caper 16 Cline ti assignment nd termination Chapter 16 Claims, their assignment and termination [A claim is another wor fr demand, To have claim on another person means tht {you have a fnancial claim on that person. Tis chapter only deals with money lain Money clan are divided into thre groups. I is important fo be clear about what kind of elaimyou have, a this determines which rls to apply in case of problems ‘The most important ac in ths area is The Danish Bonds Act. It difeentses be- tween ordinary bonds and negotiable bonds. The third group is unsecured claims. “The owner ofa claim, the ereditor, can selLhsclaim to another redtor or assignee. This is called change of creditor, and it can normally take place without the con sent ofthe peson owing the mone, the debtor. However, the debir cannot just put Someone else in his place. It isthe creditworthiness of the orginal debtor which the Creditor accepted when te claim arose (when the loan or the credit was granted), ‘When sealing with claims, we speak legally of ‘assigning’ or ‘vansfrtng” the claim. List of definitions Unsecured claims: claims which are not founded ona bond. Bond: a spec'al pro ofthe debt. Must be in writing, unconlona, unilateral, con cerma particular amount and contain a debt declaration. [Negotiable bond: bond which i sultable for wading, eg. a morigage deed in real property. ‘Assignor: someone who volustarily sells or pledges an asset. ‘Assignee: someone who voluntarily buys oF receives security in an asset Perfection: what you need 10 do to ensure you right. enunciation: information othe debtor staring that aclaim has been assigned. Possession: 1 be in possession of he proof ofthe claim (eg. the mortgage deed) — disposal deprivation Extingushment: bone ide assignment Resiion: beable to maintain your orginal right.apie 16 Chains te signmentandwinaton Objecion: reason for assertion about eg. the ima ofa clam. Barriag of claim: means that aclai loses it eet because itis not fled, e. nan fxtate ofa deceased person. ‘Deposling: means that an amounts Rep until the righgul owner is foun Serroff1vo parties’ mutual debts are added together 50 that ony the difference is ei ‘Apparent authority: means hat a person is entitled, eto recelve payment ‘The chapters divided ino the following sections: ‘Types of claims ‘Cemmon rules fo all claims ‘Asignmeat and objections Pedection Peyment and apparent authority ‘The termination ofthe claim © Payment © Limitstion © Depositing, set-off and baring of elaimns © Sommary Links 8 Exercises ‘Types of claims ‘As ncationed in the introduction, claims canbe divided int thee categories: Ordinary bonds | [Negotiable bondsChante 16 Clans, at ssgnnent nd erin Unsecured claims areal those claims which are not documented by means of bonds. ‘They canbe both ora and writen. Examples of unsecure claims ae invoices put chase contacts and lees, [iampte Lene bys aster fc DKK 500 and pays DKK 2.00 in eth A crit pee ten | weit forte ance wit reservation a i. The conta sie tng ote ing, whe linerest he DKK 3,00 shall bear and bow itis to be pai | Te shop has an unsecured claim against Lene. Lene isthe debtor and the shop i the credit. The claim san asset othe shop, which may sel assign it just ike it may Sell nventory and other assets. Part 3 of The Danish Bonds Act applies by analogy ‘o unsecured claims. ‘Bonds distinguish themselves fom unsecured cl ‘A bore! mus be: © in wring nial {© unconditional ts by meeting five conditions specify acertn amount contain a declaration of debt ("acknowledge owing” o he like, plus asigna- ure) All conditions mast be met before the document can be defined a a bond Inthe above example, the music shop's purchase contracts not a bond, because the ‘contracts not unilateral. Purchase contacts and, for example, eases ate not nit ral but bilateral, since a stereo isto be delivered in ret for money. ora flat for rent mone. In prectice, the distinction between unsecured elim and ordinary bonds is no the ‘most important one, since, as mentioned the ac's ules an ordinary bonds also ep- ply to unsecured claims. However, the distinction berweer negotiable bonds and ‘inary boods is significant, Section 11 of The Danish Bonds Act is used for finding ou which bonds are or nary and which are negotiable It states precisely which documents are negodable bonds. Al other bonds are ceding.caer thee ssgnment so emlastion ‘Accoxlng to setion 11 of The Danish Bonds Act, negotiable bond are: 12 Bearer bonds: bonds which state thatthe debt is owed tthe pesson-m posses- son of the bood ‘+ Bends to order: bonds which state that th debtor acknowledges to owe some- bedy a onder. ‘© Mortgage deeds in real property: bonds which provide security inl proper ty. Mortgage deeds are the most practical example of negotiable bonds. This ‘Sees not however, apply to deeds from credit instiations ~ the commercial va Ue of the claim fs ust instead in case of sale of bons ‘© Registered land bonds which explicitly state tht they ae negotiate bonds “Theres on negotiable bonds meen tht negotiable bonds ate more suite for trade ing than ordinary bonds and claims, The buyer of a negotiable bond i potectd at the expense of the debtor and