Principles of assignment on accrued causes of action

Abstract

It is submitted that it is a common practice in the construction industry for contractors to give guarantee to employers for rectification of defects by way of collateral warranties. It is also normal for employers to assign these warranties to subsequent purchasers or lessees to enable them to directly sue the contractors when defects occur. This mechanism is effective if the defects occur subsequent to the assignment. The general principle is that the assignment may not be effective if the defects or the cause of actions are already in existence at the time when the assignment is made. However, this may not always necessarily be the case. A brief examination of the case law on this issue shows that there are certain situations, by applying certain principles, considering the wordings of the assignments and the facts of the case, courts have allowed claims for accrued cause of actions under collateral warranties. The objective of this research is to identify the principles that the judges used when dealing with the assignments that involved accrued cause of action. The methodology used in this research is by way of quantity analysis of the relevant case law. The scope of this research includes Malaysian and English cases on assignment of collateral warranty and accrued cause of action. In particular, the assignment required from the building contractor to the subsequent building owner. From the analysis, it was found that the assignment only covers the damages caused before the assignment is made and not the right to sue against the loss caused after the assignment. Further, if there is a prohibition that prevents the transfer of contract, it includes the prohibition of assignment as well; and if the assignment requires prior consent of the parties, the assignment without consent would be invalid.