Delegation of Payment in France: A Practical Guide to Délégation

What delegation of payment is under French law

Delegation of payment in France is a three-party mechanism by which one person, the delegant, obtains from a second person, the delegate, an undertaking to become bound towards a third person, the delegatee, who accepts that person as a debtor. This definition is set out in Article 1336 of the Civil Code. In plain terms, your own debtor arranges for someone who owes money to them to pay you directly, and you accept that person as a new debtor alongside the original one.

The characteristic feature of a délégation de paiement is that it creates a fresh, second obligation. The delegatee acquires a right against a second debtor without losing the right against the first. This is the whole point of the technique: a creditor who was owed by a single party now holds two independent claims for the same economic debt, which materially improves the prospects of being paid. Delegation is regulated by Articles 1336 to 1339 of the Civil Code.

Delegation is frequently used in commercial chains where money is owed up and down a line of contracts. A classic example is subcontracting: a main contractor may secure a subcontractor by delegating the project owner, so that the owner undertakes to pay the subcontractor directly. Because delegation of payment is not tied to any single sector, foreign businesses selling to or buying from France encounter it in construction, distribution, rent arrangements and group financing alike.

The three parties: delegant, delegate and delegatee

Every delegation of payment in France supposes three roles, and identifying them correctly is the first step in any analysis. The delegant is the party who instigates the operation. In the typical case the delegant is a debtor who owes money to the delegatee and is in turn owed money by the delegate; the delegant channels the second relationship to satisfy the first.

The delegate is the person who undertakes to pay. Usually the delegate is itself a debtor of the delegant, which is why it is willing to take on the commitment. It is possible, though rare, for the delegate to owe nothing to the delegant and simply to volunteer to settle the delegant's debt. Either way, the delegate must give a direct and personal undertaking to the creditor.

The delegatee is the creditor who benefits. The delegatee must accept the delegate as a debtor for the delegation to exist. This acceptance is essential: without the creditor's acceptance of the new debtor, and without the delegate's own acceptance of the obligation, there is no delegation at all, only a proposal. The three consents interlock, and all three parties should be documented as taking part.

• Delegant — the party who arranges the delegation, usually a debtor of the delegatee.
• Delegate — the third party who undertakes to pay the delegatee directly.
• Delegatee — the creditor who accepts the delegate as a second debtor.

Certain (independent) delegation versus imperfect delegation

French law draws two distinctions that decide how strong a delegation of payment is. The first concerns the independence of the delegate's undertaking. In a certain (independent) delegation, the delegate undertakes an autonomous obligation whose amount and existence do not depend on the underlying debts. This is the default position under Article 1336: unless the parties stipulate otherwise, the delegate cannot raise against the creditor any defence drawn from its dealings with the delegant, or from the dealings between the delegant and the delegatee.

In an uncertain or imperfect delegation, by contrast, the parties tie the delegate's obligation to one or both of the underlying relationships. The delegate then promises only to pay what is actually owed, and may resist payment to the extent the underlying debt is disputed, reduced or extinguished. The parties can build this dependency into the deed, and in some commercial chains they deliberately do so to protect the delegate.

The second distinction concerns the fate of the original debtor. A delegation that discharges the delegant operates a novation and is often called perfect; a delegation that leaves the delegant bound is imperfect in that separate sense. Under Article 1337 of the Civil Code, a delegation only novates where the delegatee's intention to release the delegant results expressly from the deed. Even then, the delegant remains liable if it has expressly guaranteed the future solvency of the delegate, or if the delegate is already subject to insolvency proceedings when the delegation is made.

The effects: a new, autonomous obligation

The principal effect of a delegation of payment is the birth of a new commitment between the creditor and the delegate, while the commitment of the original debtor survives unless expressly discharged. Where the delegant is a debtor of the delegatee who has not been released, Article 1338 of the Civil Code gives the delegatee a second debtor, and payment by either debtor discharges the other to the extent of that payment. The creditor thus holds two claims for one economic debt and may pursue whichever debtor can pay.

