Assignment & Transfer of Obligations

Overview

The Civil Code of Quebec (CCQ) devotes Chapter Seven of Book Five to the transmission and modification of obligations (transmission et mutations de l'obligation). These mechanisms allow the obligational bond to be transferred to a new party, transformed, or replaced outright. The principal devices fall into three categories: changes involving a new creditor (assignment of claims, subrogation, novation by substitution of creditor), changes involving a new debtor (delegation of payment, novation by substitution of debtor), and changes affecting the debt itself between the same parties. Each mechanism carries distinct formation requirements, opposability rules, and consequences for accessory rights such as hypothecs (hypothèques) and suretyships (cautionnements). Understanding these distinctions is a prerequisite for any practitioner advising on debt restructuring, refinancing, or the sale of receivables in Quebec.

Learning Objectives

After completing this lesson, readers should be able to:

Distinguish assignment of claims, subrogation, and novation as modes of creditor substitution
Identify the validity and opposability requirements for an assignment of claims under the CCQ
Explain the differences between conventional and legal subrogation and the formal requirements each demands
Describe the operation and effects of imperfect and perfect delegation of payment
Recognize the conditions under which novation extinguishes an original obligation and creates a new one
Apply the collocation and priority rules that govern creditor ranking after partial assignments or partial subrogation

Key Concepts and Definitions

Transmission of obligation (transmission de l'obligation): the transfer of an existing obligational bond to a new creditor or debtor, preserving the identity of the obligation itself.

Mutation of obligation (mutation de l'obligation): a transformation or replacement of the obligational bond, typically through novation, which extinguishes the old obligation and creates a new one.

Assignment of claim (cession de créance): a contract between a creditor (assignor) and a third party (assignee) by which the creditor transfers all or part of a claim (art. 1637 CCQ).

Subrogation (subrogation): a mechanism by which a third party who pays a creditor in the debtor's place acquires the creditor's rights against the debtor (art. 1651 CCQ).

Novation (novation): a convention that extinguishes an existing obligation and replaces it with a new one, potentially involving a new creditor, a new debtor, or a different debt (art. 1660 CCQ).

Delegation of payment (délégation de paiement): an arrangement in which the original debtor (delegator) instructs a third party (delegate) to perform the obligation for the benefit of the creditor (delegatee) (art. 1667 CCQ).

Assignment of Claims

Assignment of claims (cession de créance) is the most commonly used mechanism for transferring creditor rights. The assignor (cédant) transfers a claim or right of action, in whole or in part, to the assignee (cessionnaire) (art. 1637, al. 1 CCQ). Before the 1994 reform, assignment was treated alongside the contract of sale. The CCQ now situates it within the chapter on transmission and mutations, reflecting the reality that an assignment may result from a sale, a donation, or any other juridical act. When practised on a large scale with a universality of present and future claims, the operation is known as factoring (affacturage).

Assignment must be distinguished from both subrogation and novation. Unlike subrogation, assignment has a speculative character: the assignee may collect from the debtor more than the price paid to the assignor. Unlike novation by substitution of creditor, assignment does not extinguish the original obligation and create a new one; the same obligational bond passes from one creditor to the next. Assignment of a claim must also be distinguished from assignment of a contract (cession de contrat): in the former, only the assignor's rights transfer, whereas in the latter, both rights and obligations under the contract pass to the assignee.

Conditions of Validity

Assignment results from a contract between the assignor and assignee. Standard formation rules apply: the parties must have capacity, and their consent must be free of defects. The CCQ adopts the principle of consensualism for this contract. No particular form is required for validity, although a written instrument is almost always necessary in practice to satisfy the opposability requirements discussed below.

The debtor's consent is not required. Assignment is a bipartite operation. The legislator does protect the debtor: the assignment may not prejudice the debtor's rights or render the obligation more onerous (art. 1637, al. 2 CCQ). For example, if the assignor cedes only part of a claim, the resulting division into two creditors should not impose additional burdens on the debtor; in the event of non-performance, the two creditors would be expected to join their respective proceedings.

Any claim may be assigned unless the parties have stipulated inalienability or the law declares it non-assignable. Claims that are intrinsically personal to the creditor and linked to public order, such as alimentary obligations (obligations alimentaires), also resist assignment.

