By Onyekachi Umah, Esq., LL.M, ACIArb (UK)

Introduction:

Debt is generally any amount of money owed. Managing debt and debtors can be frustrating, especially in a country with poor access to justice and no dependable database. Both the burden of a debtor to repay debt and the benefit of a creditor to recover debt can be assigned and transferred to a third party. However, there are conditions that must be observed for an assignment of debt to be valid. The conditions and are considered below.

In every debt, there must be at least a debtor and a creditor. While the debtor has an obligation to repay debt, a creditor has a right to demand and recover debt. There could be transactions seeking to transfer and assign the responsibilities of a debtor or creditor. For such assignment to be lawful and effective, there are basic conditions that must be fulfilled, according to the Supreme Court of Nigeria.

1. The Supreme Court of Nigeria in the case of FERDINAND GEORGE v. UNITED BANK FOR AFRICA LIMITED (1972) LPELR-1321(SC), where the court held that;

“Obviously, where the burden of a debt is being assigned, the creditor must consent or the assignment could be used as a simple means of avoiding liability. When the benefit of a debt is assigned the debtor does not need to consent. He still owes the money which he previously borrowed, and so long as he knows whom to pay in order to get an effective receipt and discharge he has no cause to be consulted over the assignment.” Per FATAYI-WILLIAMS ,J.S.C (Pp. 9 paras. A)

2. The Court of Appeal in the case of JULIUS BERGER NIGERIA PLC & ANOR v. TOKI RAINBOW COMMUNITY BANK LTD (2009) LPELR-4381(CA)

“Under the common law, a debt or other legal thing in action includes the benefit of a contract or a debt arising out of contract from which payment was to be made at a future date. Such debt is capable of being assigned under section 136 of the Law of property Act 1925. See BRICE V. BANNISTER (178) 3 Q. B.D. 569, JAMES V. HUMPHREYS (1908) 1 KB. 10, CONTRAST LAW V. COBURN (1972) 1 WLR 1238. Furthermore is was held that the benefit of a contract is only assignable in cases where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it. TOLTURST V. ASSOC PORTLAND CEMENT MANUFACTURERS LTD (1902) 2 K.B. 660 at 668, (1903) A.C. 414. A party to a contract can in equity also assign a contractual right in one of two ways (a) he can inform the assignee that he transfers the chose to him or (b) he can instruct the debtor to discharges the Obligation by payment to or performance for, the assignee. Thus an agreement by traders or merchants with a Bank that payment for goods sold by them should be remitted direct by the purchasers to the Bank has been held to, constitute a valid equitable assignment of the amount to the Bank. BRANDTS SONS & CO. V. DUNLOP RUBBERCO. (1905) A.C. 454. Generally however, a mere direction by a creditor to his debtor to pay money to a third party is not necessarily an assignment unless the instructions can be said in their context text, to amount to an irrevocable mandate to the debtor. See CURRAN V. NEWPARK UNEMAS LTD (1957) 1 ALL E.R. 295, BRITISH EAGLE INT’L AIRLINES LTD V. CIE NATIONAL AIR FRANCE (1973) 1 LIOYD’S REP.414 AT 427. Another principle of the common law on assignment in that an assignment made by letter is complete as soon as the letter is posted to the assignee as was held in the case of ALEXANDER V. STENHARDTWAKER & CO. 0903) 2 K.B. 208 The above general positions of the common law on assignment are to guilde a determination of the issue. whether indeed, fact and law, there was an assignment of the benefits of the contracts between the company and the 1st Appellant to the Respondent.” Per MOHAMMED LAWAL GARBA ,JCA (Pp. 27-29, paras. C-B)

3. The Court of Appeal in the case of JULIUS BERGER NIGERIA PLC & ANOR v. TOKI RAINBOW COMMUNITY BANK LTD (2009) LPELR-4381(CA)

“The question I now ask is what in law are the essential requirements which make an assignment of such benefits, interests or title to property effective? Speaking generally, they include:-(1) ownership of or entitlement to the benefits, interest, rights or title to property by the assignor; (2) the absolute transfer in writing of such benefits, interests, rights or title to property to person/named therein; (3) Where, as in the present appeal, the benefits, rights and interests are in possession or custody of 3rd party, there is the requirement that the assignor should notify that 3rd party in writing of the assignment. See Chitty on Contracts Vol. 1 Paragraph 19 – 007 at page 1166, Halbury’s Laws of England, 4th Edition, volume 6 paragraphs 12 at page 9. It is however to be noted that no particular form or mode is prescribed or required by law for a legal assignment as long as the assignor absolutely and unequivocally indicates the transfer of the benefit, interest or title to the assignee. Once the above requirements are met, an assignment will be effective in law and the assignee would be entitled to the subject of the transfer and a claim thereto.” Per GARBA ,J.C.A ( Pp. 25-26, para. D )

4. The Court of Appeal in the case of BEN ELECTRONIC CO. (NIG) LTD v. ATS & SONS & ORS (2013) LPELR-20870(CA)

“It is not in doubt that Professor Sagay in his text Nigerian Law of Contract, 2nd Edition, Ibadan Spectrum Books Ltd. 2000 at page 516 paragraph 9, had supported the views expressed by the learned Counsel to the Appellant that in certain circumstances the owner of a contractual right can transfer same to a third party without the consent of the debtor, thereby enabling the third party to enforce the right against the debtor or obligator. The learned Author following English authorities like Torkington v. Magee (1902) 2 K.B. 42 at page 430, other texts like “Cheshire & Fifoot on Equity 10th Edition” (pages 455 – 475) and Jegede’s “Principles of Equity” pages 145 – 184, also added that the process of transfer of such a right is known as “Assignment” and that the types of property which are susceptible to this type of transfer are known as “Choses in action.”

