Gældsbrevsloven (the Danish Promissory Notes Act)
Also known as danish promissory notes act, law on promissory notes
Gældsbrevsloven governs promissory notes and the assignment of claims — including which objections the debtor carries over to a new creditor.
- Governs
- Promissory notes and assignment
- Decides
- Which objections carry over
- Perfected by
- Notice to the debtor
In practice
The act only becomes interesting the day a claim changes hands — on the sale of a portfolio, in factoring, or when a claim is put up as security.
The decisive distinction is what travels with the claim to the new creditor. With a simple promissory note the debtor keeps his objections: if he thought the goods were defective as against the original seller, he still thinks so as against whoever bought the claim. With a negotiable note some of those objections are cut off, and that is precisely what makes the paper worth more.
The other half is perfection. An assignment stands weakly until the debtor has been notified — the notice is what protects against the claim being sold twice, or against the debtor paying the wrong party with discharging effect.
Where it commonly goes wrong
- The debtor is never notified of the assignment. If he then pays the old creditor, he has paid validly, and the new one has to pursue his claim one step further back.
- Assuming a promissory note cuts off every objection. Only the negotiable kind does, and only some of them.