A civil law obligatory relationship is determined by the legal fact which established that relationship (for example, a contract). However, it is possible that a further, new legal fact may be added to the original fact. As a consequence, a change in the legal relationship then occurs. The change may occur in the content of the legal relationship (change of content by agreement, debtor’s default, creditor’s default) or in the subjects of the relationship. The general grounds for change of subjects of obligations regulated by the Civil Code include assignment of claims, assumption of debt, accession to an obligation, assignment order and assignment order for securities.
The legal regulation of changes of subjects of obligatory legal relationships contained in the Civil Code also applies to commercial obligatory relationships, given that the Commercial Code does not contain such regulation (cf. Section 1(2) of the Commercial Code).
Assignment of claims – cession
Assignment of claims is regulated by Sections 524 to 530 of the Civil Code. By assignment, a change occurs in the person of the creditor; the person of the debtor and the content of the obligation (for example, the time, place or conditions of performance) do not change. By assignment of a claim (cession), the original creditor (assignor, cedent) assigns his claim to a third person – the new creditor (assignee, cessionary). The assignee becomes the legal successor of the assignor (so-called singular succession).
The title (legal ground) for assignment of a claim may be a contract or statute. The contract for assignment of a claim is concluded by the assignor (i.e. the original creditor) with the assignee (the new creditor). The contract must, under sanction of invalidity, be in written form. The claim must be clearly determined and defined so that it is clear from the contract without any possible doubt what claim is the subject of the assignment. The consent or other legal act of the debtor is not required by law for the creation of the contract. However, the assignor is obliged to notify the debtor of the assignment of the claim without undue delay. Until the assignment of the claim is notified to the debtor (or until the assignee proves the assignment of the claim to the debtor), the debtor is discharged from the obligation by performance to the assignor. If the assignor notifies the debtor of the assignment of the claim, the debtor is not entitled to demand proof of the assignment contract. A change in the subject of the obligatory legal relationship may occur by operation of law, for example, as a consequence of succession or upon transfer of a claim to a new creditor as a result of performance by a guarantor.
The causa (economic reason) for assignment of a claim may vary. If the claim is assigned for consideration, the assignment of a claim differs from a contract of sale only in its subject matter (only a claim may be the subject of assignment). If no counter-value is provided for the assigned claim, it may be a donation, a transfer of right with the intention of discharging a debt, or provision of credit.
The subject of assignment is only a particular claim, i.e. the right to performance from the debtor, for example a claim for payment of the purchase price, not the entire obligatory relationship from which the claim arose. Both monetary and non-monetary claims may be assigned, whether due, not yet due, future claims or even time-barred claims (but not claims extinguished by preclusion). However, not every claim may be assigned. Non-assignability may be given by statute, by agreement between the assignor and the debtor, or may result from the nature of the obligation. Thus, pursuant to Section 525 of the Civil Code, a claim which expires at the latest upon the death of the creditor (for example, the right to compensation for pain and suffering and for social disadvantage, the right to compensation for loss of earnings) or whose content would change with the change of creditor cannot be assigned (the debtor’s legal position must not be worsened by the assignment). Furthermore, it is not possible to assign a claim if it cannot be subject to enforcement of a decision (in the interest of protecting the new creditor). Claims not subject to enforcement of a decision are listed in Sections 317 to 319 of the Code of Civil Procedure and include, for example, monetary benefits of social care, benefits of state social support paid as a lump sum pursuant to Act No. 117/1995 Coll., on State Social Support, and in part claims for author’s remuneration, claims arising from rights of performing artists and from rights of originators of industrial property objects. Winnings from bets and games are also not enforceable by enforcement of a decision (with the exception of bets and games operated by the state or officially authorised). Assignment may also be prevented by an agreement between the original creditor and the debtor (the agreement may exclude any assignment or, for example, only assignment to a particular person). By excluding the assignment of certain claims, the law protects both the creditor and the debtor. The law does not exclude the assigned claim from being further assigned to another (or even the original) creditor.
