return the documents confirming the right to the client and take measures to transfer the right to the client.

6. According to the general provisions of the law of obligations, the original creditor is not responsible for the actual enforceability of the right, that is, for the solvency and performance of the debtor.

Verification of the debtor's solvency rests with the new creditor, who, as a general rule, assumes the risk of non-receipt of payment. If the obligation is not fulfilled by the debtor due to its malfunction (i.e. in the absence of legal objections that weaken the creditor’s claim), there is no invalidity of the right; accordingly, as a general rule, there is no liability of the assignor.

1. Unless otherwise provided for in the financing agreement for the assignment of a monetary claim, the client shall be liable to the financial agent for the validity of the monetary claim that is the subject of the assignment.

2. A monetary claim that is the subject of an assignment is recognized as valid if the client has the right to transfer the monetary claim and at the time of assignment of this claim he does not know the circumstances due to which the debtor has the right not to fulfill it.

Commentary on Article 827 of the Civil Code of the Russian Federation

1. Similar to the general rules on assignment, paragraph 1 comment. Art. provides that the client (assignor) is responsible to the financial agent (assignee) for the validity of the monetary claim that is the subject of the assignment. However, in contrast to the provisions of Art. 390 Civil Code comment. the norm is stated dispositively, which gives the parties the opportunity, by agreement, to exclude or limit the client’s liability for the validity of the assigned claim.

2. In the doctrine, the assigned right is recognized as valid if the following conditions are simultaneously present: a) it exists legally and in fact; b) it belongs to the assignor; c) the assignor is authorized to make the assignment. In addition, the general rules on liability for the validity of an assigned claim (Article 390 of the Civil Code) also cover the responsibility of the assignor: for encumbering the assigned right with any rights and claims of third parties; the debtor has objections to defend (for example, about missing the limitation period, failure to fulfill a counter-obligation by the assignor, set-off); changing the claim and the agreement from which it arises, without the consent of the assignee (see: Novoselova L.A. Commentary on the Review of the practice of considering disputes related to the assignment of claims // Bulletin of the Supreme Arbitration Court. 2008. N 1. pp. 29 - 30; art. 9.1.15 International principles commercial contracts UNIDROIT; Art. 11:204 Principles of European Contract Law).

3. The legislator’s attempt to determine in paragraph 2 of the comment. Art. the concept of a real requirement can hardly be considered successful.

Firstly, the term “reality”, widely used in theory and practice, is replaced by the vague category “possession”, which makes it difficult to use comments. provisions.

Secondly, paragraph 2 comment. Art. somewhat incorrectly uses a subjective criterion (“unknown”), thereby imposing on the financial agent the risk of hidden objections of the debtor, about which the client (assignor) is not aware. This approach worsens the position of the financial agent. Since it is the client who can most effectively prevent the possibility of objections arising and raising, the risk of their occurrence, as a general rule, should lie with him (see Article 12 of the UN Assignment Convention).

Thirdly, possible practical difficulties in determining whether the client “knew” or “did not know” about the debtor’s objections are also obvious.

4. Largely repeating the rules of Art. 390 Civil Code, paragraph 3 comments. Art. imposes on the assignee (financial agent) the risk of non-performance ( improper execution) the assigned claim by the debtor. Thus, as general rule a system of “non-recourse factoring” is established, in which the financial agent is deprived of the right to make a claim against the client if the debtor does not pay the financial agent.

At the same time, the dispositive nature of the comment. The provisions provide the parties with the opportunity to establish otherwise by agreement, including using the “working stock factoring” system, which provides for similar liability of the client (assignor).

5. Taking into account the specifics of the moment of assignment (see commentary to Article 826 of the Civil Code), the rules of commentary. Art. also apply to financing agreements for the assignment of future claims. In such a situation, the client, in essence, gives the financial agent a guarantee that the future claim will not only arise, but will also meet all the criteria of reality. Since the relevant circumstances depend directly on the client himself, the legality of such a “guarantee” is beyond doubt.

Another commentary on Article 827 of the Civil Code of the Russian Federation

1. The commented article regulates the client’s responsibility to the financial agent. The general rule is that the client is responsible for the validity, but not the enforceability, of a monetary claim against a third party transferred under a factoring agreement. The first part of this rule is established dispositive norm clause 1 of the commented article, from which it follows that the contract can exclude this liability by establishing that even in the case of the transfer of an invalid claim, the financial agent will not be able to make any claims against the client.

The practical problem is to answer the question about the consequences of the debtor’s failure to comply with the financial agent’s demands in situations where the client has assumed responsibility for the fulfillment of the requirement: can the financial agent demand from the client the fulfillment of the requirement for the debtor or compensation for losses caused by the debtor’s failure to fulfill the requirement? The first answer follows from the logic and essence of the relationship; from the literal interpretation of the norms of the commented article (they speak specifically about the client’s responsibility for the debtor, and not about the fulfillment of the debtor’s obligations) - the second option. It seems that in order to avoid problems, it is advisable to indicate in the contract what exactly the financial agent can demand from the client if the client has undertaken to be responsible for the enforceability of the monetary claim against the debtor.

