assignment of future rights singapore

This judgment text has undergone conversion so that it is mobile and web-friendly. This may have created formatting or alignment issues. Please refer to the PDF copy for a print-friendly version.

Foot Note 1

Foot note 2, foot note 3, foot note 4, foot note 5, foot note 6, foot note 7, foot note 8, foot note 9, foot note 10, foot note 11, foot note 12, foot note 13, foot note 14, foot note 15, foot note 16, foot note 17, foot note 18, foot note 19, foot note 20, foot note 21, foot note 22, foot note 23, foot note 24, foot note 25, foot note 26, foot note 27, foot note 28, foot note 29, foot note 30, foot note 31, foot note 32, foot note 33, foot note 34, foot note 35, foot note 36, foot note 37, foot note 38, foot note 39, foot note 40, foot note 41, foot note 42, foot note 43, foot note 44, foot note 45, foot note 46, foot note 47, foot note 48, foot note 49, foot note 50, foot note 51, foot note 52, foot note 53, foot note 54, foot note 55, foot note 56, foot note 57, foot note 58, foot note 59, foot note 60, foot note 61, foot note 62.

Version No 1: 07 Jan 2022 (11:31 hrs)

Assignment of Future Rights: Everything You Need to Know

An assignment of future rights is when a person transfers his/her contractual rights and obligations to someone else. 3 min read updated on January 01, 2024

An assignment of future rights is when a person transfers his/her contractual rights and obligations to someone else. This transfer completely confers all of the rights to receive benefits under the contract.

However, if at the time of the assignment there is only a mere possibility or expectation that a future right will arise, the assignment of the future interest will be invalid. The interest in the property assigned must exist and be vested at the time of the assignment. In order to make an assignment valid, the thing assigned must be the product, growth, or increase of property on which the assignor holds a present vested interest.

Money that has been substantially earned on a contract can be assigned. If the benefits, future earnings, or other future interest assigned has not yet accrued, or the assignor has not yet performed his/her part of the contract, the assignment may still be valid. Future earnings or crops may not be a mere possibility.

• An owner of farmland may sell the crops that will grow on his own land but may not sell the crops that will grow on someone else’s land. Unless he has a present vested interest in that land of another. A right which is expected to arise in the future upon a contract which existed at the time of assignment can be assigned.
• An anticipated future right under an executory contract can be assigned.
• An assignment of wages made in reference to a contract of employment not in existence at the time of assignment is not valid.
• An assignment of future wages where there is no contract for services is invalid.
• A person can assign his/her earnings under an existing contract for service.
• A contract to perform a personal skill cannot be assigned.
• The money due on a contract involving personal skill or service or a confidential relationship can be assigned.
• An assignment of future earnings from a certain employment or trade has been treated as an assignment of wages under an existing contract of employment. This is because the possibility of future earnings is coupled with an interest. There is the existence of a vested right.
• Chose in action, except in torts, is assignable. a. A chose in action is the right to bring an action to recover a debt, money, or thing.

An assignment of wages to be earned in the future under an existing employment agreement, even though the employment is for an indefinite time, is not against public policy and is valid if made for valuable consideration, in good faith, and without fraud.

According to Restatement of the Law, Second, Contracts, “[a]n assignment of a right to payment expected to arise out of an existing employment or other continuing business relationship is effective in the same way as an assignment of an existing right.”

However, “a purported assignment of a right expected to arise under a contract not in existence, operates only as a promise to assign the right when it arises and as a power to enforce it.”

Although an executory contract is not assignable, once the contract has been executed to the extent that nothing remains to be done except the payment of money by one of the parties to the other, the claim becomes a chose in action which is assignable.

Supreme Court

What happens when you have a present assignment (or at least a contractual obligation to assign) of invention rights that don’t exist at the time of the assignment (aka “future invention rights”)?

The Supreme Court suggests it is the factual record that will answer this question. They look to:

• The chronological order in which the assignment and the activities occurred
• When a party received funding for the research completed
• When the research activities were carried out after signing anything
• Relative to the invention rights at issue, how much were those rights based on the federally funded research
• How much were they based on the research activities carried out by the other party

If the factual record is complex or unclear, it will be difficult for a court to make a decision.