Given that the debtor’s position must not be worsened by the assignment, all objections against the claim which the debtor could have raised at the time of assignment are preserved for the debtor. These are objections concerning the very substance of the claim (e.g. its creation and continuance), its extent or limitation. New objections may arise for the debtor even after the assignment of the claim (e.g. the objection of limitation). These objections may also be raised. The debtor may also use for set-off against the assignee his claims capable of set-off which he had against the assignor at the time when the assignment of the claim was notified or proved to him, provided he notified them to the assignee without undue delay. The debtor has this right even if his claims were not yet due at the time of notification or proof of the assignment (cf. Section 529 of the Civil Code). The claim passes to the assignee in the state in which it belonged to the assignor (for example, time-barred). The assignor is obliged to hand over to the assignee all documents and provide all necessary information relating to the assigned claim (cf. Section 528(2) of the Civil Code).
The accessories and rights connected with the assigned claim also pass with it, including of course the right to judicial enforcement of the claim (cf. Section 524(2) of the Civil Code). Likewise, security interests follow the fate of the assigned claim even without the consent of the security provider (i.e. the person who provided the security for the obligation). If performance of the assigned claim is secured by a pledge, guarantee or other means, the law provides, for the benefit of the security provider, only the assignor’s obligation to give notice to the security provider of the assignment of the claim (cf. Section 528(1) of the Civil Code). However, breach of this obligation is not sanctioned by law.
As regards enforcement of the assigned claim, the assignor may, at the request of the assignee, enforce the assigned claim himself in his own name for the account of the assignee. If the assignment of the claim has been notified or proved to the debtor, the assignor may enforce the claim only if it is not being enforced by the assignee and the assignor proves to the debtor the assignee’s consent to such enforcement. If the assignor enforces the claim, the debtor may use his claims capable of set-off which the debtor has against the assignor at the time of its enforcement, but not claims which he has against the assignee (cf. Section 530 of the Civil Code). If the original creditor asserted a claim in court by action for satisfaction of his claim against the debtor and only thereafter assigned the claim to a new creditor, Section 170a of the Code of Civil Procedure allows a change in the circle of participants in court proceedings, i.e. the debtor would remain the defendant and the new creditor would become the plaintiff.
If assignment of a claim for consideration was agreed (consideration means not only financial performance but also other counter-value for the assigned claim), the assignor is liable to the assignee if:
a) the assignee did not become the creditor of the claim with the agreed content instead of the assignor (e.g. the debtor’s debt does not reach the amount agreed between the creditors upon assignment),
b) the debtor discharged the obligation to the assignor before he was obliged to discharge it to the assignee (as already stated above, until the assignment of the claim is notified to the debtor or until the assignee proves the assignment of the claim to the debtor, the debtor is discharged from the obligation by performance to the assignor),
c) the assigned claim or part thereof was extinguished by set-off of a claim which the debtor had against the assignor.
The assignee is therefore liable for the genuineness of the claim, i.e. for the fact that it existed at the time of assignment. If agreed in writing, the assignor also guarantees the recoverability of the assigned claim up to the amount of consideration received together with interest. However, this guarantee expires if the assignee does not enforce the assigned claim against the debtor without undue delay in court. This concerns in particular ensuring that the new creditor sues for the claim before the expiry of the limitation period (cf. Section 527 of the Civil Code). In the case of gratuitous assignment, no liability arises for the assignee pursuant to the said provision.
Certain special cases of assignment of claims
Sale of an enterprise By a contract for sale of an enterprise (Sections 476 et seq. of the Commercial Code), the seller undertakes to hand over the enterprise to the buyer and transfer ownership of the enterprise to him, and the buyer undertakes to assume the seller’s obligations connected with the enterprise and pay the purchase price. All rights and obligations to which the sale relates pass to the buyer in connection with the sale of the enterprise. The transfer of claims is otherwise governed by the provisions on assignment of claims. The consent of the creditor is not required for the transfer of an obligation; however, the seller guarantees the discharge of the transferred obligations by the buyer. The buyer is obliged to notify the creditors without undue delay of the assumption of obligations and the seller to notify the debtors of the transfer of claims to the buyer. If an enterprise (or part thereof) is being contributed as a non-monetary contribution to the registered capital of a trading company, the provisions on the contract for sale of an enterprise shall apply mutatis mutandis (cf. Section 59(5) of the Commercial Code).