2. Paragraph 2 of the commented article reveals the concept of the validity of a monetary claim. In order to be recognized as such, the client must have a requirement on the date of conclusion of the factoring agreement. In addition, the client should not be aware of any circumstances that may exempt a third party (debtor) from fulfilling the requirement.

The concept of validity of a claim has nothing to do with the arrival of the deadline for fulfilling the claim: an overdue claim will also be valid; This is stated in paragraph 1 of Art. 826 of the Civil Code of the Russian Federation (see commentary to this article).

3. The commented article does not determine the extent of the client’s liability to the factor for the transfer of an invalid claim. Therefore, in accordance with general provisions the client will be obliged to compensate the factor in in full losses caused by the fact that the factor will not be able to realize the claim against the debtor.

4. Paragraph 3 of the commented article establishes the second part of the rule mentioned above: the client is not responsible for the feasibility of the requirement, i.e. for failure to fulfill or improper fulfillment of a requirement by the debtor (third party). This norm is dispositive, i.e. in accordance with the contract, the client may assume (obviously, not free of charge) an additional obligation to be responsible not only for the validity, but also for the enforceability of the requirement that is the subject of the assignment.

1. Unless otherwise provided for in the factoring agreement, the client shall be liable to the financial agent for the invalidity of the monetary claim that is the subject of the assignment.

Comments to Art. 827 Civil Code of the Russian Federation

1. This article establishes the client’s responsibility to the financial agent. As a general rule, the client is responsible for the validity of the monetary claim that is the subject of the factoring agreement. However, the contract itself may provide for other conditions.

2. The validity of the claim means that the client has the right to transfer it. In addition, if at the time of transfer of the claim to the financial agent there are any circumstances due to which the debtor has the right not to fulfill this monetary claim, then they are unknown to the client.

3. If the debtor fails to fulfill a valid monetary claim submitted to the financial agent or fulfills it improperly, the client cannot be held liable for this.

1. Unless otherwise provided for in the factoring agreement, the client shall be liable to the financial agent for the invalidity of the monetary claim that is the subject of the assignment.

Commentary on Article 827

2. In the doctrine, the assigned right is recognized as valid if the following conditions are simultaneously present: a) it exists legally and in fact; b) it belongs to the assignor; c) the assignor is authorized to make the assignment. In addition, the general rules on liability for the validity of an assigned claim (Article 390 of the Civil Code) also cover the responsibility of the assignor: for encumbering the assigned right with any rights and claims of third parties; the debtor has objections to defend (for example, about missing the limitation period, failure to fulfill a counter-obligation by the assignor, set-off); changing the claim and the agreement from which it arises, without the consent of the assignee (see: Novoselova L.A. Commentary on the Review of the practice of considering disputes related to the assignment of claims // Bulletin of the Supreme Arbitration Court. 2008. N 1. pp. 29 - 30; art. 9.1.15 UNIDROIT Principles of International Commercial Contracts; Article 11:204 Principles of European Contract Law).

3. The legislator’s attempt to determine in paragraph 2 of the comment. Art. the concept of a real requirement can hardly be considered successful.

Firstly, the term “reality”, widely used in theory and practice, is replaced by the vague category “possession”, which makes it difficult to use comments. provisions.

Thirdly, possible practical difficulties in determining whether the client “knew” or “did not know” about the debtor’s objections are also obvious.

4. Largely repeating the rules of Art. 390 Civil Code, paragraph 3 comments. Art. places on the assignee (financial agent) the risk of non-fulfillment (improper fulfillment) of the assigned claim by the debtor. Thus, the system of “non-recourse factoring” is established as a general rule, in which the financial agent is deprived of the right to make a claim against the client if the debtor does not pay the financial agent.

1. Unless otherwise provided for in the factoring agreement, the client shall be liable to the financial agent for the invalidity of the monetary claim that is the subject of the assignment.

Commentary on Article 827 of the Civil Code of the Russian Federation

2. In the doctrine, the assigned right is recognized as valid if the following conditions are simultaneously present: a) it exists legally and in fact; b) it belongs to the assignor; c) the assignor is authorized to make the assignment. In addition, the general rules on liability for the validity of an assigned claim (Article 390 of the Civil Code) also cover the responsibility of the assignor: for encumbering the assigned right with any rights and claims of third parties; the debtor has objections to defend (for example, about missing the limitation period, failure to fulfill a counter-obligation by the assignor, set-off); changing the claim and the agreement from which it arises, without the consent of the assignee (see: Novoselova L.A. Commentary on the Review of the practice of considering disputes related to the assignment of claims // Bulletin of the Supreme Arbitration Court. 2008. N 1. pp. 29 - 30; art. 9.1.15 UNIDROIT Principles of International Commercial Contracts; Article 11:204 Principles of European Contract Law).

3. The legislator’s attempt to determine in paragraph 2 of the comment. Art. the concept of a real requirement can hardly be considered successful.

Firstly, the term “reality”, widely used in theory and practice, is replaced by the vague category “possession”, which makes it difficult to use comments. provisions.

Thirdly, possible practical difficulties in determining whether the client “knew” or “did not know” about the debtor’s objections are also obvious.