If you need help with assignment of future rights, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Assignment Legal Definition
• Assignment Law
• Legal Assignment
• Assignment of Rights and Obligations Under a Contract
• Assignment of Rights Example
• Assignment Contract Law
• Assignment Of Contracts
• Consent to Assignment
• What Is the Definition of Assigns
• Assignment and Novation Agreement: What You Need to Know

Transferring Contracts in Singapore

In any contract, the parties to the contract are more or less set in stone. Only the parties which entered into the contract are allowed to make use of the rights and held to the obligations under the contract. What happens when you want to transfer the whole contract or parts of it?

In the corporate world, it is quite common for whole contracts to be transferred to other parties who were not originally parties to the contract. This routinely happens, for example, in major corporate settlements, intellectual property matters, mergers and acquisitions and the construction industry.

Such contractual transfers play an important role in the commercial world. They allow, amongst other things, a party with insufficient resources to fully complete the contract to transfer contractual obligations to another party, and they allow a party at risk of losing the benefits of the contract (due to an errant or impecunious contractor) to find another party to replace the errant or impecunious contractor so that the contractual benefits are not lost altogether.

This article seeks to introduce the ways of transferring rights and obligations under contracts in Singapore.

2 Ways of Transferring Contracts in Singapore

A contract is transferred by, you guessed it, yet another contract!

There are two ways to transfer contracts in Singapore – Assignment and Novation.

Assignment – if what is sought is the transfer of only rights under the contract, you enter into an Assignment of the contract.

Novation – if what is sought is the transfer of both rights and obligations under the contracts, you enter into a Novation of the contract.

Let’s discuss both in more detail.

Need Advice ?

Speak to a lawyer now.

At Lions Chambers LLC, we pride ourselves on being responsive. We understand that some problems need immediate attention, let us assist you.

Assignments in Singapore

  As mentioned before, an assignment transfers only the rights under the contract and not the obligations. The assignment thus does not have the effect of transferring the obligations under the contract. The person or entity which assigned the contract to someone else is still liable to perform all of its obligations under the contract.

Some important things to keep in mind when it comes to assignments are:

• The law treats the original assignor as the proper party to the original contract and not the assignee. If the assignor breaches the contract, the assignee is not to blame.
• Contracts of a personal nature cannot be assigned. Such contracts were predicated upon the special or highly specific nature or character of one of the parties. Examples of such contracts are employment contracts and motor insurance policies.
• Check the contract carefully to see if assignments are permitted at all in the first place. Many contracts include clauses expressly prohibiting either or both parties to the contract from assigning the contract to other parties.
• Some contracts allow for assignments but contain terms that place limits or conditions on assignments. These limits or conditions may pertain to the types (or even exact identity/ies) of assignees permitted, prior written notice to the other party, limits on the number of assignments, types of rights which may be assigned, and even consent (which may not be unreasonably withheld at times) by the other party before assignments are undertaken.
• In the absence of such clauses prohibiting assignment, contracts can usually be assigned to a third party without the consent of other parties to the contract.
• The original contract remains in place (only the rights of one party have been transferred).
• Once the assignment has properly been executed, the assignee now has a right to sue the other party to the contract for the rights it has received under the assignment. However, this can only be done by first joining the assignor as a party to the civil action.
• In the real world, what sometimes happens is that the assignee does actually take over some or all of the obligations, and the assignee will indemnify the assignor against any breach or failure to perform contractual obligations.

Novations in Singapore

As mentioned before, a novation transfers both the rights and obligations under the contract to another party. In effect, what actually happens in a novation is that a new party replaces one of the original parties to the contract. The person or entity which is replaced is fully absolved of all obligations under the contract and no longer can exercise its rights under the contract.