Guarantee As soon as the guarantor has discharged the obligation to the creditor, the guarantee obligation expires and the guarantor is entitled to demand reimbursement from the debtor for the performance provided to the creditor. The guarantor enters into the rights of the creditor on the basis of statutory cession, in accordance with Section 550 of the Civil Code. Similarly, for commercial obligatory relationships, cession is regulated by Section 308 of the Commercial Code: A guarantor who discharges the obligation for which he guarantees acquires vis-à-vis the debtor the rights of the creditor and is entitled to demand all documents and aids which the creditor has and which are necessary for asserting the claim against the debtor. He thus enters into the rights of the creditor; the transfer occurs by operation of law.
Transfer of the right to compensation for damage to the insurance company If the insured has a right against another person to compensation for damage caused by an insured event, his right passes to the insurer, up to the amount of the benefit which the insurer provided to him (cf. Section 813 of the Civil Code).
Assignment of licence under the Copyright Act The acquirer of a licence may assign the licence only with the written consent of the author (this is therefore a limitation of the conditions of assignability of the right compared to the standard regulation). He is obliged to inform the author without undue delay of the assignment of the licence and of the person of the assignee. Upon sale of an enterprise of which the licence is also a part, the author’s consent is not required unless otherwise agreed. Compulsory assignment of a claim also occurs in enforcement of a decision by garnishment of a claim pursuant to Section 303 et seq. of the Code of Civil Procedure.
Other methods of change in the subject of an obligatory relationship
Assumption of debt – privative intercession
By assumption of debt, a new debtor enters the original obligatory legal relationship instead of the original debtor. The new debtor assumes the debt upon himself. Assumption of debt thus results in a change in the person of the debtor. Monetary debt may be assumed; of non-monetary debts, only those whose subject is fungible performance. The assumption arises on the basis of a written contract in which the new debtor agrees with the original debtor that he will assume his debt. The consent of the creditor is required for the agreement on assumption of debt (since the change in the person of the debtor may seriously jeopardise the creditor’s position). The creditor’s consent may be given either to the original debtor or to the person who assumed the debt. Assumption of debt may also occur on the basis of statute (for example, in settlement of an estate) or on the basis of a court decision (for example, in settlement of co-ownership by shares). Objections which the original debtor has against the creditor may also be raised by the person who assumed the debt. The content of the obligation does not change by assumption of debt. Security for the debt provided by third persons continues only if these persons consent to the change in the person of the debtor. A person who assumes a debt by contract with the creditor without agreement with the debtor becomes a debtor alongside the original debtor (this is already so-called cumulative intercession). The creditor has the right to demand discharge from either of the debtors. If the new debtor discharged the debt, he has no right to demand from the original debtor what he performed, since he performed his own obligation (cf. Sections 531 and 532 of the Civil Code).
Accession to an obligation – cumulative intercession
In accession to an obligation, a new debtor joins the original debtor on the basis of a written contract with the creditor, by which he undertakes to discharge the debtor’s monetary obligation for him. Both debtors are then jointly and severally liable. The consent of the original debtor is therefore not required for this agreement. Accession to an obligation must be distinguished from so-called assumption of performance, in which no change in the subjects of the obligatory relationship occurs. On the basis of an agreement between the debtor and another third person, that third person undertakes to discharge the debtor’s obligation to the creditor. However, no direct right arises for the creditor from this (cf. Sections 533 and 534 of the Civil Code).
The general grounds for change of subjects of obligations regulated by the Civil Code further include the assignment order (regulated by Sections 535 to 539 of the Civil Code) and the assignment order for securities (regulated by Sections 540 to 543 of the Civil Code). A more detailed description would, however, exceed the scope of this article.
This text was translated from Czech to English using an AI translator.