Contractual Prohibition of the Assignment of Receivables: Pactum de Non Cedendo in Turkish Law

As a reflection of this principle, the parties to a debt relationship can also decide whether a right to a receivable can be assigned to a third party. At this point, the institution of 'pactum de non cedendo,' which means 'agreement not to assign' in Latin, comes into play. In this article, we will discuss in detail the contractual prohibition of the assignment of receivables, a significant area of debate in Turkish Law of Obligations, along with its legal basis, consequences, and practical implications.

As a general rule, under Article 184/1 of the Turkish Code of Obligations (TCO) No. 6098, a creditor may assign their receivable to a third party without seeking the debtor's consent. This situation significantly contributes to the fluidity of commercial life by increasing the liquidity of receivables. However, the same article lists exceptions by stating that this assignment is free 'unless prohibited by law, contract, or the nature of the transaction.' The case of 'prohibition by contract' forms the legal basis for pactum de non cedendo. Parties can agree, through an explicit provision in a contract they sign, that the receivable arising from that contract cannot be assigned to third parties.

So, what happens if the receivable is still assigned to a third party despite such a prohibitory clause? The answer to this question lies in the legal nature of the prohibition. According to the prevailing view in doctrine and Court of Cassation decisions, pactum de non cedendo is a prohibition with an 'in rem' (real) effect that directly affects the right to the receivable and eliminates its 'assignability' characteristic. This means the prohibition binds not only the parties to the contract but also the third parties involved in the assignment transaction. Therefore, an assignment made in violation of the prohibition is definitively invalid against the debtor.

The most significant consequence of this situation is the protection of the debtor. If a contractual prohibition of assignment has been established, the debtor can assert this prohibition as a defense (exceptio) against a third party claiming to have acquired the receivable. TCO Article 184/3 explicitly regulates this: '...when it is asserted against the debtor that a receivable based on a contract containing a prohibition of assignment has been assigned, the debtor can also assert against the assignee that the receivable is non-assignable.' This provision also clarifies that the good faith of the third-party assignee is irrelevant. Even if the third party is unaware of the assignment prohibition in the contract, the debtor can use this defense against them and refuse payment.

In practice, pactum de non cedendo is often included in contracts to protect the debtor's interests. Especially in large projects, subcontractor agreements, or situations where personal performance is crucial, the debtor may not want their creditor to change. A constant change of the debtor's counterparty can lead to confusion in payment and set-off processes, or the debtor may face the risk of being unable to assert potential defenses against the original creditor to the new assignee. A prohibition on assignment aims to eliminate such risks from the outset.

However, it is worth noting that this rule is not absolute and can be overcome in certain circumstances. For example, if the debtor subsequently ratifies (approves) the assignment, it becomes valid. Additionally, some special laws may limit the effect of assignment prohibitions, as is the case in factoring transactions, which are frequently used as a financing tool in commercial life. Nevertheless, the general rule under the Turkish Code of Obligations is that pactum de non cedendo is a strong prohibition with an 'in rem' effect.

In conclusion, pactum de non cedendo is a significant legal tool that, as a manifestation of the freedom of contract, allows parties to limit the assignability of their receivables. This prohibition protects the debtor from facing an unwanted change of creditor and provides a powerful defense mechanism that can be asserted even against a good-faith third-party assignee. Therefore, it is of great importance for parties to carefully consider the issue of assignability during contract drafting processes and to clearly reflect their intentions in the contract text to prevent future legal disputes.