Non-Assignment Clauses And Their Implications For Loan Agreements

The essence of this article is to afford due consideration to the legal ramifications of an assignment of rights (insofar as it relates to loan agreements), effected by an "original" lender to an "incoming" lender, in circumstances where such an arrangement is invalidated vis-a vis the borrower, having been made in contravention of a non-assignment clause which is stipulated in the contract between the original lender and the borrower.

As a starting point, it might perhaps be worthy of mention, that a borrower may have convincing reasons for insisting on the inclusion of a non-assignment clause in an operative loan agreement. For instance, it may be that, from a personal or business perspective, the debtor is entirely comfortable with the particular creditor with whom he is transacting. Accordingly, it might thereby stand to reason that he would decline to consider the prospect of having to contend with anyone other than the existing lender himself. Indeed, in Don