Creditor’s consent to the assumption of debt

The Supreme Court of the Republic of Slovenia (the “Supreme Court“) issued a judgment, ref. no. III Ips 1/2022, of 10 May 10 2022, in which it decided on the appropriate manner of notifying the creditor of the agreement on the assumption of debt. Assumption of debt is regulated in Article 427 of the Slovenian Code of Obligations (“OZ“), which establishes the creditor’s consent to the assumption of debt as a mandatory element for the agreement to take effect.

The defendant, the owner of the office space, was obligated to pay the operating and maintenance costs of those premises to the plaintiff, the building manager. The defendant leased its business premises to a tenant, with which the defendant concluded, in addition to the lease agreement, also the agreement, pursuant to which the tenant bears its proportionate share of the operating, technical management, and maintenance costs for the premises. The defendant informed the plaintiff of the contents of the lease agreement, which also contained an assumption of debt clause. Having been informed of the lease agreement, the tenant, and no longer the debtor, was invoiced by the plaintiff for the operation and maintenance services, and the defendant was thus of the opinion that the plaintiff had thereby implicitly accepted the content of the assumption of debt and had consented to it.

The Supreme Court disagreed with the defendant’s view. Pursuant to Article 427/1 of the OZ the debtor and the acquirer cannot independently agree that the acquirer assumes the debtor’s debt. The creditor’s consent to the agreement to assume a debt is in this respect decisive for the effect of the assumption of debt to take effect, as only the creditor’s consent authorizes the arrangement between the debtor and the acquirer.

In addition, Article 427/2 of the OZ also provides that the creditor must be notified of the agreement on the assumption of debt by either of the two parties thereto. The discharge of debtor’s obligations pursuant to the agreement on the assumption of debt is thereby performed by the debtor first entering into an agreement on the assumption of debt with the acquirer, and then either of them notifies the creditor of the agreement. Based on the notification, the creditor can then decide whether to agree to the arrangement, which is crucial for the arrangement to become effective. Namely, the creditor’s consent is inextricably linked to the creditor’s knowledge of the agreement. The creditor’s consent to the content of the agreement on the assumption of debt is the key element that distinguishes between the assumption of debt and the debt accession, which is primarily governed by Article 432 of the OZ and with which the creditor’s consent is not required for the agreement to take effect.

The Supreme Court held that, even if it may have been the common intention of the defendant and the tenant that the tenant should assume the defendant’s debt, that did not mean, in the circumstances of the case, that the plaintiff, as a creditor, had been informed of that common intention merely by being informed of the wording of the lease agreement between the defendant and the tenant. If the creditor is not aware of the assumption of debt, his declaration of intent in that contract does not at the same time include his consent to the substitution of the defendant as debtor for the tenant. The creditor was aware of the content of the lease agreement and could therefore only consent to the content of the lease agreement and not also to the assumption of debt.

It is also necessary to point out Article 427/3 of the OZ, which states that a creditor is presumed to have given his consent if he has accepted, without limitation, any fulfillment from the acquirer which the acquirer fulfilled on his own behalf. The law thus allows the assumption of the debt to take effect from the creditor’s acceptance of the fulfillment from the acquirer. In the present case, the plaintiff had in fact accepted fulfillment from the tenant, who paid the maintenance costs on its own behalf, however, the Supreme Court judgment referred to above considers that, in addition to the creditor’s consent, a clear (preliminary) notification of the creditor of the agreement on the assumption of the debt is a mandatory element for the assumption of the debt to take effect. As the Supreme Court also points out, the creditor’s intention to consent to the substitution of a third party for the debtor in an existing relationship must be unequivocal.

Considering the judgment of the Supreme Court all debtors who enter into an assumption of debt agreement with a third-party, are required to send a notice to the creditor clearly stating that an assumption of debt agreement has been concluded between them and the third party, and also to clearly invite them to express their consent.

RELATED POSTS
New CJEU ruling on the implementation of the Air Passenger Rights Regulation No 295/91

New CJEU ruling on the implementation of the Air Passenger Rights Regulation No 295/91

On 29 September 2022, the Court of Justice of the European Union (CJEU) issued its judgment in Case C-597/20, ruling…

Read more
As of September 1, 2022, it is only possible to report accidents and injuries through the SPOT portal

As of September 1, 2022, it is only possible to report accidents and injuries through the SPOT portal

On September 1, 2022, the new Regulations on the Reporting of Accidents and Injuries at Work (Official Gazette RS, no….

Read more
JUDGMENT OF THE COURT OF JUSTICE REGARDING THE ACT ON JUDICIAL PROTECTION OF FORMER HOLDERS OF ELIGIBLE LIABILITIES

JUDGMENT OF THE COURT OF JUSTICE REGARDING THE ACT ON JUDICIAL PROTECTION OF FORMER HOLDERS OF ELIGIBLE LIABILITIES

With the adoption of the Act on Judicial Protection Procedure for Former Holders of Eligible Liabilities of Banks (Act on…

Read more

Address:

Dalmatinova ulica 2
SI-1000 Ljubljana, Slovenia

Phone:

+386 59 097 400
+386 59 097 410

Email:

info@s-k.law

Social: