Discussion
This topic came up on another forum, and I'm keen to understand if this is legally viable.
The scenario is that Company A supplies Bob with goods. Bob hasn't paid Company A, and refuses to do so.
Company B also supplies Bob with goods, and they are the sole supplier of those goods - Bob cannot get them elsewhere, but needs them.
Company B is proposing to buy Bob's debt with Company A, and then add a mandatory repayment whenever he needs to buy their goods.
I know that buying debt is A Thing, but this sounds like two blokes agreeing in a pub rather than something enforceable.
Thoughts, chaps? It's obviously purely hypothetical, as the OP on the other forum is incredibly cagey about providing info.
The scenario is that Company A supplies Bob with goods. Bob hasn't paid Company A, and refuses to do so.
Company B also supplies Bob with goods, and they are the sole supplier of those goods - Bob cannot get them elsewhere, but needs them.
Company B is proposing to buy Bob's debt with Company A, and then add a mandatory repayment whenever he needs to buy their goods.
I know that buying debt is A Thing, but this sounds like two blokes agreeing in a pub rather than something enforceable.
Thoughts, chaps? It's obviously purely hypothetical, as the OP on the other forum is incredibly cagey about providing info.
Bob has a contract with Company A. Under that contract Bob has an obligation to pay £100 for the goods.
Normally there is nothing to stop Company A selling Bob's obligation to Company B. Company A can sell the debt to Company B for either £100 or for any other amount they agree. Typically Company B would expect a discount and only pay, say, £70 for Bob's debt. Bob is still on the hook for the full £100
The companies MUST give formal written notice to Bob that the debt has been assigned so that he knows who to pay. This overall process is very common and is typically called "factoring" of debt.
Back to the specific example - Yes, Company B can hold Bob to ransom if it so wishes. However, it may make little sense to do so. If Bob goes bust (he's presumably short of money which is why he isn't paying for things in the first place) then Company B has not only lost a customer but also bought a debt which is never going to be paid......
Normally there is nothing to stop Company A selling Bob's obligation to Company B. Company A can sell the debt to Company B for either £100 or for any other amount they agree. Typically Company B would expect a discount and only pay, say, £70 for Bob's debt. Bob is still on the hook for the full £100
The companies MUST give formal written notice to Bob that the debt has been assigned so that he knows who to pay. This overall process is very common and is typically called "factoring" of debt.
Back to the specific example - Yes, Company B can hold Bob to ransom if it so wishes. However, it may make little sense to do so. If Bob goes bust (he's presumably short of money which is why he isn't paying for things in the first place) then Company B has not only lost a customer but also bought a debt which is never going to be paid......
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