Victory at the Supreme Court of Lithuania in a contract law precedent case

We represented a client, who was the company director and agreed with creditors that they would waive all claims against him and the company he managed by providing significant benefit to the creditors. Ten days before signing the confirmation of the waiver of claims, the creditors assigned their claims but did not inform the company about this assignment. To record the date of the assignment, they did so at the bailiff’s office.

Subsequently, one year after the waiver of the claims by the old creditors, the new creditors filed claims against the company, asserting that the waivers by the old creditors had no legal effect on them since, at the time of the waiver, the old creditors no longer held the secretly transferred claims.

The case went through the court system twice. The second time the case was heard by the Supreme Court of Lithuania, the dispute was resolved in our client’s favour, establishing a highly significant precedent for contract law.

The Supreme Court of Lithuania clarified that as long as the debtor has not been informed of the assignment of the claim, the assignment does not have any consequences for the debtor, and the old creditor retains the right to exercise the claim. Consequently, if the old creditor waives the claim before notification of the assignment, the waiver produces a legal effect and constitutes the termination of the claim.

The fact that the creditor secretly transfers the claim to another person before the waiver and does not disclose the transfer to the debtor is considered dishonest behaviour towards both the new creditor and the debtor. This is the first time in Lithuanian case law that such conduct of a party has been explicitly identified as unfair and unlawful, and it does not create any negative consequences for the debtor toward whom the old creditor has agreed to waive the right to claim.

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