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Where a claim is assigned, the debtor must be notified of the assignment strictly in accordance with the law, failing which the debtor may pay the claim to the assignor rather than the assignee.
Groupama had insured a number of vehicles. The assureds obtained repair of the insured vehicles using their selected repair company. The repair company took an assignment of the assureds' rights under the policy of insurance with Groupama to cover the cost of the repairs. The repair company notified Groupama of the assignment by sending Groupama a registered letter with acknowledgment of receipt.
Groupama (the debtor) nevertheless continued to pay the repair costs directly to its assureds (the assignors) and not to the repair company (the assignee). Groupama argued that it had not been notified of the assignment in accordance with article 1690 of the Civil Code.
The French Court of Cassation upheld Groupama's argument. It was not enough that Groupama was aware of the assignment. The formalities of article 1690 had to be met before the assignment could be validly asserted against Groupama.
Article 1690 is of general, and therefore wide, application in commercial and civil matters.
For an assignment of a claim to be valid as against third parties (including the original debtor), article 1690 requires that notification be done by way of 'signification' - i.e. through a bailiff; alternatively, that the assignment be acknowledged by the debtor in an 'acte authentique' - i.e. in a formal deed before a notary public.
The French courts have at times varied as to how strictly article 1690 must be observed. And legal practitioners have at times suggested procedures to palliate the somewhat burdensome and often slow legal notification process, particularly where the debtor is based overseas.
However, this recent decision illustrates the modern technical and literal approach being taken by the Cour de Cassation in this area. It reveals the dangers inherent for assignees of claims who try to take shortcuts, even very reasonable ones.
In Europe, under Rome I, the law governing a claim also governs its assignability, including as to the relationship between the assignee and the debtor. The danger illustrated by the case under comment is therefore not avoided by providing for a foreign law to govern the deed of assignment.
If the claim to be assigned is governed by French law, parties should be mindful of the formalities of French law. If the formal requirements of article 1690 of the French Civil Code are not met, the notion of equitable assignment will not come to the rescue of a disgruntled assignee.