Description of the legal term Equitable Assignment:
An equitable assignment is a concept within English law that refers to the transfer or assignment of rights or benefits from one party to another, which is recognized in equity rather than at common law. Unlike legal assignments, which require formalities such as writing under the hand of the assignor, equitable assignments can be recognized even without full adherence to statutory formalities, provided there is a clear intention to assign.
However, it is crucial to understand the limitations and requirements for an equitable assignment to be effective. The assignor must demonstrate a clear intention to transfer the benefit of a contract or a right to the assignee. This intention can be conveyed through conduct or written or oral statements. Moreover, all the rights subject to the assignment must be ascertainable at the time of the assignment. The rights must also be fully existing and not merely expected to arise in the future.
Another essential aspect of an equitable assignment is the notification requirement. The debtor, or the party who owes the duty under the assigned right, must be notified of the assignment for it to bind them. The reason behind this is to prevent them from being held in breach of contract for performance to the wrong party. Until notice is given, they can safely discharge their duty by fulfilling their obligations to the original party.
Equitable assignments differ from legal assignments, which are governed by statute, in particular under s136 of the Law of Property Act 1925. Legal assignments must involve the outright transfer of the whole interest in the right being assigned, must be in writing, signed by the assignor, and express notice must have been given to the debtor. In contrast, an equitable assignment, without expressing the whole interest or without formal written notice, might still take effect.
However, the lack of formalities can lead to complexities. For example, multiple equitable assignments made by the same assignor can result in confusion and disputes regarding priority. In such cases, the first in time is usually the first in right, provided they have given notice.
Equitable assignments are an integral part of the flexibility of English equity law; they allow parties to work around some of the more rigid requirements of common law to effectuate the transfer of rights and benefits in a manner reflecting their intentions. They are particularly relevant in areas such as trusts and property law, where equitable interests are frequently dealt with.
Legal context in which the term Equitable Assignment may be used:
Consider a scenario where an individual, Sally, has a large insurance policy that she wishes to assign to her sibling, Bob, to help him secure a loan from the bank. They agree to this arrangement during a family dinner, and Sally sends an email to the insurance company expressing her intention to assign the benefits of the policy to Bob. Bob then informs the bank of his new interest in the policy. This is a classic example of an equitable assignment. Although there isn’t a formal legal assignment document, the intention to assign is clear from Sally’s actions, especially the email to the insurance company. Once the insurance company is notified, they are obligated to recognize Bob as the beneficiary, and the bank can also acknowledge his interest in the policy for the purposes of the loan.
Suppose there is another case where George is entitled to receive royalties from a book he authored. When he is facing financial difficulties, he orally agrees to assign future royalties to his friend Lara as repayment for a debt. In this situation, although future royalties are not yet in existence and cannot be legally assigned, such an arrangement can be recognized under the principles of equitable assignment. The effectiveness of this would depend on George’s clear intention to assign and whether he has notified the publisher of this arrangement. In this way, Lara can receive the royalties directly from the publisher until the debt is repaid, all while avoiding the formalities of a legal assignment.
The concept enables a more flexible and intentional approach to the transfer of rights and benefits, reflecting the parties’ actual agreement and intentions. It evidences the willingness of the English legal system to advance fairness above procedural rigour, ensuring the substance of a transaction is not hamstrung by overly strict legal formalities, which is why this legal concept holds significant value in British jurisprudence.
