The implications of a pledge of receivables

Abstract

In these last years most commercial transactions have been effected by the transfer of intangible rights rather than tangibles; this development has created certain consequences in that there has been an increase in the regulation of intangible rights and receivables. The concept of an assignment by way of security, which is used extensively by the Anglo-Saxon jurisdictions, does not form part of our law and the applicable provisions of our law for such transactions are those regulating pledge and the assignment of rights. However difficulties might arise in the application of such provisions since the pledge of a right precludes ownership and one cannot assign a right without being the owner of such a right. The object of this thesis is to analyse the nature of a receivable and the nature of an intangible right in the context of a pledge of such a right. The pledging of a debt arising out of a contract might prove to be problematic in the sense that the debt is conditional on the full and proper performance of the original contract by the pledgor, where the debt is not fixed and it might be open to arguments and defences by the payor of the debt. Furthermore the assignment in receivables financing has been the subject of a recent draft convention (2-13 March 1998) drawn up by the United Nations Commission on International Trade Law. The main aim of this draft convention is the harmonization of the above-mentioned legal regimes and it would be desirable if the basic principles enunciated in this instrument could be incorporated in Maltese law in the future. This thesis also examines recent legislation on the use of receivables for financing or security purposes, such as the UNDROIT Convention on International Factoring and the Dailly Act which was enacted in France in 1981 with the object of updating French legislation on pledge and assignment.