Transfer of Debt according to the UAE Civil Transactions Law

Whereas Article 1106 of the UAE Civil Transactions Law defines that the assignment transfers the debt and the claim from the assignor to the transferee. The transfer may be restricted or absolute, as stated in Article (1108) of the Civil Transactions Law.

• Article 1109 of the Civil Transactions Law stipulates that the assignor, the assignee, and the beneficiary must be satisfied for the transfer to be valid.
• In this respect, there must be a distinction between the validity of establishing a debt transfer that is legitimately concluded with the consent and agreement of the transferor (debtor) and the transferee and the validity of establishing such transfer with respect to the beneficiary , it will be binding on him only upon his acceptance.
• Article 1110 of the Civil Transactions Law requires the transferor to be indebted to the transferee for the transfer to be legitimate but does not require the transferee to be indebted to the transferor.
• In this regard, it is also essential that we clarify the effects of the transfer between the beneficiary and the transferee, as the beneficiary has the right to claim the transferee, and the transferor is released from both the debt and the claim if the transfer is legitimate (Article 1116). **
• Further, the debt is transferred to the transferee with the same condition of the one owed by the transferor. So, if the debt is due, it shall be transferred as due, and if it is deferred, it will be so when transferred (M 1117).
• Article 1120 of the Civil Transactions Law refers to a crucial point, namely that “The assignee has the right to retain against the beneficiary all of the debt-related defences those he had against the assingor, as well as the defences that the assignor has against the beneficiary.
• This means that if the amount of the claim or the original debt claimed by the assignor against the assignee is disputed or applies to forfeiture due to the lapse of time or other legal defences, then the assignee has the right to hold it against the beneficiary (the new creditor).

The objective of this brief article is to  keep aware all commercial and civil businesses, as well as all commercial dealers, of the specific conditions for the transfer’s legitimacy and its  consequences on the remaining parties. Irrespective of whether the transferor, the transferee, or the assignee, the practical fact demonstrated in this article is also significant for employees in the legal and judicial fields, since many cases involve issues pertaining to the transfer and the scope of its legitimacy and implications for the transferee and others.