“Section 25(6) of Judicature Act now replicated in Section 136 of the Law of Property Act 1925 provides as follows: (1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice;- (a) The legal right to such debt or thing in action (b) All legal and other remedies for the same and (c) The power to give a good discharge for the same concurrence of the assignor; Provided that if the debtor, trustee or other person liable in respect of such debt or thing in action has notice:- i. That the assignment is disputed by the Assignor or any person under him or; ii. Of any other opposing or conflicting claim to such debt or thing in action, he may if he thinks fit either call upon the person making claim hereto to inter plead concerning the same, or pay the debt or other in action in Court.”

Conclusion:

Debt is payable, even where the original creditor appoints another person as its representative or replacement. The consent of a debtor to such arrangement is not needed. However, a debtor cannot transfer his obligation to repay debt to a third party, except with the consent of his creditor. Any such assignment by a debtor without the approval of his creditor is deemed as a plan to delay/evade debt. Although no particular writing style or form is approved for assignment of debt, an assignment of burden of debt or benefit of debt should be clear and ambiguous at all times.

My authorities, are:

1. Sections 1, 2, 3, 4, 5 and 6 of the Constitution of the Federal Republic of Nigeria, 1999.

2. Judgement of the Supreme Court of Nigeria in the case of FERDINAND GEORGE v. UNITED BANK FOR AFRICA LIMITED (1972) LPELR-1321(SC)

3. Judgment of the Court of Appeal in the case of JULIUS BERGER NIGERIA PLC & ANOR v. TOKI RAINBOW COMMUNITY BANK LTD (2009) LPELR-4381(CA)

4. Judgment of the Court of Appeal in the case of BEN ELECTRONIC CO. (NIG) LTD v. ATS & SONS & ORS (2013) LPELR-20870(CA)

5. Onyekachi Umah, “Creditors, Debtors And The Covid-19 Lockdown?” (LearnNigerianLaws.com, 21 April 2020) <https://learnnigerianlaws.com/creditors-debtors-and-the-covid-19-lockdown-daily-law-tips-tip-552-by-onyekachi-umah-esq-llm-aciarbuk/> accessed 28 March 2021

6. Onyekachi Umah, “Owing Debts And Refusing To Pay Is Not An Offence In Nigeria” (LearnNigerianLaws.com, 14 December 2019) <https://learnnigerianlaws.com/owing-debts-and-refusing-to-pay-is-not-an-offence-in-nigeria-daily-law-tips-tip-478-by-onyekachi-umah-esq-llm-aciarb-uk/> accessed 28 March 2021

7. Onyekachi Umah, “The Supreme Court Has Warned Efcc And Police Against Recovering Debts And Investigating Disputes From Civil Transactions” (LearnNigerianLaws.com, 26 October 2019) <https://learnnigerianlaws.com/the-supreme-court-has-warned-efcc-and-police-against-recovering-debts-and-investigating-disputes-from-civil-transactions-daily-law-tips-tip-444-by-onyekachi-umah-esq-llm-aciarb-uk/> accessed 28 March 2021

8. Onyekachi Umah, “When, Why And How Can A Guarantor/Surety Be Held Liable For Debt Guaranteed” (LearnNigerianLaws.com, 25 July 2019) <https://learnnigerianlaws.com/when-why-and-how-can-a-guarantor-surety-be-held-liable-for-debt-guaranteed-daily-law-tips-tip-380-by-onyekachi-umah-esq-llm-aciarb-uk/> accessed 28 March 2021

9. Onyekachi Umah, “How To Be Exempted From Electricity Disconnection In Any Part Of Nigeria Even When Owing Debt For Consumed Electricity.” (LearnNigerianLaws.com, 29 June 2019) <https://learnnigerianlaws.com/how-to-be-exempted-from-electricity-disconnection-in-any-part-of-nigeria-even-when-owing-debt-for-consumed-electricity-daily-law-tips-tip-361-by-onyekachi-umah-esq-llm-aciarb-uk/> accessed 28 March 2019

10. Onyekachi Umah, “You Cannot Be Arrested For Breach Of Contract/Refusal To Pay Debt” (LearnNigerianLaws.com, 15 October 2018) <https://learnnigerianlaws.com/daily-law-tips-by-onyekachi-umah-esq-tip-205-you-cannot-be-arrested-for-breach-of-contract-refusal-to-pay-debt/> accessed 28 March 2021