Some important things to keep in mind when it comes to novations are:

• Since all the rights and obligations have been transferred, the earlier contract is effectively extinguished. A new contract takes its place.
• Check the contract carefully to see if novations are permitted at all in the first place. Many contracts include clauses expressly prohibiting either or both parties to the contract from novating the contract to other parties. Some contracts allow for novations but contain terms that place limits or conditions on novations. These limits or conditions may pertain to the types of novatees permitted, prior written notice to the other party, and even consent by the other party before assignments are undertaken.
• If there are no such clauses prohibiting or limiting novations, contracts may usually be novated to a third party. Unlike assignments, though, novations generally require the consent of all parties to the original contract and the new third party.
• Unlike assignments, where the original contract is retained, novations mean that all the rights and obligations are created in a new contract.
• Novations may also be found by law to have arisen through the parties’ conduct, not just by agreement.
• Consideration must be provided by the new party in return for the contract novated to it unless the novation is executed by a deed signed by all parties.
• Once the novation has been properly executed, the original outgoing party to the contract is released from all future liabilities under the contract and may not avail itself of any of the rights it previously held under the contract.
• Generally, novations do not cancel past rights and obligations under the original contract. Nevertheless, parties may agree to novate these as well.

Assignments and novations are important mechanisms in the law of contract and offer a convenient way with which to transfer the rights and obligations under contracts. We would strongly advise you to examine all contracts you enter into from now on to see if there are any clauses that govern such novations or assignments.

How We Can Help You

Transferring of rights & obligations under a contract has to be done correctly. The matter is not as simple as using a template online. Do speak to us if you require assistance.

Lions Chambers LLC is an established law firm in Singapore. Our team of lawyers specialise in various areas of law and will be able to assist you. Our consultations are free. Please call +65 8777 3677 or  click here  to WhatsApp us today.

• Skip to primary navigation
• Skip to main content
• Skip to primary sidebar
• Skip to footer

Conventus Law

More results...

Singapore – Receivable Financing With A Prohibition Against Assignment – A Possibility?

February 23, 2018 by Conventus Law

23 February, 2018

First Abu Dhabi Bank PJSC v BP Oil International Limited [2018] EWCA Civ 14

The English Court of Appeal recently considered the effect of a contractual prohibition against assignment of receivable in receivable financing. The decision affirms that such a prohibition is effective to prevent any attempted assignments. However, it does not restrict other alternative methods of transferring the economic benefit of the contract, such as declarations of trust, subrogation, sub-participation and payments to the assignee after receipt by the assignor.

The case also cautions lenders on the need to tighten widely worded representations and warranties on the ability of the assignor to assign receivable in receivable financing.

Facts of First Abu Dhabi Bank

BP Oil International Limited (“BPOI”) and Société Anonyme Marocaine de L’Industrie de Raffinage (“SAMIR”) entered into an agreement for the delivery of crude oil (“the SAMIR Agreement”). The SAMIR Agreement incorporated the following clause (“the section 34 clause”):

“Neither of the parties to the Agreement shall without the previous consent in writing of the other party (which shall not be unreasonably withheld or delayed) assign the Agreement or any rights or obligations hereunder. In the event of an assignment in accordance with the terms of this Section, the assignor shall nevertheless remain responsible for the proper performance of the Agreement. Any assignment not made in accordance with the terms of this Section shall be void.”

BPOI subsequently entered into a receivables financing arrangement with First Abu Dhabi Bank PJSC (“FADB”), under which BPOI transferred to FADB the credit risk of SAMIR failing to make payment under the SAMIR Agreement. FADB would pay to BPOI 95% of the value of the receivable under the SAMIR Agreement in advance of the receivable being due; in exchange, BPOI would assign 95% of the value of the receivable to FADB and pay it a fee. It was further provided in the agreements between BPOI and FADB that if such assignment was not able to take place:

(a)  FADB would be subrogated to BPOI’s rights against SAMIR;

(b)  BPOI would take legal proceedings against SAMIR for amounts unpaid by SAMIR;

(c)  BPOI would hold on trust for FADB the proceeds of 95% of the receivable; and

(d)  FADB would be entitled to a funded sub-participation in the rights to receive payment in respect of 95% of the receivable.

BPOI also represented and warranted to FADB that:

“BPOI is not prohibited by any security, loan or other agreement, to which it is a party, from disposing of the Receivable evidenced by the Invoice as contemplated herein and such sale does not conflict with any agreement binding on [BPOI]”.

SAMIR’s consent was not obtained in relation to the assignment of the receivable. Subsequently, after SAMIR took steps to file for insolvency before payment in respect of the receivable were made, FADB commenced proceedings against BPOI, claiming a breach of the representation and warranty. 

