Case 12: Bank loan on the basis of money claims (I)

(Security assignment of claims in respect of an identified debtor -- distinction between present and future claims -- dependence of the secured creditor’s rights on communication of the security right to the debitor cessus)

B, a software developer, has concluded a three-year contract with Happyplay Ltd (H) under which he is obliged to develop one new computer game every two months, against a regular monthly payment of 3,000 Euros. His bank (A) is prepared to grant him a loan amounting to 50,000 Euros but would like to take a security over B’s monthly earnings. If necessary, B is prepared to accept that H be notified of the security right. Otherwise he would prefer that A’s security right is not made known to H, so that he (B) would remain entitled to collect the money.

Questions

(a)Is it possible to conclude an agreement by which B gives A a security over the monthly claims against H? Are these claims regarded as present or future/conditional? Describe the main features and prerequisites of such an agreement, including any requirements as to form, registration, communication of the assignment to the debitor cessus (H), etc. How common are agreements of this kind in business practice?

(b)Suppose that A’s right was not communicated to H before B became bankrupt. What rights would A have in B’s insolvency in respect of

(i)money already earned by B but not yet paid to him and (ii) money already earned and paid to B’s bank account before insolvency?

(c)Suppose that A’s right was communicated to H before B became bankrupt. What rights would A have in B’s insolvency in respect of

(i)money already earned by B but not yet paid to him and (ii) money already earned by B and paid by H to B’s bank account before B’s insolvency?

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