Conditions of Opposability

To produce effects against the debtor and other third parties, the assignment must be rendered opposable (opposable). The CCQ provides several personalized methods (art. 1641, 1642, 1644, 1645 CCQ):

Acquiescence by the debtor or surety
Notification to the debtor or surety of the deed of assignment or a relevant extract of it
Notification of proof of assignment that is opposable to the assignor
Service of proof during judicial proceedings against the debtor or surety (art. 1644 CCQ); a debtor who pays within the time allowed to answer is not liable for court costs unless already in default

When the debtor cannot be found in Quebec, the assignee may publish a notice in accordance with the rules of the Code of Civil Procedure for notification by public notice (art. 1641, al. 2 CCQ). Assignment of a universality of claims, present and future, requires registration in the Register of Personal and Movable Real Rights (RDPRM) (Registre des droits personnels et réels mobiliers) (art. 1642 CCQ), in addition to the personalized opposability formalities performed for each existing debtor. Assignment of a hypothecary claim also requires registration in the appropriate register (art. 3003 CCQ). Failure to complete additional registration formalities may be raised by affected third parties and may improve their position.

Effects of Assignment

Because assignment transmits the same obligation, the assignee steps into the assignor's position with all the same rights, including accessories such as accrued interest and hypothecs (art. 1638 CCQ). The assignee also benefits from any suretyship, provided the assignment has been rendered opposable to the surety in the same manner as to the debtor (art. 1645 CCQ).

Debtor's defences. The debtor may raise against the assignee every defence that was available against the assignor (art. 1637, al. 2 and 1643, al. 1 CCQ). A payment made to the assignor before the assignment was rendered opposable is valid and may be set up against the assignee (art. 1643, al. 1 CCQ). The same applies to any other cause of extinction that arose before opposability. A payment made after opposability formalities have been completed may only be invoked against the assignee if it qualifies as a payment in good faith to an apparent creditor (créancier apparent) (art. 1643, al. 2 CCQ; see art. 1559 CCQ). Good faith in this context requires the debtor to have been genuinely unaware of the assignment; this situation may arise where the assignee used a collective mode of opposability such as public notice. A debtor who cannot demonstrate good faith must pay the assignee and pursue the assignor through the recovery of a payment not due (réception de l'indu) (art. 1491 CCQ). A debtor uncertain of the creditor's identity at the time of payment may resort to tender and deposit (offres réelles et consignation) (art. 1583, al. 2 CCQ).

Assignor's warranty. When the assignment is for value, the assignor warrants that the claim exists and is owing (art. 1639 CCQ). The parties may exclude this warranty if the assignment is at the assignee's risk and peril, or if the assignee knew the claim was uncertain at the time of assignment. The assignor may also guarantee the debtor's solvency at the time of assignment, but only up to the price the assignee paid (art. 1640 CCQ). A guarantee extending to future solvency is known as a "fournir et faire valoir" guarantee (garantie de fournir et faire valoir) and places the assignor in a position analogous to that of a surety.

Collocation in partial assignment. When the assignor retains part of the claim, assignor and assignee (or multiple assignees) share proportionally (art. 1646, al. 1 CCQ). An assignee who benefits from a "fournir et faire valoir" guarantee is paid in preference. Among multiple preferred assignees, priority follows the order in which their respective assignments became opposable to the debtor (art. 1646, al. 2 CCQ).

Consumer protection. Under the Quebec Consumer Protection Act (Loi sur la protection du consommateur), the assignee of a merchant's claim against a consumer is solidarily liable for the merchant-assignor's obligations toward the consumer, up to the amount of the claim at the time of assignment. A subsequent assignee is liable up to the amount of the payment received.

Bearer Instruments

When a claim is embodied in a bearer instrument (titre au porteur), simplified rules apply. Delivery of the instrument from one bearer to the next suffices to render the assignment opposable; no prior notification to the debtor is required, because the instrument itself constitutes the debtor's advance acquiescence to any transfer (art. 1647 CCQ). The debtor must honour the instrument in favour of any bearer, even if the title was transferred without the debtor's knowledge or against the debtor's wishes (art. 1649 CCQ). The debtor's available defences are limited to nullity or defect of the title, express stipulations on the instrument, and personal exceptions against the current bearer (art. 1648, al. 2 CCQ). If the original bearer has been dispossessed involuntarily, the debtor must still pay the current bearer unless a court order suspending payment has been obtained and notified (art. 1648, al. 1 and 1650 CCQ).

Subrogation

Subrogation (subrogation) arises when a third party (the subrogee, subrogé) pays a creditor (the subrogor, subrogeant) in the debtor's place and thereby acquires the creditor's rights. Unlike assignment, subrogation is an accessory of payment and cannot exist independently. The subrogee may never recover more than the amount actually paid, which means the mechanism lacks the speculative character of assignment. Despite its close ties to payment, the CCQ treats subrogation under the chapter on transmission and mutations to acknowledge its function as a mode of creditor substitution.

