General Assignment Of Receivables Agreement


The assignment of receivables, which constitutes an important security method under the obligations law, is regulated under Articles 183 to 190 of the Turkish Code of Obligations, No: 6098 ("Code"). The Code does not specifically define assignment of receivables. Pursuant to Art. 183 of the Code, the assignor assigns its receivables arising from an obligation under a contract to a third party without the necessity of the consent of the debtor. We will hereby briefly explain the voluntary assignment of receivables under Turkish law and banking practice.

Assignment of Receivables

Legal Nature, Scope

The receivables right is assigned to the assignee under the assignment of receivables1. The assignment of receivables is a way of disposal; therefore, the assignor should have the rights arising from these receivables2. For example, an assignment of receivables over an asset having attachments or injunctive relief is invalid since there is no power of disposition over it.

The assignment of receivables is subject to the validity of the main agreement, and this is commonly accepted by the scholars3. In other words, if the transaction between the assignor and assignee is invalid, then the assignment of receivables that is based on the main agreement, shall be invalid, as well.

The assignment of receivables that is used as security under banking practices, and is generally enforced if the party fails to duly fulfill its obligations (in the event of default). If the assignment of receivables is contingent upon the occurrence of an event, then the relevant receivables shall be paid to the assignor after the occurrence of such condition or event.

Form of the Assignment of Receivables Agreement

Pursuant to Art. 184 of the Code, the assignment of receivables agreement shall be made in writing. An assignment of receivables agreement that is not executed shall be void. The express intention, declaration, and signature of the assignor are the key points, and the intention of the assignee is neither required, nor necessary, for the assignment of receivables agreement to be valid4. In practice, the assignment of receivables agreement is mutually executed by the assignee and the assignor. Moreover, in transactions where a bank is the assignee, the bank will generally prefer and require the execution of the assignment of receivables agreements to be notarized, by stating that this method strengthens the proof mechanism, and determines the time for such an assignment. Thus, the debtor is notified by the notary public.

The terms and conditions regarding the assigned receivables are set forth under the assignment of receivables agreement; the assigned receivables shall be determined as specifically set forth under the agreement.

Effects and Consequences

The subject of the assignment of receivables also includes affiliated rights (Art. 189 of the Code). Interest accrued on the assigned receivables shall also be deemed to have been assigned. However, the parties may mutually determine to omit the accrued interest within the scope of the assignment of receivables5.

The right of filing a law suit and enforcement rights arising from the assigned receivables shall also be assigned to the assignee. Compensation claims and penalty claims, as well as securities, such as pledges and suretyships, arising from the assigned receivables, are also to be transferred with the assigned receivables.6 The right of selection is one of the transferred rights that are aligned with the assigned receivables to the benefit of the assignee. The assignor shall deliver all documents evidencing the assignment of receivables and other information in order to request and claim the assigned receivables to the assignee (Art. 190 of the Code).

The consent of the debtor is not required to validate the assignment of receivables (Art. 183 of the Code). The assignment of receivables agreement is executed between the assignor and the assignee without the consent of the debtor that is attached to the subject assigned receivables. However, the debtor, who has no knowledge of the assignment (has not been notified of the assignment of receivables agreement), shall be released of its obligations when he makes a bona fide payment to the assignor (Art. 186 of the Code). According to banking practices, the assignor is requested to notify the debtor of the execution of the assignment of receivables agreement. This requirement is generally regulated under the assignment of receivables agreement, and it is usually deemed that the assignment of receivables agreement is duly perfected when the notification is made to the debtor. Moreover, in practice (mostly in the cases where the banks' are the assignee) confirmation by the debtor to receive such a notification with regard to the assignment of receivables agreement is requested. Some debtors may submit confirmation with no questions raised; however, the confirmation process may be troubled, and may not be smoothly effected. Upon the notice of assignment, the payment obligation of the debtor is to the assignee7.

The debtor may raise defenses against the assignor to the assignee at the time of notice of the assignment of receivables (Art. 188 of the Code). Such defenses may include a plea (e.g. non-payment plea) and objection rights8.


The assignment of receivables is one of the most important and commonly used security methods, and will be continued to be applied in banking practices. Two key points are that the assignment of receivables agreement shall be executed in writing, and the debtor is to be notified with regard to the assignment. The assignee generally requests a letter from the debtor confirming that the assignment of receivables agreement is in place, and that he is aware of the assignment.


1 Prof. Dr. Fikret Eren, 6098 sayılı T�rk Bor�lar Kanununa G�re Hazırlanmış Bor�lar Hukuku Genel H�k�mler, 14. Baskı, Yetkin Yayınları, Ankara, 2012, p. 1224.

2 Eren, p. 1228.

3 Pls see Prof. Dr. Kemal Oğuzman/ Prof. Dr. M. Turgut �z, Bor�lar Hukuku Genel H�k�mler Cilt-2 for an opposite opinion, 9. Bası, Vedat Kitap�ılık, İstanbul, 2012, s.534.

4 Eren, p. 1233.

5 Oğuzman/�z, p. 549.

6 Eren, p. 1239-1240.

7 Oğuzman/�z, p. 552.

8 Eren, p. 1241.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Assignment of accounts receivable is an agreement between a lending company and a borrowing company in which the later assigns its accounts receivable to the former in return for a loan. By assignment of accounts receivable, the lender gets a right to collect the receivables of the borrowing company if it fails to repay the loan in time. The lender also receives finance charges and service charges.

It is important to note that the receivables are not sold/transferred under an assignment agreement. If the receivables have been transferred, the agreement would be of sale/factoring of accounts receivable. Usually, the borrowing company would itself collect the assigned receivables and remit the loan amount as per agreement. It is only when the borrower fails to pay as per agreement, that the lender gets a right to collect the assigned receivables on its own.

The assignment of accounts receivable may be general or specific. A general assignment of accounts receivable entitles the lender to proceed to collect any accounts receivable of the borrowing company whereas in case of specific assignment of accounts receivable, the lender is entitled only to collect the accounts receivable specifically assigned to the lender.

The following example shows how to record transactions related to assignment of accounts receivable via journal entries:


On March 1, 20X6, Company A borrowed $50,000 from a bank and signed a 12% one month note payable. The bank charged 1% initial fee. Company A assigned $73,000 of its accounts receivable to the bank as a security. During March 20X6, the company collected $70,000 of the assigned accounts receivable and paid the principle and interest on note payable to the bank on April 1. $3,000 of the sales were returned by the customers.

Record the necessary journal entries by Company A.


Journal Entries on March 1:

Finance Charge500
Notes Payable50,000
Accounts Receivable Assigned73,000
Accounts Receivable73,000

Journal Entries on April 1:

Sales Returns3,000
Accounts Receivable Assigned73,000
Notes Payable50,000
Interest Expense500

Written by Irfanullah Jan

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