Bam242 Sas Module7-1

Course Code: BAM 242
Module #7
Name: Class number:

Section: Schedule: Date:
Lesson Title: ASSIGNMENT OF CREDITS AND OTHER Materials:

INCORPOREAL RIGHTS Student Activity Sheet
Lesson Objectives:
At the end of this module, I can:
1. Define assignment of credit and other incorporeal rights References:
2. State the binding effect and extent of assignment. Regulatory Framework and
3. Enumerate and explain the warranties of the assignor of Legal Issues in Business Part 1
credit and the duration of assignor’s liability by Atty. Andrix Domingo,CPA,MBA
Productivity Tip:
If you find yourself out of track, do not lose your fighting spirit. Besides, you are not
the only person in this world that loses track from time to time. Be kind enough to
yourself by being your own best friend! Tell yourself to never say never! Keep
fighting! Happy learning!
A. LESSON PREVIEW/REVIEW
1) Introduction (2 mins)
Assignment of credits and other incorporeal rights is really a sale!

 The subject matter or object is the credit or the right assigned.
 The consideration is the price paid for the credit or right
 The consent is the agreement of the parties to the assignment of the
credit or right
Important difference between a contract of sale and assignment of credits and

other incorporeal rights:
after the transfer, a definite third person is obliged (personal right)
unlike in the contract of sale the whole world (real right) must respect
the title of the buyer.
In this module, you will learn more about the assignment of credits and other incorporeal rights as well as
the binding effect and extent of assignment, the warranties of the assignor of credit and the duration of
the assignor’s liability.
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B. MAIN LESSON
1) Activity 2: Pre-Printed Content Notes (13 mins)
Assignment of credit – It is an agreement by virtue of which the owner of a credit, known as the
assignor, by a legal cause, such as sale, dacion en pago, exchange or donation, and without the
consent of the debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires
the power to enforce it to the same extent as the assignor could enforce it against the debtor.
Incorporeal rights are right to intangible property.

Assignment of credits and other incorporeal rights is a consensual, bilateral, onerous and commutative
contract.
In a simple illustration, say your friend owes you P500.00. As a creditor, you can sell your right to collect from
your friend. You can sell it for let say P450.00 and the P50.00 difference plus the accrued interests can be the
possible income of the third person who assumed the responsibility to collect.
Perfection of Contract for Assignment of Credit:

The contract for the assignment of credit and other incorporeal rights is perfected from the moment the partiesagree upon
the credit or right assigned and upon the price even if neither has been delivered.
Binding Effect of Assignment:

Article 1625. An assignment of a credit, right or action shall produce no effect as against third
persons, unless it appears in a public instrument, or the instrument is recorded in the
Registry of Property in case the assignment involves real property.
But if the assignment does not appear in public instrument or the same is not notarized, as between the parties,the same is
still valid.
The assignee is subrogated to the rights as well as to the obligations of the seller, He cannot acquire greater rights than
those pertaining to the assignor.
Consent of the Debtor is Not Required

In an assignment of credit, the consent of the debtor is not required in order that the assignment produce legal effects.
Only notice should be given to the debtor to inform the debtor that he should make payment to the assignee and not to
the original creditor.
Extent of the Assignment of Credit

Article 1627. The assignment of a credit includes all the accessory rights, suchas
guaranty, mortgage, pledge or preference
Daniel owes Cris P20,000 with Greg as guarantor.

Cris assigns his credit to May.
Daniel fails to pay May.
Daniel can enforce the guaranty of Greg and ask him to make the payment.
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Warranties of the Assignor of Credit

At the perfection of the contract of assignment, the creditor warrants the following:
1. existence and
2. legality of the credit
The assignor or the original creditor does not warrant the solvency of the debtor unless it is expressly stipulated
or unless the insolvency was already existing and of public knowledge at the time of the assignment. If there are
breach of the above warranties, then the assignor shall be held liable.
Liabilities of the Assignor of Credit:

Assignor in good faith is one who has no knowledge of any circumstances like the insolvency of the debtor at
the time the assignment is perfected. The assignor in good faith who has violated the warranties stated shall
be liable to the price received and to the expenses of the contract and other legitimate payments by reason
of the assignment.
But the assignor is in bad faith shall also be liable for damages.
Duration of Assignor’s Liability Where Debtor’s Solvency Guarantee:

In case the assignor has expressly warranted the solvency of the debtor, the duration
of the assignor’s liability are as follows:
1. If there is a stipulation – the term or period agreed upon