Conventional Subrogation

Conventional subrogation may be granted by the creditor or arranged by the debtor.

By the creditor (art. 1653 CCQ). The creditor may grant subrogation to any third party who pays. The subrogation must be express, in writing, and contemporaneous with payment (art. 1654 CCQ). It need not use the word "subrogation"; a receipt acknowledging payment and the transfer of rights suffices. The debtor's consent is not required, and any clause purporting to prohibit subrogation or make it subject to the debtor's approval is ineffective (art. 1654 in fine CCQ). If the subrogee acquires a hypothec through the operation, the subrogee must comply with the rules governing publication of rights (art. 3003 CCQ).

By the debtor (art. 1655 CCQ). A debtor may use this mechanism to refinance on more favourable terms. The debtor borrows from a third party, uses the loan proceeds to pay the existing creditor, and subrogates the lender in the creditor's rights. Strict formal requirements apply: the loan and the receipt (quittance) must be executed by notarial act or by private writing before witnesses. The loan instrument must state that the borrowing is intended to retire the debt, and the receipt must confirm that payment was made from the loan proceeds (art. 1655, al. 2 CCQ). The subrogation operates without the creditor's consent (art. 1655, al. 1 CCQ). If the creditor refuses a conforming payment offer without justification, the debtor may resort to tender and deposit.

A creditor who holds the benefit of a term may refuse a premature payment offer, and the same right extends to refusing a third party's premature offer. Even after the term expires, subrogation retains value because it preserves the hypothecary rank and avoids the costs of constituting a new hypothec. Publication formalities must be completed so that the hypothecary rights transmitted with the claim are opposable to third parties (art. 3003 CCQ).

Legal Subrogation

In certain circumstances subrogation arises by operation of law, without the agreement of either party to the obligation (art. 1656 CCQ):

A third party pays a debt owed to a creditor holding a prior or hypothecary claim that outranks the third party's own claim (art. 1656(1) CCQ)
An acquirer of property pays a creditor holding a hypothec on that property (art. 1656(2) CCQ)
A person pays a debt to which that person is bound with or for others and has an interest in paying, for example a solidary co-debtor or a surety (art. 1656(3) CCQ)
An heir pays a succession debt for which that heir was not personally liable (art. 1656(4) CCQ)
Additional instances of legal subrogation exist throughout the CCQ and in special legislation (art. 1656(5) CCQ)

In every case, the general rules of payment must still be observed. A creditor may refuse a partial or premature payment, but an unjustified refusal exposes the creditor to a tender and deposit procedure. The subrogee must also attend to the publication formalities for hypothecary rights (art. 3003 and 3004 CCQ).

Effects of Subrogation

The subrogee acquires the same claim as the subrogor, together with all accessory rights, sureties, and available recourses (art. 1651, al. 2 and 1657 CCQ). A prudent subrogee informs the debtor of the creditor substitution to avoid complications arising from payment to the wrong creditor, such as the rule on payment in good faith to an apparent creditor (art. 1559 CCQ).

Two exceptions modify the general principle that the obligation passes unchanged. First, a solidary co-debtor who exercises a recursive claim through legal subrogation (art. 1656(3) CCQ) may only claim each co-debtor's proportionate share; the co-debtor does not benefit from solidarity (art. 1536 CCQ). Second, subrogation arranged by the debtor (art. 1655 CCQ) permits the debtor to benefit from terms negotiated with the new lender that may differ from the original conditions.

Priority between subrogor and subrogee. If the subrogee makes only a partial payment, the subrogor retains rights for the balance. Should the debtor's assets prove insufficient, the subrogor is paid in preference to the subrogee (art. 1658, al. 1 CCQ). This priority reverses only where the subrogor has given a "fournir et faire valoir" guarantee (art. 1658, al. 2 CCQ). Among multiple subrogees, their respective shares against the debtor are proportional to their contributions to the payment, absent a contrary agreement (art. 1659 CCQ).

Subrogor's obligations. The subrogor owes no warranty of the claim or the debtor's solvency unless the parties agree otherwise. If the claim turns out to be non-existent or null, the subrogee's recourse lies in the recovery of a payment not due (art. 1491 and 1492 CCQ). The subrogor may, in certain circumstances, be held accountable if the subrogee is deprived of rights or securities to which the subrogee was entitled through the subrogation (art. 1531, 1538, al. 2 and 2365 CCQ).

Novation by Substitution of Creditor

Novation (novation) extinguishes the original obligation and creates a new one (art. 1660 CCQ). When the new obligation involves a different creditor, the operation is a novation by substitution of creditor (art. 1660, al. 2 CCQ). Several features set this mechanism apart from assignment and subrogation.

The intention to novate must be manifest; it is never presumed (art. 1661 CCQ). The operation is tripartite: the debtor must consent because the old debt is extinguished and a new engagement is created in its place. Accessories attached to the extinguished obligation, including sureties and hypothecs, do not survive unless expressly reserved (art. 1662 CCQ; art. 2661 CCQ). Where co-debtors or a surety have not participated, they are released (art. 1665, al. 1 CCQ). If the creditor required their accession and failed to obtain it, the original obligation subsists (art. 1665, al. 2 CCQ). A hypothec reserved on the property of a solidary debtor cannot be reserved on the property of co-debtors who did not participate in the novation (art. 1664 CCQ). A novation granted by a single co-creditor is inopposable to the others except for that co-creditor's share in the solidary claim (art. 1666 CCQ).

The debtor cannot raise against the new creditor defences that were available against the original creditor, except where nullity of the old obligation affects the validity of the new one.

Because novation by substitution of creditor strips away accessory guarantees and requires debtor participation, it is rarely used in practice. Assignment of claims or subrogation will usually provide a more favourable outcome for all parties involved.

Delegation of Payment

Delegation (délégation de paiement) occurs when the original debtor (delegator, délégant) instructs a third party (delegate, délégué) to perform the obligation in favour of the creditor (delegatee, délégataire). The delegate must assume a personal commitment to perform (art. 1667 CCQ). A mere instruction to make payment, without personal engagement by the delegate, constitutes a simple indication of payment (indication de paiement), which produces different legal effects.

Imperfect Delegation

In an imperfect delegation (délégation imparfaite), the delegator remains bound alongside the delegate. The creditor thereby gains a second debtor. Where doubt exists about the parties' intention to effect a novation, the law presumes an imperfect delegation (art. 1668 CCQ). The delegator and delegate are each bound for the full amount; depending on the circumstances, their obligation may be characterized as solidary or in solidum. The delegatee may demand performance from either debtor.

Defences available to the delegate. The delegate may not raise against the delegatee defences arising from the relationship between the delegate and the delegator (art. 1669, al. 1 and 2 CCQ). For instance, in a successive sale of immovable property, the second purchaser (delegate) may not plead error in the second sale against the original vendor (delegatee); the recourse lies against the first purchaser (delegator). This restriction does not apply if nothing was owed to the delegatee at the time of delegation (art. 1669, al. 2 CCQ).

The delegate may invoke defences that the delegator holds against the delegatee (art. 1670 CCQ), such as prescription of the delegatee's claim. The delegate may not, however, plead compensation of debts between the delegator and delegatee because the required reciprocity is absent (art. 1670, al. 2 CCQ).

A common practical application involves successive sales of immovable property with an outstanding balance of the sale price. Each successive purchaser assumes the obligation to the original vendor through delegation, and all successive purchasers remain bound to the delegatee in the absence of an express release.

Perfect Delegation

In a perfect delegation (délégation parfaite), the delegator is released and only the delegate remains bound. Perfect delegation is never presumed (art. 1668 CCQ); a clear manifestation of the creditor-delegatee's intention to release the delegator is required. A court may nevertheless bar the delegatee from pursuing the delegator on the basis of fin de non-recevoir if the delegatee's conduct toward the delegator was consistent with having released the delegator.

Under the traditional approach, perfect delegation is assimilated to novation by substitution of debtor and governed by the corresponding rules. A more recent doctrinal view treats it as a form of assumption of debt (cession de dette), permitting the transmission of the same obligation rather than the extinction and re-creation entailed by novation. This newer approach, which has gained some support in recent Quebec jurisprudence and in the reformed French law of obligations, offers greater flexibility because accessory rights may survive the transfer. The majority of case law, however, continues to apply the traditional novation framework.

Novation by Substitution of Debtor

Novation by substitution of debtor (art. 1660, al. 1 CCQ) extinguishes the original debt and creates a new one borne by a different debtor. The former debtor is released. Because only the old debtor benefits from this release, the novation may proceed without the old debtor's consent (art. 1660, al. 1 in fine CCQ). The intention to novate must, as in all cases of novation, be manifest (art. 1661 CCQ).

Defences. The new debtor may not invoke defences available against the old debtor, nor defences the old debtor held against the creditor, except for nullity of the original act (art. 1663, al. 1 CCQ).