The court had to determine three issues:

(a)  What, on its true construction, was BPOI contractually prohibited from doing under the section 34 clause?

(b)  What, as a matter of law, was the effect of such a restriction on BPOI’s ability to dispose of the receivable?

(c)  As a matter of construction, was BPOI in breach of the representation and warranty?

On the first issue, the Court held that the section 34 clause imposed a contractual obligation on BPOI not to assign its future or existing rights under the SAMIR Agreement without SAMIR’s prior consent. This includes the attempted assignment of 95% of the receivable by BPOI to FADB. The prohibition on assignment did not, however, impose any contractual restriction on BPOI from:

(a)  Paying to FADB all payments received from SAMIR in connection with the receivable;

(b)  Where an assignment was unable to take place, subrogating FADB to its rights against SAMIR;

(c)  Holding the proceeds of the receivable on trust for FADB; and

(d)  Granting FADB a funded sub-participation in respect of the rights to receive payment of the receivable.

Payment by the assignor to assignee after receipt of sums due is not prohibited, since these are not “rights under” the underlying contract. The Court affirmed its 2007 decision in Barbados Trust Company Ltd v Bank of Zambia that prohibitions on assignment do not preclude declarations of trust by the assignor in favour of the assignee. Further, it was common ground between the parties that clauses prohibiting assignment also do not prevent the creation of rights of subrogation (any claim brought pursuant to the subrogation right must be brought by and in the name of BPOI) or sub-participation (this would result in a debtor-creditor relationship between BPOI and FADB without giving FADB an interest in the underlying debt).

On the second issue, the Court admitted that the House of Lords’ decision in Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd was binding on it. In that case, it was held that contractual prohibitions on assignment are effective to prevent attempted assignments of contractual rights in breach of the prohibition. Nonetheless, the Court considered at great length Professor Goode’s proposition that “a no-assignment clause is valid only so far as it operates as a matter of contract, conditioning the duty to perform, not as a restraint on alienation”, and that “[i]f … it purports to render a transfer void … it invades the field of property law and is of no effect, both on the ground of repugnancy and on the ground of public policy”. While clearly impressed with Professor Goode’s analysis, the Court’s remarks are ultimately obiter dicta since it observed that BPOI did not seek to argue this issue before it. The Court thus proceeded on the assumption that the section 34 clause was capable of rendering ineffective any purported equitable assignment of the receivable without SAMIR’s consent.

In relation to the third issue, the Court held that BPOI was not in breach of the representation and warranty. It observed that the parties expressly contemplated the possibility of a contractual restriction against assignment, and thus provided for alternative means of transferring the economic benefit of the receivable to FDAB. Moreover, the primary means of transferring such economic benefit was for BPOI to make immediate payment of amounts received from SAMIR to FDAB, and to impose a trust over such amounts received in BPOI’s hands. Only to the extent that such sums were not received or paid over to FDAB did the assignment take effect. Against this background, the Court considered that on true construction of the representation and warranty, the words “disposing” or “sale” did not refer exclusively to an assignment. Hence, even accepting that the section 34 clause was effective to prohibit assignment of the receivable, it did not prohibit other means of transferring the economic benefit of the receivable. There was accordingly no breach of the representation and warranty. 

Implications for Banks

1. Clauses prohibiting assignment of debts do not prohibit other ways of transferring economic benefit of underlying contract

The case demonstrates that despite the existence of a clause in the underlying contract prohibiting assignment of receivables thereunder, there are other valid mechanisms by which banks may acquire the economic benefit of the contract may be transferred. Clauses prohibiting assignment do not, as a matter of construction, preclude payment of amounts received by the assignor to the assignee, declarations of trust, and the giving of rights of subrogation and sub-participation. Assignees would do well to strengthen their position by including such other means of transferring the benefit of the underlying contract in their agreements.

