Delegation of Payment in France: A Powerful Debt Collection Strategy for Creditors and International Businesses

Recovering a debt in France often requires more than persistence. For managers, financial directors, and foreign lawyers acting on behalf of international clients, the real challenge is not identifying who owes the money, but determining who can actually pay and how payment can be secured efficiently under French law.

Among the available legal mechanisms, delegation of payment (délégation de paiement) stands out as a particularly effective and flexible tool. When used correctly, it allows a creditor to obtain payment directly from a third party connected to the debtor’s business activity, without necessarily releasing the original debtor from liability. In debt collection practice, this mechanism frequently makes the difference between a theoretical claim and real recovery.

This article explains how delegation of payment works under French law, why it is highly relevant in debt recovery matters, and how it can be strategically used by companies and their legal advisors to secure payment in complex commercial situations.

1. Delegation of Payment: Legal Concept and Commercial Rationale

Under French law, delegation of payment is defined as an arrangement whereby a debtor (the delegator) requests a third party (the delegate) to undertake to pay a creditor (the delegatee), who accepts this third party as debtor. This mechanism is governed by Articles 1336 to 1339 of the French Civil Code.

What makes delegation particularly attractive from a debt-collection perspective is that it creates a direct and personal obligation between the third party and the creditor. The creditor no longer depends solely on the financial capacity or goodwill of its original debtor. Instead, it gains access to a second debtor, often positioned closer to cash flows and operational revenues.

Unlike informal payment arrangements frequently encountered in business practice, delegation is not a mere promise or instruction to pay. Once validly constituted, it gives the creditor a legally enforceable claim against the delegate, independent of the underlying relationship between the delegate and the original debtor.

This legal architecture makes delegation especially valuable in commercial environments where payment chains are layered, such as construction projects, real estate operations, distribution networks, insurance-related claims, and group structures involving subsidiaries and parent companies.

2. Why Delegation of Payment Is Highly Effective in Debt Collection

In many debt recovery cases, the debtor’s inability or reluctance to pay is not due to a lack of economic activity, but rather to cash-flow constraints, internal prioritisation, or impending insolvency. The debtor may itself be owed substantial sums by clients, contractors, tenants, or insurers. Delegation of payment allows the creditor to intercept these receivables legally and directly.

From a strategic standpoint, delegation of payment offers several decisive advantages.

First, it diversifies the creditor’s recovery options. Unless the parties expressly agree otherwise, delegation does not release the original debtor. The creditor therefore benefits from two potential sources of payment. If the delegate defaults, the creditor may still pursue the original debtor. If the original debtor becomes insolvent, the creditor can continue to claim payment from the delegate without being subject to the collective enforcement rules applicable to insolvency proceedings.

Second, delegation significantly reduces procedural risk and delay. Rather than engaging in lengthy litigation against a debtor with uncertain solvency, the creditor may secure a direct payment undertaking from a financially stronger third party. In practice, this often results in faster recovery and improved negotiation leverage.

Third, delegation limits disputes and tactical defences. As a general rule under French law, the delegate may not raise against the creditor defences arising from its own relationship with the delegator, nor disputes between the delegator and the creditor. This legal separation protects the creditor from being drawn into unrelated contractual conflicts.

3. The Essential Requirement: Acceptance by the Delegate

A recurring mistake in international debt recovery cases is to confuse delegation of payment with a simple indication of payment. French law draws a strict distinction between the two.

If a debtor merely informs its creditor that a third party will pay, or that payment is expected from another source, no delegation exists. In the absence of acceptance by the third party, the creditor has no legal means to compel that party to pay.

For delegation to be valid, the delegate must clearly accept the obligation to pay the creditor. French law does not impose any specific formal requirements for this acceptance. It may be expressed in a tripartite agreement, a bilateral undertaking, or even, in certain circumstances, implied conduct. However, in debt collection matters involving significant amounts, reliance on tacit acceptance is rarely advisable.

Experienced practitioners ensure that acceptance is documented in writing, clearly identifying the parties, the underlying debt, the amount covered by the delegation, and the payment modalities. This clarity is essential not only for enforcement, but also to avoid future disputes regarding the scope and duration of the delegate’s commitment.

