Thursday, August 27, 2020

Transfer of Negotiable Instruments by Assignment

 Transfer of Negotiable Instruments by Assignment

Normally, a bilateral contract between two parties produces effect only as between the two parties However, one of the parties may freely transfer the rights arising out of the contract to another 3rd party, who is an outsider to the contract. Such mode of transferring rights is known as Assignment. Shortly stated assignment is the transfer of rights to a third person. The party making the assignment is the assignor, where as the party receiving the assignment is the assignee.

Art 1962 of the civil code expressly allows the creditor to assign his right to a third party even without the consent of the debtor. Transfer by Assignment gives the assignee only those rights the assignor possesses. In other words the assignee takes only those rights that the assignor originally had. The fact that no better title is transferred through assignment is what basically distinguishes assignment from negotiation. No transfer of better title also implies that the assignee’s rights are subject to defenses that  the debtor had against the assignor(Art 1966)

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