Assignment of Claims in France: How Receivables, Guarantees, and Disputed Debts Really Work

The assignment of claims is a cornerstone of debt recovery and credit structuring in France. Whether you are a creditor seeking liquidity, an investor acquiring receivables, or a debtor facing a change of creditor, understanding how claim assignments operate under French law is essential.

Unlike the Dailly assignment, which is reserved for financial institutions, ordinary claim assignment under the French Civil Code applies to a much broader range of transactions. It governs transfers between companies, individuals, investment vehicles, litigation funds, and debt purchasers. It also plays a decisive role in insolvency proceedings and contested debt situations.

This article explains how claim assignment works in France, what formalities must be respected, how it affects debtors and creditors, and how recent reforms have expanded its use as a security tool.

1. What Is an Assignment of Claims Under French Law?

Under French law, an assignment of claims is a contract by which a creditor transfers all or part of a claim against a debtor to a third party. The transfer may be made for consideration or free of charge, and it may concern one or several claims, whether existing or future, provided they are identifiable or at least identifiable in the future.

This mechanism is governed by the French Civil Code and applies whenever the assignment is not made through a Dailly transfer. Unlike Dailly assignments, which are restricted to banks and similar institutions, ordinary claim assignments are open to anyone.

The assignment automatically includes the claim’s accessories, such as guarantees, securities, and ancillary rights, unless otherwise agreed.

2. Mandatory Formalities: Why Writing Is Not Optional

French law imposes strict formal requirements. An assignment of claims must be recorded in writing. Without a written instrument, the assignment is null and void.

Between the assignor and the assignee, ownership of the claim transfers on the date of the agreement. From that same date, the assignment is also enforceable against third parties. However, if the date is disputed, the burden of proof lies with the assignee, who may prove it by any means.

Crucially, the debtor’s consent is not required, unless the claim was contractually declared non-assignable. That said, even without debtor consent, the assignment is not enforceable against the debtor until one of two things occurs:

• the debtor is formally notified of the assignment, or

• the debtor formally acknowledges it.

Until then, the debtor may validly pay the original creditor.

3. What the Debtor Can Still Invoke After an Assignment

Assignment does not deprive the debtor of legal defenses. Once notified, the debtor may still raise all defenses inherent to the debt, such as nullity, non-performance, termination of contract, or legal set-off.

The debtor may also invoke defenses arising from prior dealings with the original creditor, provided they arose before the assignment became enforceable against the debtor. These include extensions of time, debt forgiveness, or non-connected set-offs.

French courts have recently reaffirmed an important limitation regarding set-off. If the debtor becomes insolvent and the assignment was not notified before insolvency proceedings opened, set-off cannot operate in favor of the assignee. Notification must occur before the insolvency judgment for legal set-off to be available.

As for costs generated by the assignment itself, the debtor cannot be required to advance them. The assignor and assignee are jointly liable for any additional costs, and unless otherwise agreed, the assignee ultimately bears them.

4. The Assignor’s Liability: Existence vs. Solvency

When a claim is assigned for value, the assignor automatically guarantees that the claim exists and includes its accessories, unless the assignee knowingly accepted the risk.

However, the assignor does not guarantee the debtor’s solvency by default. Solvency is guaranteed only if the assignor expressly undertakes to do so, and even then, the guarantee is limited to the price received for the assignment.

If solvency is guaranteed, the law presumes that the guarantee covers only the debtor’s current solvency, unless the contract expressly extends it to solvency at maturity.

This distinction is critical in distressed debt transactions and litigation finance, where valuation depends heavily on enforceability versus collectability.

5. Competing Assignees: Who Wins?

When the same claim is assigned to multiple parties, French law resolves the conflict strictly by date. The first assignment in time prevails, regardless of notification, provided its date can be proven.

The winning assignee may seek reimbursement from a debtor who mistakenly paid another assignee.

This rule underscores the importance of precise dating and evidence preservation in receivables transactions.

6. Assigning a Claim as Security: A Powerful New Tool

Since January 1, 2022, French law expressly allows assignment of claims as security, following a major reform adopted in September 2021.

In this structure, ownership of the claim is transferred to secure another obligation, typically a loan. The agreement must clearly identify both the secured claim and the assigned claim. If they are future claims, the contract must include sufficient elements to allow individualization, such as debtor identity, payment location, amount, or maturity.

Amounts paid by the debtor are applied to the secured debt once it becomes due. If the secured debt is fully repaid before the assigned claim is collected, ownership of the claim automatically reverts to the original creditor, without any additional formality.

French law has also formally recognized the assignment of sums of money as security, sometimes referred to as cash collateral. Ownership of the funds transfers to the secured creditor, who may freely dispose of them unless the contract provides otherwise. This security becomes enforceable against third parties upon delivery of the funds.

7. The Right of Redemption in Disputed Claims

French law provides a unique mechanism known as the right of redemption in disputed claims. When a claim that is already being contested in court is assigned, the debtor may extinguish the dispute by reimbursing the assignee for the actual purchase price, plus costs and interest.

A claim is considered disputed once litigation has begun and the substance of the claim is challenged. The French Supreme Court has emphasized that this mechanism is exceptional and must be interpreted strictly.

It applies only if, before the assignment:

• litigation had already been initiated, and

• formal pleadings contesting the substance of the claim had been filed.

Even bulk assignments of receivables do not prevent the exercise of this right, provided the price attributable to the disputed claim can be determined.

However, the right does not apply when the assignment is made to a co-owner, a co-heir, a creditor receiving payment of what is owed to them, or the possessor of the disputed inheritance.

8. Assignment of Debt: Substituting the Debtor

French law also recognizes the assignment of debt, introduced by the 2016 reform. This mechanism allows a debtor to be replaced by another debtor, but only with the creditor’s consent.

If the creditor consented in advance or was not involved in the agreement, the assignment becomes enforceable only once it is notified to the creditor or formally acknowledged.

If the creditor expressly agrees, the original debtor is released for the future. Otherwise, and unless otherwise agreed, the original debtor remains jointly liable.

The substituted debtor and the original debtor may both raise defenses inherent to the debt. Each may also raise personal defenses. Securities remain in place unless the original debtor is released, in which case securities provided by that debtor or third parties survive only with their consent.

9. Why This Matters for Debt Recovery

For debt recovery professionals, claim assignment is not an abstract legal tool. It determines:

• who has standing to sue,

• which defenses remain available,

• whether guarantees survive,

• how insolvency affects enforcement,

• and whether a debtor can neutralize a claim through redemption.

Errors in formalization, notification, or timing can render an otherwise valid claim unenforceable. Conversely, a properly structured assignment can secure priority, preserve guarantees, and dramatically improve recovery prospects.