The right of set-off is exercised by notice to the other party. ARTICLE 8.4 (Content of notice)
(1) The notice must specify the obligations to which it relates.
(2) If the notice does not specify the obligation against which set-off is exercised, the other party may, within a reasonable time, declare to the first party the obligation to which set-off relates. If no such declaration is made, the set-off will relate to all the obligations proportionally. 28
ARTICLE 8.5 (Effect of set-off)
(1) Set-off discharges the obligations.
(2) If obligations differ in amount, set-off discharges the obligations up to the amount of the lesser obligation.
(3) Set-off takes effect as from the time of notice.
CHAPTER 9 — ASSIGNMENT OF RIGHTS, TRANSFER OF OBLIGATIONS, ASSIGNMENT OF CONTRACTS SECTION 1: ASSIGNMENT OF RIGHTS ARTICLE 9.1.1 (Definitions)
“Assignment of a right” means the transfer by agreement from one person (the “assignor”) to another person (the “assignee”), including transfer by way of security, of the assignor’s right to payment of a monetary sum or other performance from a third person (“the obligor”). ARTICLE 9.1.2 (Exclusions)
This Section does not apply to transfers made under the special rules governing the transfers:
(a) of instruments such as negotiable instruments, documents of title or financial instruments, or
(b) of rights in the course of transferring a business. ARTICLE 9.1.3
(Assignability of non-monetary rights)
A right to non-monetary performance may be assigned only if the assignment does not render the obligation significantly more burdensome. ARTICLE 9.1.4 (Partial assignment)
(1) A right to the payment of a monetary sum may be assigned partially. (2) A right to other performance may be assigned partially only if it is divisible, and the assignment does not render the obligation significantly more burdensome. ARTICLE 9.1.5 (Future rights)
A future right is deemed to be transferred at the time of the agreement, provided the right, when it comes into existence, can be identified as the right to which the assignment
relates. 29
ARTICLE 9.1.6
(Rights assigned without individual specification)
A number of rights may be assigned without individual specification, provided such rights can be identified as rights to which the assignment relates at the time of the assignment or when they come into existence. ARTICLE 9.1.7
(Agreement between assignor and assignee sufficient)
(1) A right is assigned by mere agreement between the assignor and the assignee, without notice to the obligor.
(2) The consent of the obligor is not required unless the obligation in the circumstances is of an essentially personal character. ARTICLE 9.1.8
(Obligor’s additional costs)
The obligor has a right to be compensated by the assignor or the assignee for any additional costs caused by the assignment. ARTICLE 9.1.9 (Non-assignment clauses)
(1) The assignment of a right to the payment of a monetary sum is effective notwithstanding an agreement between the assignor and the obligor limiting or prohibiting such an assignment. However, the assignor may be liable to the obligor for breach of contract.
(2) The assignment of a right to other performance is ineffective if it is contrary to an agreement between the assignor and the obligor limiting or prohibiting the assignment. Nevertheless, the assignment is effective if the assignee, at the time of the assignment, neither knew nor ought to have known of the agreement. The assignor may then be liable to the obligor for breach of contract. ARTICLE 9.1.10 (Notice to the obligor)
(1) Until the obligor receives a notice of the assignment from either the assignor or the assignee, it is discharged by paying the assignor.
(2) After the obligor receives such a notice, it is discharged only by paying the assignee. ARTICLE 9.1.11 (Successive assignments)
If the same right has been assigned by the same assignor to two or more successive assignees, the obligor is discharged by paying according to the order in which the notices were received. 30
ARTICLE 9.1.12
(Adequate proof of assignment)
(1) If notice of the assignment is given by the assignee, the obligor may request the assignee to provide within a reasonable time adequate proof that the assignment has
been made.
(2) Until adequate proof is provided, the obligor may withhold payment. (3) Unless adequate proof is provided, notice is not effective.
(4) Adequate proof includes, but is not limited to, any writing emanating from the assignor and indicating that the assignment has taken place. ARTICLE 9.1.13
(Defences and rights of set-off)
(1) The obligor may assert against the assignee all defences that the obligor could assert against the assignor.
(2) The obligor may exercise against the assignee any right of set-off available to the obligor against the assignor up to the time notice of assignment was received. ARTICLE 9.1.14
(Rights related to the right assigned)
The assignment of a right transfers to the assignee:
(a) all the assignor’s rights to payment or other performance under the contract in respect of the right assigned, and
(b) all rights securing performance of the right assigned. ARTICLE 9.1.15
(Undertakings of the assignor)
The assignor undertakes towards the assignee, except as otherwise disclosed to the assignee, that:
(a) the assigned right exists at the time of the assignment, unless the right is a future right;
(b) the assignor is entitled to assign the right;
(c) the right has not been previously assigned to another assignee, and it is free from any right or claim from a third party; (d) the obligor does not have any defences;
(e) neither the obligor nor the assignor has given notice of set-off concerning the assigned right and will not give any such notice;
(f) the assignor will reimburse the assignee for any payment received from the obligor before notice of the assignment was given. SECTION 2: TRANSFER OF OBLIGATIONS ARTICLE 9.2.1 (Modes of transfer)
An obligation to pay money or render other performance may be transferred from one person (the “original obligor”) to another person (the “new obligor”) either 31
a) by an agreement between the original obligor and the new obligor subject to Article 9.2.3, or
b) by an agreement between the obligee and the new obligor, by which the new obligor assumes the obligation. ARTICLE 9.2.2 (Exclusion)
This Section does not apply to transfers of obligations made under the special rules
governing transfers of obligations in the course of transferring a business. ARTICLE 9.2.3
(Requirement of obligee’s consent to transfer)
The transfer of an obligation by an agreement between the original obligor and the new obligor requires the consent of the obligee. ARTICLE 9.2.4
(Advance consent of obligee)
(1) The obligee may give its consent in advance.
(2) If the obligee has given its consent in advance, the transfer of the obligation becomes effective when a notice of the transfer is given to the obligee or when the obligee acknowledges it. ARTICLE 9.2.5
(Discharge of original obligor)
(1) The obligee may discharge the original obligor.
(2) The obligee may also retain the original obligor as an obligor in case the new obligor does not perform properly.
(3) Otherwise the original obligor and the new obligor are jointly and severally liable.
ARTICLE 9.2.6
(Third party performance)
(1) Without the obligee’s consent, the obligor may contract with another person that this person will perform the obligation in place of the obligor, unless the obligation in the circumstances has an essentially personal character. (2) The obligee retains its claim against the obligor. ARTICLE 9.2.7
(Defences and rights of set-off)
(1) The new obligor may assert against the obligee all defences which the original obligor could assert against the obligee.
(2) The new obligor may not exercise against the obligee any right of set-off available to the original obligor against the obligee. 32
ARTICLE 9.2.8
(Rights related to the obligation transferred)
(1) The obligee may assert against the new obligor all its rights to payment or other performance under the contract in respect of the obligation transferred. (2) If the original obligor is discharged under Article 9.2.5(1), a security granted by any person other than the new obligor for the performance of the obligation is discharged, unless that other person agrees that it should continue to be available to the obligee.
(3) Discharge of the original obligor also extends to any security of the original obligor given to the obligee for the performance of the obligation, unless the security is over an asset which is transferred as part of a transaction between the original obligor and the new obligor.
SECTION 3: ASSIGNMENT OF CONTRACTS