2. A potential relook at Linden Gardens?

Despite being bound by the House of Lords’ decision in Linden Gardens, and the issue not being argued before it, the English Court of Appeal referred extensively to Professor Goode’s analysis on the effect of contractual prohibitions on the assignment. This case has been roundly criticised for several years, and it was thus perhaps unsurprising that the English Court of Appeal took this opportunity to consider the “strong arguments in favour of Professor Goode’s proposition” that “it is not competent for the debtor to exclude by contract the proprietary effects of an assignment as between assignor and assignee, or the creation of a trust as between trustee and beneficiary; and that ‘all he can do is to insist that he will not recognise the title of the beneficiary or the ability of the beneficiary to bring proceedings in his own right.’” Notably, Professor Goode has suggested that Linden Gardens concerned the issue of whether the assignment was effective against the debtor, rather than as between the assignor and assignee. Thus, while the Court was bound by Linden Gardens, it could – if it so wished – adopted Professor Goode’s characterisation of that decision in order to distinguish it from the present facts, had the issue been live before it. For now, at least, Linden Gardens remains authority from the apex court in UK, and is binding in the UK and persuasive in Singapore. But this decision now provides fresh ammunition to a future litigant wishing to challenge the correctness of Linden Gardens.

This decision, as noted above, already lends considerable support to lenders in the context of receivables financing by permitting various methods of acquiring the economic benefit of an underlying contract despite a contractual prohibition on assignment of the receivable. A potential reversal of Linden Gardens would go even further by holding that an equitable assignment is effective to transfer the receivable in respect of an underlying contract in the face of a contractual prohibition on assignment.

3. Representations and warranties should be tightened to expressly cover “assignment”

A representation and warranty employing general language that the assignor is not prohibited from “disposing” of, or effecting a “sale” of, the receivable may not be breached by the existence of a prohibition on assignment if other means of transferring the economic benefit of the contract were envisaged by the parties. Lenders will benefit from tighter drafting that expressly covers “assignment” of the receivable, in order to succeed in a claim against the assignor for breach of representation and/or warranty. 

Register for your monthly Asia legal updates from Conventus Law

Error: Contact form not found.

Twin Transition In Vietnam’s Financial Sector – Green And Digital Transitions.

- le net - partner,.

Singapore – Trademark Invalidation By CrossFit LLC.

India – AKP Banking & Finance Digest- May 27, 2024.

- anuroop omkar - ak & partners,.

CONVENTUS LAW

CONVENTUS DOCS CONVENTUS PEOPLE

3/f, Chinachem Tower 34-37 Connaught Road Central, Central, Hong Kong

[email protected]

A patent can help you to protect your new product, process or technical improvement to existing technology. Read on to find out more about registering and managing your patents.

What is a Patent?

A patent is a right that is granted for an invention. It can take the form of a new product, process or technical improvement to existing technology.

• Term of Protection

When you register a patent for your invention, you hold the exclusive right to use the patent. This means that no other person can take advantage of that patent, unless your permission is sought.

When your patent portfolio is properly managed, it can present many economic opportunities – whether as a means to develop new and cutting-edge technologies, raise investment, or extract value from third parties through sale or licensing.

You may also like:

How to Register

• Step 1: Check Registration Criteria for a Patent
• Step 2: Apply for a Patent
• Step 3: Forms & Fees for New Applications
• Our Service Commitment
• Acceleration Programmes
• Domestic Route
• Provisional Application
• National Security Clearance

Managing Patents

• Renew or Restore Your Patent
• Monetise Your IP
• Resolve Disputes
• Forms & Fees

Practice Guidelines & Circulars

• Circulars (pre-2015)
• Practice Directions (pre-2015)

Patent Agents

Patents FAQs

The Government restricts bans on assignment

United Kingdom |  Publication |  November 2018

Legislation now in force preventing parties from prohibiting the assignment of receivables under certain contracts.

At the moment, a contract can prohibit or restrict the parties’ ability to assign or transfer rights created under the contract. The extent of the restriction is a matter of interpretation of the clause concerned. If one of the parties to the contract attempts to assign the benefit of the contract in breach of the restriction, the purported assignment is ineffective.

One of the key assets of any business is its receivables, and restrictions on assignment can prevent the parties from factoring receivables or otherwise raising finance on them. The Government has decided that it should be easier for businesses to raise finance on their receivables. Accordingly the Small Business, Enterprise and Employment Act 2015 allows regulations to be made to invalidate restrictions on the assignment of receivables in particular types of contract. The regulations have now been made. They are contained in The Business Contract Terms (Assignment of Receivables) Regulations 2018. Draft regulations published in July, have been approved by both Houses of Parliament and are now in force.