2. If there is no stipulation:
a. For 1 year from the assignment of the credit when the period for payment of the credit has expired.
b. For 1 year after its maturity, when such period for payment has not yet expired.
2) Activity 3: Skill-building Activities (with answer key) (18 mins + 2 mins checking)
Exercise I
1. Is the consent of the debtor to assignment required? Explain
2. What is the binding effect of an assignment if the same is not notarized?
.
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3. What does an assignor of credit warrant and what liabilities will he incur in case of violation thereof?
3) Activity 5: Check for Understanding (5 mins)
Exercise I. TRUE or FALSE
1. The contract of sale is perfected at the moment there is a meeting of minds upon the thing
which is the object of the contract and upon the price and the complete delivery of the thing.
2. Assignment of credits and other incorporeal rights are perfected by delivery.
3. An assignment of a credit, right or action may produce an effect as against third person, even
if it does not t appear in a public instrument.
4. The assignment of a credit includes all the accessory rights, such as a guaranty, mortgage,
pledge or preference.
5. The notice to the debtor of the assignment of credit is required as well as his consent.
6. The vendor in good faith shall be responsible for the existence and legality of the credit at the
time of sale but not for the solvency of the debtor.
7. In assignment of credit, the object is credit, incorporeal rights or rights of action or the property
8. In a contract of sale, the object is incorporeal rights or rights of action or the property just like in
the assignment of credit.
9. In a contract of sale, it needs to appear in a public instrument to affect a third person.

10. In assignment of credit, it must appear in a public or private instrument to produce effect as
against third person.
of credit, it must appear in a public instrument to produce effect as againstthird person.
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A.LESSON WRAP-UP
Activity 6: Thinking about Learning
Congratulations for finishing this module! Shade the number of the module that you finished
Did you have challenges learning the concepts in this module? If none, which parts of the module helped you
learn the concepts?
Some question/s I want to ask my teacher about this module is/are:
_.
Learning Scores Action Plan

Date
Target/Topic
What module# did you What contributed to the quality of your

What were your
What’s the do? What were the performance today? What will you do next
scores in the
date today? learning targets? What session to maintain your performance or
activities?
activities did you do? improve it?
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FAQs
What is the nature of assignment of credit?

An assignment of credit has the nature of a sale of personal property.
What is the difference between Contract of Sale and Contract of Assignment?

In contract of sale, the object is property while in the assignment of credit is the credit, incorporeal rights
or rights of action.
Contract of sale need not appear in a public instrument to affect the third person while assignment of
credit must appear in a public instrument to produce effect as against a third person. In case the
assignment involves real property, the instrument must be recorded in the Registry of Property.
What is insolvent?
A person who either has ceased to pay his debts in the ordinary course of business or cannot pay his
debts as they become due.
One who sells a present inheritance (sale of future inheritance is void) without enumerating the things of
which it is composed, shall only be answerable for his character as an heir.
When a credit or other incorporeal right in litigation is sold, the debtor shall have a right to extinguish it
by reimbursing the assignee for the price the latter paid therefor, the judicial costs incurred by him, and
the interest on the price from the day on which the same was paid.
A credit or other incorporeal right is said to be in litigation there is pending case in court with regard to
the credit or other incorporeal right.
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Course Code: BAM 242

Name: Class number:

Lesson Title: ASSIGNMENT OF CREDITS AND OTHER Materials:

Assignment of credits and other incorporeal rights is really a sale!

Important difference between a contract of sale and assignment of credits and

Name: Class number:

1) Activity 2: Pre-Printed Content Notes (13 mins)

Incorporeal rights are right to intangible property.

Perfection of Contract for Assignment of Credit:

Binding Effect of Assignment:

Consent of the Debtor is Not Required

Extent of the Assignment of Credit

Daniel owes Cris P20,000 with Greg as guarantor.

Name: Class number:

Warranties of the Assignor of Credit

Liabilities of the Assignor of Credit:

Duration of Assignor’s Liability Where Debtor’s Solvency Guarantee:

1. If there is a stipulation – the term or period agreed upon

1. Is the consent of the debtor to assignment required? Explain

2. What is the binding effect of an assignment if the same is not notarized?

Name: Class number:

3) Activity 5: Check for Understanding (5 mins)

Exercise I. TRUE or FALSE

9. In a contract of sale, it needs to appear in a public instrument to affect a third person.

Name: Class number:

Activity 6: Thinking about Learning

Some question/s I want to ask my teacher about this module is/are:

Learning Scores Action Plan

What module# did you What contributed to the quality of your

Name: Class number:

What is the nature of assignment of credit?

What is the difference between Contract of Sale and Contract of Assignment?

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