Effect of transfer of receivables with special agreement for prohibition of transfer

Subsection 449(2) of the Civil Act provides that “Where the parties have declared a contrary intention, a claim shall not be assigned: Provided, That such declaration of intention, cannot be set up against a third person acting in good faith” Regarding the interpretation of this subsection, the existing majority theory and precedents interpret that if there is a special agreement on prohibition of transfer, the transferability of the claim is lost and the transfer of the claim does not occur, but in order to protect the safety of the transaction, the invalidity cannot be claimed against a bona fide third party. This is referred to as the property effectiveness theory. However, on the grounds that improving the property character and transferability of claims is an international trend, the claim effectiveness theory is strongly asserted, which interprets that the transfer of receivables with a special agreement on transfer prohibition is valid, but the debtor can refuse performance against the malicious assignee. Accordingly, an opinion on amendment to subsection 449(2) of the Civil Act was presented. However, the claim effectiveness theory has the following questions. First, because the current subsection of Civil Act explicitly stipulates that “non-transferability”, it is questionable that this subsection may be interpreted as “transferability.” The reason why the Civil Law has a separate provision on the special agreement for the prohibition of the transfer of receivables is that if the principle of relativity of claims is applied to the transfer of receivables, it may break the trust of the debtor who believed in the special agreement for the prohibition of the transfer of claims, and if the effect of the special agreement for the prohibition of the transfer of receivables is only applied to the contracting parties because it cannot affect a third party, the principle of relativity of claims cannot be adhered. Second, the claim effectiveness theory is thought to be an interpretation that overemphasizes the interests of the creditor and the transferee in relation to effect of transfer of receivables with special agreement for prohibition of transfer. It is the creditor and the debtor who have to weigh the profits in relation to effect of transfer of receivables with special agreement for prohibition of transfer, so it would not be reasonable to overemphasize the interests of the transferee. Third, the claim effectiveness theory explains that transfer of receivables with special agreement for prohibition of transfer is valid, and the creditor only needs to impose liability for default on the violation of the special contract for non-transfer. However, if the creditor's default is liable to the damages which debtor does not suffer damages, the claim for damages against the creditor will be of no practical benefit. Therefore, it is not appropriate as a legal responsibility for the violation of special agreement for prohibition of transfer.…