The assignment of credits is a legal mechanism by which a creditor (assignor) transfers its credit rights to a third party (assignee). The assigned debtor is not a party to the assignment agreement, although they must be notified for the assignment to be enforceable against them.assin
In Spain, the assignment of credits is expressly regulated in the Civil Code and the Commercial Code and is widely accepted by the Courts.
Among the various purposes of credit assignment, its use as a form of debt payment is particularly noteworthy. In this context, a debtor may assign a credit right it holds to satisfy a debt, serving as an alternative to making a cash payment. We can distinguish two forms in this regard.
Assignment in Payment (Assignment Pro-Soluto / Dation in Payment)
The payment assignment, also known as dation in payment (dación en pago), is a method for extinguishing an existing obligation. In this case, the debtor assigns the creditor a credit right it holds against a third party with the intent to settle the original debt.
This action constitutes a payment through assets transfer, in which the ownership of the credit is fully transferred to the third-party creditor, thereby extinguishing the debt entirely and releasing the debtor from their obligations. The creditor’s consent is essential, as this form of payment differs from that originally agreed upon.
Assignment for Payment (Assignment Pro Solvendo)
The assignment for payment, or pro solvendo, does not immediately extinguish the original debt. Here, the debtor assigns a credit right to the creditor for the latter to collect. The debt only expires insofar as the creditor successfully recovers the amount from the assigned credit. The title to the credit remains with the debtor, and the assignment serves only as a management and collection function.
Differences between the two mechanisms
| Assignment in Payment (Dation in Payment) | Assignment for Payment (Pro Solvendo) | |
|---|---|---|
| Purpose | Extinguish the obligation immediately via credit transfer. | Facilitate debt payment without immediate extinction. |
| Effects | Obligation is extinguished upon assignment if accepted by the creditor. | Obligation is extinguished only upon successful collection. |
| Risk | Creditor (assignee) bears the risk of the assigned debtor’s insolvency. | Debtor (assignor) remains liable if the credit is not collected. |
| Legal Nature | Payment via asset transfer. | Credit assignment for collection purposes. |
In conclusion, credit assignment is a versatile legal tool that can be used either to extinguish existing debts (dation in payment) or to facilitate their fulfilment (assignment for payment). The appropriate mechanism will depend on the parties’ intentions and the specific context of their legal relationship. Understanding the differences between these two forms and complying with the relevant legal requirements is essential to ensure the assignment’s validity and effectiveness.
If you need additional information regarding the assignment in payment versus the assignment for payment in Spain,
