Section 3 of the Transfer of Property Act of 1882 specifies what constitutes an actionable claim. A claim to any debt, other than a debt secured by a mortgage of immovable property or by the hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the claimant’s possession, either actually or constructively, is considered an actionable claim under Section 3 of the Transfer of Property Act, regardless of whether the debt or beneficial interest is actual, accruing, or confidential.

Examples:

1. X owes 500 rupees to Y. this is an actionable claim.

2. A agrees to sell to B, a product P in future. Here B gains a beneficial interest and hence is an actionable claim.

Transfer of Actionable Claim:

Section 130 of the transfer of property explains the transfer of an actionable claim as following ; ‘the transfer of actionable claim , whether with or without consideration, shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorized agent, shall be complete and effectual upon the execution of such instrument, and thereupon all the rights and remedies of the transferor, whether by way of damages or otherwise, shall vest in the transferee, whether such notice of the transfer is given or not’

The above mode of transfer can be broken down as following;

1. The transfer can be done only by:

2. An instrument in writing,

3. Signed by the transferor or his duly assigned agent.

4. The transfer can be with or without consideration.

5. The transfer will be complete and effective when executed.

6. The transfer vests all the rights and remedies of the transferor in the transferee.

Notice of Transfer:

The transfer of an actionable claim will be valid irrespective of the fact whether the debtor had the knowledge of it or not. But if the notice has not been given to the debtor, then he is not bound by the transfer. Hence, the payment made by him to the principle creditor would be valid.

Section 131 explains the mode of notice as; The notice must be :

1. In writing,

2. Signed by the transferor or his duly authorized agent on his behalf, or where the transferor refuses to sign, the transferee or his agent shall specify the name and address of the transferee.

Liability of Transferee:

Section 132 of TPA provides with the liabilities of the transferee of actionable claim. It provides that the transferee takes all the liabilities and equities which the transferor was subjected to at the date of the transfer in the same respect. Thus transferee cannot get a better title.

Illustrations:

(i) B owes Rs. 1000 to A. A owes Rs. 500 to B. A transfers the debt due to him by B to C. C sues B for the recovery of debt. B here is entitled to set off irrespective of the fact whether C was aware of it or not. C would get Rs. 500.

Warranty of solvency :

Section 133 of Transfer of Property Act, 1882 deals with Warranty of solvency of debtor Where the transferor of a debt warrants the solvency of the debtor, the warranty, in the absence of a contract to the contrary, applies only to his solvency at the time of the transfer, and is limited, where the transfer is made for consideration, to the amount or value of such consideration.

Restrictions:

Section 136 of TPA provides with a list of persons who are unable / barred to take actionable claim by transfer. The persons include:

1. Judge,

2. Legal practitioner, and

3. The officer concerned with any court of justice