the orginal eredior and this ofcourse means thatthe Drive san bese higher, making it moe atractv to dealin negotiable bons, Bonds ‘ant only be sols they can also be pledged [Negorable bonds and not least morgage deeds are of vial importance to financing. and svings, From the borrowers point of view they represent easy acest o credit because as pledgerimorigagor (of @ hovse), be can obain a Ioan by issuing & mortage deed tos house. For the lender, security neal property is tthe same ie fn investment which can be trade at the highest bid (rie). [Exarples of ordinary bonds are the Joan contracts which borrowers sign n banks and chatel mortgages.copter 16 Example of bon: — BOND ‘The udeniged Anders Ader, Bysvnget 7, Sandberg techy tcksowlges ovis (Chasm Chszesen Songer Say ” "s kK 19010 king ee hosed 0/100 218 each Ione aod "Deventer te tne en Sone 8 fre tod te et a eaten by ca Th cn tye ya ne Bicep nce nthe et mat ty Se ey oo so ‘Sen ya neg Ste rate oe Fate eee tr tn a ae aS pte dese Sauer sea aon ‘pl within the me. Anders 6 mderon As eboe Anders Anon, ier 2, Desens 1 ‘Common rules for all claims Part 1 of The Danish Bonds Act states 3 number of common rles which apply to all claims: {Section 1 deals with the relation between the debtor and the origina ereitor ‘© Section 9 deals withthe assignoe's warranty that the claim exists '* Section 10s aboutbe asignor not being ible forthe debtors incapability o pay. ‘Secon 1 of The Danish Bonds Ack He who ites abood does a rey oe hi ojetons fom heel lin whic ase ‘ie tothe sting of th bond ules someting ela has een agreed ofall om petal ‘The debtor does not waive his right to objections (10 complain or give notice) by signing bond. The debtor may give notice if for instance, delivered goods ae de- fective ofthe loan hasbeen obtained under faudalent circumstances. Butte bond ‘nas the effect that the debtor has to prove the validity of his objectionsCluins ts asgnment nd rmination ‘Second af The Danih Bonds Act 1 eb s asiged fr owe ship a seca he agnor was the existence ofthe clan. Tis dos owes st spply oir when he spe het he cam Sd ‘is orhadreson spect The person who assigns a bond sliable forthe existence ofthe claim (duty to pay), or the viiity ofthe claim. This means thatthe person who sels eg. a mortgage ees sb for he debtors duty to pay If appears ta the debtor i ot cblgat- ‘deg. Because he has been subjected to duress or incase of forgery, the assignor will have to pay the asignee. Section 10 of The Danish Bonds Act states thatthe assignor isnot able Fr the debtor's capacity to pay. The buyer of «bond (the assignee) ths rans the risk that ‘he debtor cannot py that his ability to pay is poor. This risks taken ito acecunt ‘when the price forthe bod is agreed Assignment and objections ‘When clsims are taded, conficts may arise between the debtor and the assignee. To solve this confit, i is necessary t ascertain whether the claim is otinary ar 2 negodable bond Example ] 1 debtor hs sige» bond in consecton wth apache en csi. The reo choses 6 ste chim and anasigne as here ken verte iho anes animes | ‘appears ht th puchoed ite eg hous rca) asa en dete te der il a= sally gv mice. cis mst comesint forthe bayer if the netic can ng sou ih Seco one or mre instalments ens have py es te ew the bod tun totes lawsuit gant the erin reditn who ay wat be ato pay Butte question s wheter asian ta reject the btn and ema testes ido ine tion 1 of The Danish Bonds Act determines that the debtr reserves al object ‘gsinst the orignal creditor. The question is wheter the debtor also reserves his ‘objections against an assignee ofthe claim. Before a soation can be found it's nec. essary fo find out whether the purchased claim is ordinary ora negotiable document.‘Chins tir sinner ab erin Creditrsller ‘ ov ——— Assienee Debiorouyer Inthe case ofan unsecured claim/ordinary bond, Section 27 of The Danish Bonds Act applies ‘Section 27 of The Danish Bonds Act 7 an ottiny bond is asiged for ownenhipor eu, the asic wl pot oti abt | | terre han the signer sper gal aes splat bei ‘The debtor reserves his objections against a new assignee. "The new creditor (es signee) wil ot obtain a better righ tan the asignor and has to accep thatthe debtor wil protest ifthe debtor has obectons concerming the goods or the contre the goods suffer from a defect which ene the buyer (he debt) toa pope Sonate reduction of 25%, the assignee has to seep the objection, and als arog that the payments set-of in future payment dates. The same applies oan exeeaton ‘editor. Not even the assignee’s good faith may change the relations. In the case of «negotiable hond on te othe hand, section 15 applies. This pro- Vides anther result othe same confi. { Section 15 of Phe Danish Bonds Act ‘he oer cao cham thatthe bond wa invalid pursuant othe ks fat no, 242 of & My 1917 on cone aot igeluasatos pera to oper ton 2933 erste een es Sign by him has teen sed witht cna ‘th hs ot reiedthe peed oasdoaon oUt he bas eer eects fm tee salrelainsip which gave see suing ofthe bond = tstpayent had taken place befor the agama or hat he det there hd esd tp txistor een changed by agement tf Gvlanton,teminaoa cea [SESRRES Ty Storer eget emaai d hche | is inte poss,grec 6 “vis. ss sgnmen an eination [According to section 15, the debtor loses all The Danish Contncts Act's weak ob- Jpations and objections concerning defective goods, et. and hasto pay the assignee ‘The assignee only has to come into possesion ofthe Bond in good faith and the 3 Signment hao be valid, Tat the assignee isin possession of he bond means, for instance, that {isn he assignees bank box or attaché 25 If he thee conitions (good fsth, possession and valid assignment) are met the a tines is protested spsnst the debtors objections. Te debtor tus reserves his b= jection aint the ovginal creditor (he assignr) ~ cf. set I~ but Jooses ther “paint ater bona fide assignee who gains posession ofthe Bon, The assignee, i ‘ther words, eta better right than the sssignot. Tis means tht negotiable bonds basicaly cary an unconditional payment obligation for the dete “An assignmeat can take the for of asl, security or gift but not iberitance oF en forcement proceedings. “That the debi eserves objections concering strong vtiaing actors reflection ‘ofthe fact tal the debtor cannot guard against forgery or dues, for example, Perfection “The right ocaims is secured by: « Denuneiation (notice tothe debtor in case of unsecured clsims and ordinary bonds ‘© Posseslem (spol deprivation) in case of negotiable bord When house is purchased, the buyer ensues his propery right by having the deed registered. When a claim is bought, te buyer mas so ensure his right Ti case of negotiable bonds, possession ofthe bond isthe key, while denunciation co the debtor is decisive in case of ordinary bonds. Notice tothe debior is called = ‘nneiaion; the assignee most denunciatecane is Coins. ti ssipnmest an trination ‘The importance of the perfection can best be illustrated by looking a an example of double sae Akseloriginal ereitoe <= Bullerfassignee 1 Cometisfasignee 2 Didsikidebior Didi owes Aisel money Aksel isthe original creditor and Disk isthe debtor. Akse now sells the cai to Buller on Wednesday but gets a biter ofc from Cor ‘elas on Thursday He thus sels the claim one more time. The question is which of the two assignees get the ight the claim, ‘The main rules that the one who gets he righ ist, has the right. But the “est in time, rst in right” ale canbe drogatd from ifthe ac of perfection is urdentak «enin good fuith before the other person. Here it again decisive whether tan an secured claim ora negotiable bod In case of unsecured claimsfordnary bonds, the assignee who first dentacistes (Gives notice) othe debtor gets the right, and the other person has to maka claim for damages against Aksel.Iis not decisive where the actual document is. Denn ciation is valid trom the leterbox moment, In case of negotiable bonds, the assignee who gains possession of the bond in good ai may keep it Payment and apparent authority ‘The debtor may face another problem, namely whom o pay ifthe claim has ben &6- signed. The debtor needs to know who has the apparent authority to receve the debtor's payment. Ifthe debtor has signed an ordinary bord, he can get ou of his debt by peying the person who last informed him that he Was ented t receive payment if he, the ‘debtor, is in good faith. creditor (assignee) can ensure that be Is paid by the debior ‘by denunciating the debtor immediately afte the assignmentChop negotiable bond hasbeen signed instead (a purchase money mortgage), the debtor can ony free himself ofthe debe by paying ciscarge payment othe peison in possession ofthe bond. Discharge payment means that you do not sk having to pay again. Ifa debioe pays the peron eis used to paying withot making sre that ‘that person is actually in possession ofthe bond, the debtor risks having o pay again when therightfal owner appears withthe purchase money mortgage in his poses However, for practical reasons, special rules do apply tothe common payment at the selng periods ‘When conflicts conceening claims aise, anit has tobe determined whether the pe. fection has been made, it is imporant to be clear about whois who. Uncle (creditor) —_______» Assignee 4 ‘The assignee must make sue to xin possession of the mortgage deed ‘The mortgage deed must be registered House owner (bier) If house owner (detox) obains a big lean from an uncle, the uncle (creditor will very likely demand mortgage deed tothe house as security for he repayment Pet- fection besween these (vo orignal partis, nthe cae of a mortgaging of real prop. erty, registration. The uncle mist thevefreseod the mortgage deed signed by the {ebioe tothe local land resist. the uncle ltr sells the mortgage deed tan assignee (to gt bigger cash amount immediately instead of ongoing instalments and intrest from the debtor, the 35 ‘signe has o make his perfection, which in case of negotiable bonds is possession — ‘ening dat Ue le wut at Over he done the buyer Ifthe uncle himself instead obtains a loan from his bank, he also has to hand over the mortgage deed tothe bank ft wants the mortgage deed mortaaged as security for the uncle's loan, Ithishappens, the orginal debtor ~the house owner — mst pay te bank in te future, and for each payment the bank will write down the uncle's outstanding debt.