Taking security over contractual rights
Taking security over contractual rights

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Taking security over contractual rights
  • Nature of contractual rights
  • Relevant types of security used for contractual rights
  • Type of security interest that is available
  • A statutory (legal) or equitable assignment by way of security
  • Checking the terms of the contract which is to be assigned
  • Governing law of the contract
  • Prohibitions or restrictions on assignment of contractual rights other than receivables
  • Prohibitions or restrictions on assignment of receivables
  • Rights of set-off
  • More...

Taking security over contractual rights

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marks the end of the Brexit transition/implementation period entered into following the UK’s withdrawal from the EU. At this point in time (referred to in UK law as ‘IP completion day’), key transitional arrangements come to an end and significant changes begin to take effect across the UK’s legal regime. This document contains guidance on subjects impacted by these changes. Before continuing your research, see Practice Note: What does IP completion day mean for lending lawyers? [Archived].

Contractual rights are a type of chose in action, ie something that is recoverable by legal action as opposed to something that is physically possessed.

Security over contractual rights is typically taken by an assignment by way of security though it can also be taken by way of charge. Specific considerations apply to taking security over contractual rights. It is important to review the terms of the contract that is to be assigned from both the assignor and assignee's perspective. The assignee will also want to provide notice of the assignment to the contract counterparty because this has several important advantages.

This Practice Note deals with taking security over contractual rights in general. It explains:

  1. the nature of contractual rights

  2. typical methods of taking security over contractual rights

  3. common provisions to check in the contract which is

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