In a certain delegation the delegate's position is deliberately exposed. Because the undertaking is autonomous, the delegate cannot, absent a contrary clause, oppose to the creditor defences arising from its relationship with the delegant or from the relationship between delegant and delegatee. The Cour de cassation has applied this strictly, holding for instance that the delegate cannot set off a debt owed to it by the delegant, and cannot invoke fraud committed between the delegant and one of the delegate's own agents to escape payment.

There are limits. The delegate is bound to pay the delegant's debt to the delegatee, so if that underlying debt is time-barred the delegate is not obliged to settle it. Once the delegatee has accepted the delegation, the delegant's claim against the delegate becomes unavailable, which is examined in the next section. And under Article 1339 of the Civil Code, if the delegatee has released the delegant in a novating delegation, the delegate is itself discharged towards the delegant up to the amount of its undertaking to the creditor.

The accounting between the parties follows the amounts owed. Where the sum owed by the delegate matches the delegant's debt to the creditor, payment extinguishes both. Where the delegate owes less, the creditor claims the balance from the delegant. Where the delegate owes more, it remains liable to the delegant for the surplus. Getting these figures right in the deed avoids later argument about who owes what to whom.

Using delegation as a payment guarantee in a commercial chain

Delegation of payment is at its most valuable as a security device. Because the creditor keeps a claim against the original debtor and gains a claim against the delegate, insolvency of one debtor does not sink the whole claim. If the delegate later enters collective proceedings, the creditor can still pursue the delegant; if the delegant fails, the creditor can look to the delegate. The Cour de cassation has confirmed that a delegatee is entitled to be paid by the delegate without competing with the other creditors of the delegant.

This isolation from the delegant's other creditors is the heart of the security. Under Article 1339, from the moment the delegatee accepts the delegation the delegant's claim against the delegate stays in the delegant's estate but becomes unavailable. Practically, this means the delegant's other creditors cannot seize the sums the delegate owes; the Cour de cassation has held that a garnishment or a notice to a third-party holder served after the delegation took effect cannot be set up against the delegatee. The creditor who took a delegation therefore leapfrogs the queue.

Two cautions apply where insolvency is near. A delegation agreed with a debtor already in cessation of payments is valid only if it is a mode of payment commonly accepted in business dealings; the courts have annulled delegations that were unusual for the debtor's trade. And even a creditor holding a delegation should still lodge its claim in any collective proceedings against the delegant to preserve every avenue, although case law shows the delegate can remain liable even where that formality was missed.

Delegation compared with assignment and a simple payment indication

Delegation of payment is often confused with two neighbouring techniques, and the differences matter. An assignment of a claim (cession de créance) transfers an existing claim, with its defences, from the assignor to the assignee; the debtor can generally raise against the assignee the defences it had against the assignor. A delegation, by contrast, creates a new and, in the certain form, defence-free obligation. The delegate is not merely stepping into an existing claim; it is making its own promise to the creditor.

Delegation must also be distinguished from a simple indication of payment. If a debtor merely tells its creditor that someone else will pay the invoice, without that person accepting the obligation to the creditor, there is no delegation. French law treats this as a mere indication: the designated payer has undertaken nothing, and if it refuses to pay, the creditor has no means of compelling it and must fall back on the original debtor. The Cour de cassation has repeatedly refused to read acceptance into documents such as a payment voucher on a quotation, or the payment of a deposit by a third party.

Delegation is also not a guarantee (cautionnement). A guarantor's obligation is accessory to the principal debt and follows its fate; the delegate's obligation, in a certain delegation, is direct and autonomous, and is not conditioned on the delegant's default. This autonomy is precisely why a well-drafted delegation can offer stronger protection than a surety in the right circumstances, though it is less flexible to unwind. Choosing between these tools is part of securing payment in France.

Drafting and accepting a delegation of payment

A delegation of payment in France is subject to no particular form; what matters is that all three parties accept it. Acceptance can be recorded in a single deed signed by delegant, delegate and delegatee, or split across separate documents, and the Cour de cassation has accepted that the delegate's consent may even be tacit. Whatever the form, the delegate must give a direct and personal undertaking to the creditor, and that undertaking is not subject to any condition unless the parties add one.