What types of contracts do the Regulations apply to?

The Regulations apply to contracts for the supply of goods, services or intangible assets under which the supplier is entitled to be paid money. But there are a number of important exclusions from their application, including the following:

• They only apply to contracts entered into on or after 31 December 2018.
• They only apply where the person who supplies the goods, services or intangible assets concerned, and is therefore entitled to the receivable, is a small or medium-sized enterprise which is not a special purpose vehicle. Whether or not an entity qualifies in any particular case requires a detailed examination of the precise wording of the
• Regulations. Counter-intuitively, the test is not applied at the time the contract is entered into, but at the time the assignment takes place.
• There is a specific exemption for contracts “for, or entered into in connection with, prescribed financial services”: These are widely defined to include “any service of a financial nature”.
• There are specific exclusions for particular types of contract, including certain commodities, project finance, energy, land, share purchase and business purchase contracts and operating leases.
• As a general rule, it would seem that the Regulations only apply to contracts governed by English law or the law of Northern Ireland, but they prevent the parties from choosing a foreign law if it can be established that the purpose of doing so was to evade the Regulations.
• The Regulations do not apply if none of the parties to the contract has entered into it in the course of carrying on a business in the United Kingdom.

What is the effect of the Regulations?

The Regulations provide that “a term in a contract has no effect to the extent that it prohibits or imposes a condition, or other restriction , on the assignment of a receivable arising under that contract or any other contract between the same parties.”

A receivable is the right to be paid any amount under a contract for the supply of goods, services, or intangible assets. The Regulations do not prevent the parties from restricting the assignment of other contract rights.

More difficult is to establish what is meant by assignment. Receivables are transferred in various ways in practice. Sometimes the transfer is outright (for instance by way of sale); and sometimes it is by way of security (for instance to secure a loan). The transfer may be effected by a statutory assignment, an equitable assignment, a charge or a trust. “Assignment” is not defined in the Regulations, and so there is some doubt as to which of these transactions are covered.

Although charges are not expressly referred to, they might be covered by the expression “assignment” if it is given a broad interpretation. But because of the uncertainty, the best course is to take an assignment by way of security over a receivable where there is, or might be, a restriction. That way, it is clear that the Regulations do apply.

Non-assignment clauses come in a variety of forms. They will be covered by the Regulations if they prohibit or impose a condition , or other restriction on the assignment of a receivable. The Regulations expressly invalidate terms which prevent the assignee from determining the validity or value of the receivable or their ability to enforce it. Whether or not the Regulations apply in any particular case will require an analysis of the precise terms of the restriction.

The Regulations will be of particular importance to businesses involved in the financing of receivables. And they will also be of concern to buyers because they will override their contractual protections.

• Financial institutions

Practice area:

• Banking and finance

Recent publications

Publication

Digital Markets, Competition and Consumers Act: Impact on competition litigation

The Digital Markets, Competition and Consumers Act (DMCC Act) received Royal Assent on 24 May 2024 and is generally expected to come into force in autumn this year.

EMEA | June 07, 2024

Stephanie Hamon on managing change and tech implementation at a panel session of the Legal Tech Talk conference

Head of Legal Operations, Stephanie Hamon, will be joining the panel discussion on "Simplifying Legal Tech Adoption and Implementation" at the Legal Tech Talk conference on June 13th (3:30 - 4:15 PM).

Global | June 07, 2024

What is a “ship”?

What appears to be a simple question is not as straightforward as one would think. One might take the view that it is just a matter of common sense whether something is a ship or not, yet it is difficult to define exhaustively what exactly a ship is, or the extent to which something forms part of a “ship”.

EMEA | June 04, 2024

Subscribe and stay up to date with the latest legal news, information and events . . .

© Norton Rose Fulbright LLP 2023

• Canada (English)
• Canada (Français)
• United States
• Deutschland (Deutsch)
• Germany (English)
• The Netherlands
• Türkiye
• United Kingdom
• South Africa
• Hong Kong SAR
• Marshall Islands
• Nordic region