Section 14 – Asserting defence or right of compensation
81.This section puts the common law rule assignatus utitur jure auctoris (the assignee takes the rights of the assignor) into statutory form. The new rule applies by default, so that it is open to the debtor and the assignor to agree that the debtor may not assert a particular right. This section does not make express provision as to how any agreement is to be constituted, although it will need to pre-date the assignation document.
82.The effect of subsection (1) is that, unless agreed otherwise, any defences which the debtor can plead against the assignor can also be pled against the assignee.
Example
Ona sells goods to Peter at a price of £1,000. The sale is on credit, and Ona assigns her claim for payment to Quentin. It turns out that the goods are defective. If this entitled Peter to refuse to pay Ona then he is equally entitled to refuse to pay Quentin. It does not matter that Quentin is in good faith.
83.Subsection (2) states that any agreement made by the parties that a defence cannot be asserted against the assignee is subject to a contrary rule in any enactment. For example, a consumer debtor may be protected by the unfair contract terms provisions in the Consumer Rights Act 2015.
84.Subsection (3) provides that a debtor is not to be treated as having been told about the assignation of a claim only because the assignation document has been registered. This rule applies for the purpose of any enactment or rule of law about compensation, set-off, retention, balancing of accounts or counterclaims.
