Cession

Cession contracts, although common in business practice, often become subjects of court disputes due to the insufficient understanding of the types and legal effects of cession by the involved parties. In today's developed legal and commercial transactions, efficient operation and business would be unimaginable without such contracts. Therefore, we provide an explanation of the concept of cession, which is certainly one of the specific ways of settling obligations.

A cession is a change in the obligatory relationship where there is a transfer of a claim (either a receivable or liability) from the current assignor (original owner of the right or cedent) to the recipient (assignee), while the debtor (obligor) and the claim (obligation) remain the same.

Example of cession:

Person A and Person B have a contractual relationship from which rights and obligations arise. Person A owes a debt to person B, and at the same time, person A has a claim (or obligation) against person C. To settle the debt owed to person B, person A assigns their claim against person C to person B.

The assignor transfers their claim through a cession contract. For the formation and validity of the contract, the consent of the debtor or their active participation in the conclusion of the contract is not required, but the debtor must be informed of the cession. Failure of the assignee to notify the debtor of the cession only affects the debtor if they were not otherwise aware of the cession and had already fulfilled their obligation to the assignor, where the claim (obligation) has already passed to the new assignee. In such a case, the debtor is discharged from their obligation by fulfilling it for the assignee. If the debtor (obligor) were to fulfill the obligation to the assignor, even knowing about the cession, they would not be discharged from their obligation; the obligation would still exist, and they would be required to fulfill it for the assignee. Upon signing the cession, all other rights also pass to the assignee (such as priority of payment, lien rights, interest rights, agreed clauses, etc.).

It is also crucial for the relationship between the assignor and assignee, whether the cession was for consideration or gratuitous. In a consideration cession, the assignor always guarantees the existence of the claim (veritas) but does not guarantee its collectibility (bonitas), unless explicitly agreed otherwise.

In a gratuitous cession, the assignor does not guarantee either veritas or bonitas.

The subject matter of cession can be current and future receivables in various forms of sales, credit arrangements, pledges, etc.

Possible legal grounds for cession include: contract, law, court decision, or decision of another authority.

1. Voluntary cession

The assignor is not obliged to assign their claim to a third party, but they enter into a cession contract because they find an economic or other interest in it. Such cession of a claim is called voluntary or contractual cession, and it is the most common and clearly illustrates the characteristics of cession. It is regulated by the Law of Obligations.

2. Involuntary cession

This type of cession occurs due to the forced transfer of a claim (obligation) from the assignor to the assignee, such as when a third party satisfies the debtor's claim. Sometimes, the assignor is required to transfer their claim because of compelling legal provisions; otherwise, the third party cannot validly compel the debtor to fulfill the due payment.

3. Legal cession

Legal cession occurs when certain legal conditions prescribed by law are met. Examples include cases where a third party pays the debtor's debt, such as a guarantor, or in the case of the sale of a claim at a forced public sale, etc. In brief, legal cession is not cession because it is not a transfer of a claim but rather a transfer of the claim based on the law. The difference between legal and involuntary cession lies in the fact that in the former, the claim passes to the assignee without a specific transfer act, whereas in the latter, a specific cession agreement is always required.

4. Judicial cession

A cessation of the assignor's claim to another can also occur based on a court decision. A person who wants the claim assigned to them in fulfillment of an already concluded contract can sue for the assignor to assign the claim. A court decision in a dispute over who owns the claim does not result in the transfer of the claim but is merely declaratory, determining to whom among several parties claiming the right the claim belongs.