Hypothecary consequences. Hypothecs on the old debtor's property do not pass to the new debtor's property (art. 1663, al. 2 CCQ), but two exceptions apply:

The old debtor may expressly consent to reserving the hypothec on the old debtor's own property (art. 1662 and 1663, al. 2 CCQ), thereby preserving the creditor's hypothecary rank. The reservation may not prejudice third-party rights by increasing the secured amount beyond the original claim.
Where the hypothecated property is sold to the new debtor, the hypothec may continue to encumber the same property in the new debtor's hands (art. 1663, al. 2 in fine CCQ). This scenario is common when a purchaser assumes the vendor's hypothecary loan to benefit from favourable interest rates while releasing the vendor from the original commitment and avoiding prepayment penalties.

The creditor who consents to novation by substitution of debtor assumes the risk of the new debtor's insolvency, because the old debtor is fully released.

Change of Debt Between the Same Parties

The parties to an obligation may modify their relationship so substantially that the original obligation is extinguished and replaced by a new one between the same creditor and debtor (art. 1660, al. 1 CCQ). Quebec jurisprudence identifies six conditions: (1) an initial obligation exists; (2) a new obligation is created; (3) the two obligations differ; (4) the initial obligation is extinguished; (5) the parties demonstrate an intention to novate; and (6) the parties have the requisite capacity to contract.

The distinguishing element (the aliquid novi) may take several forms. A change of cause alters the juridical operation (for example, a contract of employment transformed into a contract of enterprise, or a balance of sale price converted into a loan). A change in the object of the obligation modifies the debtor's prestation in a manner beyond mere rearrangement. A change in the object of the prestation substitutes different property (for example, a lessor offers different premises). A simple extension of a term, adjustment to payment modalities, or addition of security does not, by itself, constitute novation.

In every case, the intention to novate (animus novandi) must be expressed or demonstrated clearly; it is never presumed (art. 1661 CCQ). Where no clear intention appears, the original and modified obligations coexist. A creditor consenting to novation should secure the surety's accession and expressly reserve any hypothec (art. 1662 CCQ); absent such a reservation, the hypothec is extinguished (art. 2661 CCQ). The reservation may not prejudice third-party rights, for example by increasing the value of the secured claim.

The validity of the new obligation may be affected by a cause of nullity in the obligation it replaces, unless the parties created the new obligation with full knowledge of the defect.

Practice Checklist

Glossary

English Term	French Term
Acquiescence	Acquiescement
Apparent creditor	Créancier apparent
Assignment of claim	Cession de créance
Assignment of contract	Cession de contrat
Assignee	Cessionnaire
Assignor	Cédant
Bearer instrument	Titre au porteur
Collocation	Collocation
Delegate	Délégué
Delegatee	Délégataire
Delegator	Délégant
Factoring	Affacturage
Fournir et faire valoir guarantee	Garantie de fournir et faire valoir
Hypothec	Hypothèque
Imperfect delegation	Délégation imparfaite
Indication of payment	Indication de paiement
Novation	Novation
Opposability	Opposabilité
Payment not due (recovery of)	Réception de l'indu
Perfect delegation	Délégation parfaite
Register of Personal and Movable Real Rights (RDPRM)	Registre des droits personnels et réels mobiliers
Solidarity (joint and several liability)	Solidarité
Subrogation	Subrogation
Subrogee	Subrogé
Subrogor	Subrogeant
Suretyship	Cautionnement
Tender and deposit	Offres réelles et consignation
Universality of claims	Universalité de créances

References

Civil Code of Quebec (Code civil du Québec), CQLR c CCQ-1991, Book Five: Obligations, Title One, Chapter Seven: Transmission and Mutations of Obligations, art. 1637-1670.
Civil Code of Quebec, art. 1491-1493 (payment not due and unjust enrichment).
Civil Code of Quebec, art. 1531, 1536, 1538 (solidarity).
Civil Code of Quebec, art. 1559 (payment to apparent creditor).
Civil Code of Quebec, art. 1583 (tender and deposit).
Civil Code of Quebec, art. 1591 and 1604 (exception of non-performance and remedies).
Civil Code of Quebec, art. 2365 (suretyship and subrogation).
Civil Code of Quebec, art. 2661 (extinction of hypothecs by novation).
Civil Code of Quebec, art. 3003, 3004 (publication of hypothecary rights).
Quebec Consumer Protection Act (Loi sur la protection du consommateur), CQLR c P-40.1.

Disclaimer: This article is provided for educational purposes and does not constitute legal advice. For guidance on a specific situation, consult a qualified Quebec legal professional.

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