Even though no writing is strictly required, a careful written delegation is strongly advisable, because it fixes the three consents, the amount, the payment terms and — critically — whether the delegant is discharged. A delegation may bear on a claim that is not yet due and take effect only in the future, so the document should also state when and how the delegate is to pay. For cross-border deals this is one of several payment methods for B2B in France that reward precise drafting.

A practical checklist for delegation of payment in France

Before you rely on a delegation of payment, run through a short list of points that decide whether it will hold up and protect you. Most disputes turn not on the concept but on whether acceptance was clear, whether novation was intended, and whether the delegate's undertaking was drafted as autonomous. A few minutes of care at the drafting stage prevents costly argument when it is time to collect.

• Is each of the three parties clearly identified and shown to accept the delegation?
• Has the delegate given a direct, personal and — if intended — unconditional undertaking to the creditor?
• Does the deed say whether the delegant is released, so novation is not created or defeated by accident?
• Is the delegate's obligation drafted as autonomous, or deliberately tied to the underlying debts?
• Are the amount, due date and payment method specified, including any surplus or shortfall?
• Is the delegant solvent and not in cessation of payments when the delegation is signed?

Frequently asked questions about delegation of payment in France

What is delegation of payment in France?

Delegation of payment is a three-party operation under Article 1336 of the Civil Code in which a debtor (the delegant) arranges for a third party (the delegate) to undertake payment directly to the creditor (the delegatee), who accepts that third party as a debtor. It creates a new obligation without cancelling the original one, unless the creditor expressly agrees to a release.

How is a delegation different from an assignment of a claim?

An assignment transfers an existing claim, with its defences, to a new creditor, so the debtor can raise the same objections it had before. A delegation creates a fresh obligation of the delegate to the creditor, which in a certain delegation is autonomous and cannot be met with defences drawn from the underlying debts.

Is a delegation of payment a guarantee?

No. A guarantor's obligation is accessory to the principal debt and follows its fate, whereas the delegate makes a direct and, in a certain delegation, independent commitment to the creditor. That autonomy can make a well-drafted delegation a stronger protection than a surety, though it is harder to unwind.

Can the delegate refuse to pay the creditor?

In a certain delegation the delegate cannot, absent a contrary clause, raise defences drawn from its dealings with the delegant or from the delegant's dealings with the creditor. It may, however, resist payment where the underlying debt it is meant to cover is itself extinguished, for example by prescription.

Does a delegation release the original debtor?

Not by default. Under Article 1337 of the Civil Code the delegant is discharged only where the creditor's intention to release it appears expressly from the deed, which produces a novation. Silence on release means the creditor keeps both debtors and can pursue whichever is solvent.

Does the delegation protect me from the delegant's other creditors?

Yes. Under Article 1339 the delegant's claim against the delegate becomes unavailable once the creditor accepts the delegation, so the delegant's other creditors cannot seize those sums. The Cour de cassation has held that a garnishment served after the delegation took effect cannot be set up against the delegatee.

When should I use a delegation of payment?

Use a delegation when a party down or up your commercial chain owes money to your debtor and you want a direct, independent claim against that party. It is well suited to subcontracting, rent and group arrangements, and to any case where adding a second, stronger paymaster materially improves your chance of being paid.

How our French lawyers help with delegation of payment

Petroff Avocats advises both sides of a delegation of payment in France. For creditors, we structure and draft delegations that add a solvent second debtor, preserve your claim against the original debtor, and keep the delegate's payment out of reach of competing creditors — then enforce them if the delegate defaults. For businesses asked to act as delegate, we review the proposed undertaking, advise whether it should be certain or tied to the underlying debts, and negotiate conditions that protect you against paying more than you owe. We also help foreign clients fit delegation into their wider payment-security strategy alongside retention of title, guarantees and assignments.

This article is for general information only. It does not constitute legal advice and does not create a lawyer-client relationship. French law and its interpretation by the courts evolve, and the right approach depends on the facts of your case. Contact our French lawyers for advice on your situation.