11. Onyekachi Umah, “It Is An Offence For Hospitals/Creditors To Detain Patients/Debtors For Debts” (LearnNigerianLaws.com, 26 July 2018) <https://learnnigerianlaws.com/daily-law-tips-by-onyekachi-umah-esq-tip-150-it-is-an-offence-for-hospitals-creditors-to-detain-patients-debtors-for-debts/> accessed 28 March 2021

12. Onyekachi Umah, “EFCC Cannot Recover Debts” (LearnNigerianLaws.com, 25 July 2018) <https://learnnigerianlaws.com/daily-law-tips-by-onyekachi-umah-esq-tip-149-efcc-cannot-recover-debts/> accessed 28 March 2021

13. Onyekachi Umah, “It Is Not a Crime to Be a Debtor In Nigeria” (LearnNigerianLaws.com, 20 June 2018) <https://learnnigerianlaws.com/daily-law-tips-by-onyekachi-umah-esq-tip-124-it-is-not-a-crime-to-be-a-debtor-in-nigeria/> accessed 28 March 2021

14. Onyekachi Umah, “Nigerian Police Cannot Be Used For or Be Part for Debt Recovery” (LearnNigerianLaws.com, 28 May 2018) <https://learnnigerianlaws.com/daily-law-tips-by-onyekachi-umah-esq-tip-110-nigerian-police-cannot-be-used-for-or-be-part-for-debt-recovery/> accessed 28 March 2021

15. Onyekachi Umah, “Tips On Recovery of Debt’ (LearnNigerianLaws.com, 10 March 2016) <https://learnnigerianlaws.com/tips-on-recovery-of-debt/> accessed 28 March 2021

16. Onyekachi Umah, “How to Recover Property Wrongly Seized by Court” (LearnNigerianLaws.com, 9 March 2021) <https://learnnigerianlaws.com/how-to-recover-property-wrongly-seized-by-court/> accessed 28 March 2021

17. Onyekachi Umah, “Should Landlord Stop Rent-Owing Tenants from Moving Out?” (LearnNigerianLaws.com, 26 August 2020) <https://learnnigerianlaws.com/should-landlord-stop-rent-owing-tenants-from-moving-out/> accessed 28 March 2021

18. Onyekachi Umah, “Should A Landlord Remove Roof Of A Tenant For Failure To Pay Rent/Pack Out?” (LearnNigerianLaws.com, 3 August 2020) <https://learnnigerianlaws.com/should-a-landlord-remove-roof-of-a-tenant-for-failure-to-pay-rent-pack-out-daily-law-tips-tip-624-by-onyekachi-umah-esq-ll-m-aciarbuk/> accessed 28 March 2021

19. Onyekachi Umah, “Should A Landlord Lock Gates/Doors Of A Tenant For Failure To Pay Rent/Pack Out?” (LearnNigerianLaws.com, 29 July 2020) <https://learnnigerianlaws.com/should-a-landlord-lock-gates-doors-of-a-tenant-for-failure-to-pay-rent-pack-out-daily-law-tips-tip-620-by-onyekachi-umah-esq-ll-m-aciarbuk/> accessed 28 March 2021

20. Onyekachi Umah, “Should A Landlord Cut-Off Tenant From Water/Electricity Supply For Failure To Pay Rent/Pack Out?” (LearnNigerianLaws.com, 17 July 2020) <https://learnnigerianlaws.com/should-a-landlord-cut-off-tenant-from-water-electricity-supply-for-failure-to-pay-rent-pack-out-daily-law-tips-tip-612-by-onyekachi-umah-esq-ll-m-aciarbuk/> accessed 23 March 2021

21. Onyekachi Umah, “Does Police Have Powers To Settle Civil Disputes In Nigeria?” (LearnNigerianLaws.com, 13 May 2020) <Does Police Have Powers To Settle Civil Disputes In Nigeria?> accessed 28 March 2021

22. Onyekachi Umah, “A Guarantor/ Surety And A Witness Are Not Same” (LearnNigeriansLaws.com, 12 May 2020) <https://learnnigerianlaws.com/a-guarantor-surety-and-a-witness-are-not-same-daily-law-tips-tip-567-by-onyekachi-umah-esq-llm-aciarbuk/> accessed 28 March 2021

23. Onyekachi Umah, “Minimum Period For Defence Of Undefended List Case In Abuja” (LearnNigerianLaws.com, 25 February 2020) <https://learnnigerianlaws.com/minimum-period-for-defence-of-undefended-list-case-in-abuja-daily-law-tips-tip-512-by-onyekachi-umah-esq-llm-aciarbuk/> accessed 28 March 2021

24. Onyekachi Umah, “Bounced Or Dud Cheque And Its Legal Consequence In Nigeria.” (LearnNigerianLaws.com, 5 March 2016) <https://learnnigerianlaws.com/bounced-or-dud-cheque-and-its-legal-consequence/> accessed 28 March 2021

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