4. Delegation of Payment in Construction, Real Estate and Commercial Operations

Delegation of payment is particularly common and effective in sectors where the debtor operates as an intermediary.

In the construction industry, subcontracting chains frequently give rise to payment difficulties. An unpaid subcontractor or supplier may seek to secure payment by obtaining a delegation involving the project owner or the main contractor. French law regulates such arrangements strictly, especially in private construction contracts, where payment guarantees are mandatory. However, when properly structured, delegation can provide a reliable route to payment without resorting to litigation.

In real estate matters, delegation of commercial rents is a widely used technique. A debtor who owns income-producing property may delegate to its creditor the rents owed by a tenant. This enables the creditor to access a stable and recurring cash flow, often without initiating enforcement proceedings against the property itself. From a debt-collection perspective, rent delegation is particularly attractive where the tenant is financially sound and the lease is secure.

Delegation may also be used to capture future or contingent receivables, such as insurance indemnities, contractual balances, or proceeds from ongoing projects. French case law recognises that delegation may relate to non-due claims, provided they are sufficiently determinable. This flexibility allows creditors to secure payment streams before the debtor’s financial situation deteriorates further.

5. Delegation and Insolvency Risk: A Critical Advantage

One of the most significant benefits of delegation of payment lies in its interaction with insolvency law.

When a delegation is established before the debtor enters a state of cessation of payments, it generally remains valid even if payment occurs later. This means that a creditor holding a valid delegation may continue to seek payment from the delegate despite the opening of safeguard, reorganisation or liquidation proceedings against the original debtor.

By contrast, creditors who rely solely on unsecured claims often find themselves subject to payment suspensions, compulsory debt restructuring, or limited recoveries. Delegation therefore operates as a form of structural risk mitigation, particularly valuable for creditors dealing with financially fragile counterparties.

That said, delegations granted during the so-called suspect period may be challenged if they constitute an unusual method of payment in the debtor’s line of business. For this reason, timing and professional structuring are essential. Anticipating financial distress and securing delegation early can materially improve recovery outcomes.

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6. Novation or Not? A Strategic Choice for Creditors

Under French law, delegation of payment results in novation only if the creditor expressly agrees to release the original debtor. In the absence of such an express declaration, the debtor remains bound.

From a debt-collection standpoint, novation is rarely in the creditor’s interest. Retaining two debtors provides additional security and bargaining power. Consequently, professionally drafted delegation agreements almost invariably include express clauses stating that the delegation does not operate novation and that the creditor retains all rights against the original debtor until full payment is received.

Only in specific scenarios, such as a comprehensive settlement with a highly solvent delegate, might a creditor agree to release the original debtor. Even then, such a decision should be taken with caution and supported by appropriate guarantees.

7. Common Pitfalls and How to Avoid Them

Despite its effectiveness, delegation of payment is often misunderstood or poorly implemented. Frequent errors include relying on informal assurances instead of obtaining a clear acceptance, failing to define the scope of the delegation precisely, or neglecting to assess competing claims and prior assignments affecting the delegated receivable.

Another common issue arises when creditors fail to consider insolvency timing. A delegation that appears attractive in theory may be vulnerable if granted too late or structured in a way that deviates from normal business practices.

For these reasons, delegation of payment should not be treated as a standard template exercise. It requires a tailored legal analysis, taking into account the debtor’s financial position, the nature of the delegated receivable, existing securities, and the broader recovery strategy.

8. Conclusion: Delegation of Payment as a High-Value Debt Collection Tool

Delegation of payment is one of the most effective yet underutilised mechanisms available to creditors seeking to recover debts in France. By creating a direct obligation from a third party, it allows creditors to move beyond traditional debtor-centric enforcement and secure payment from the most economically relevant source.

For managers, international companies, and foreign law firms involved in cross-border debt recovery, delegation of payment offers a pragmatic and legally sound solution to complex recovery challenges. When anticipated early and structured correctly, it can significantly increase recovery rates while reducing litigation risk and delay.