Intangible property rights can be assigned and the assignment may be legal or equitable (formal or informal). In order for an assignment to be legal and effective the assignment must be:
(i) absolute (that is, an assignment of the whole debt), and
(ii) in writing signed by the assignor, and
(iii) expressly notified in writing by the assignee to the debtor.
Thus if A owes 500 to B, B can assign his right to payment to C. A is the debtor, B the assignor and C the assignee. The legal assignee can enforce his rights by action against the debtor who can, however, raise against him any defence that he could have raised against the assignor, such as the right to set off. The assignment is thus subject to the doctrine of nemo quod non habet (no-one can give what he does not have) in that he gets no better title than the assignor. If the assignment is informal the equitable assignee cannot enforce his rights in his own name but must join the assignor as coplaintiff in any action. An equitable assignment also requires notice to the debtor and is subject to the doctrine of nemo dat.
Negotiable choses
Assignment of choses in action at common law was only legally possible after the passing of the Judicature Act 1873; previous to this, all assignments were equitable. Merchants had, however, developed the practice of transferring among themselves documents representing rights to payment under a bill of exchange free from the requirement of giving notice to the person ultimately obliged to pay, who was required to pay to the holder when payment was due. To inspire confidence in this practice, the custom developed that, if a bill was taken in certain conditions, then the transferee would take the bill free from defects in title of the transferor.
These conditions were that the assignee took the bill: (i) for value, (ii) in good faith, and (iii) without notice of any defects in title of the transferor. Such a person was the holder in due course of the bill whose transfer was not subject to the doctrine of nemo dat.
Negotiable instruments.
Choses capable of negotiation are classified as negotiable instruments and include: (i) bills of exchange, promissory notes and cheques; (ii) treasury bills; (iii) share warrants and debentures issued or payable to bearer; (iv) bankers drafts; (v) dividend warrants. Postal orders and bills of lading are not negotiable instruments. A negotiable instrument is not legal tender (but bank notes are negotiable instruments) and a creditor can refuse to accept a negotiable instrument in discharge of a debt. However, discharge of a monetary obligation by negotiable instrument is not the giving of something different and the transaction is covered by the rule that a debt is not discharged by the payment of a smaller sum. Payment by negotiable instrument is conditional upon it being honoured and failing that the original liability revives and the creditor may sue on the original debt or on the negotiable instrument. The advantage of the latter is that there is no defence avaiable.
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In certain cases the negotiability of a document can be removed without affecting its assignability, but making an instrument non-assignable also removes its negotiability: a cheque payable to John Brown or Order and crossed not negotiable is transferable but not negotiable, but a cheque payable To John Brown only is neither negotiable nor transferable. Bills of Exhange Act 1882 provides that a cheque crossed account payee (only) or a/c payee (only) is only valid as between the parties and is non transferable.
Characteristics of negotiable instruments.
Negotiable instruments have the following features:
(i) they are transferable by mere delivery (or by indorsement plus delivery in the case of a bill of exchange drawn payable to order);
(ii) there is no need for notice of transfer and payment is to the holder for the time being;
(iii) legal title passes on negotiation and the holder can sue to enforce payment in his own name;
(iv) the title passes free from equities of which the transferee has no notice;
(v) a holder in due course has a title free from the defects that affected the transferor.
