Payment delegation 2026: French Civil Code articles 1336-1340

Quick answer. Payment delegation, governed by articles 1336 to 1340 of the French Civil Code since the contract law reform of 10 February 2016, is a tripartite operation that allows a creditor (the delegatee) to obtain direct payment from a third party (the delegate) instead of the original debtor (the delegator). In an imperfect delegation, the delegatee keeps two debtors: the delegator remains liable if the delegate fails to pay. It is one of the cornerstones of the payment guarantee regime for construction subcontracting (Law No. 75-1334 of 31 December 1975) and a key lever to secure trade receivables in 2026.

The French economic environment in 2025-2026 has put payment delegation back at the centre of creditor protection. Insolvencies remain at historically high levels according to public Banque de France data, and subcontracting chains in construction and industry continue to suffer from compressed margins. Faced with upstream default risk, SME managers, wholesalers and subcontractors are looking for mechanisms that are more protective than ordinary invoicing at term.

We were recently consulted by a second-fix subcontractor who had lost €180,000 on the judicial liquidation of his main contractor. A payment delegation signed by the project owner at the start of the works would have secured most of that receivable. It is this kind of situation, frequent in construction and industry, that justifies putting this tool back at the heart of the commercial contract. Our firm, registered with the Paris Île-de-France Order of Chartered Accountants, works alongside in-house counsel to qualify, draft and properly account for these operations.

Payment delegation is not new: the contract law reform issued by Order No. 2016-131 of 10 February 2026 consolidated the regime in articles 1336 to 1340 of the Civil Code, codifying centuries of case law. The framework is now stable, readable and fully operational.

Three parties, one mechanism#

Article 1336 of the Civil Code defines delegation as the operation by which a person, the delegator, obtains from another, the delegate, that he undertake an obligation toward a third party, the delegatee, who accepts him as debtor. Three actors, therefore, and three converging consents.

• The delegator is generally the initial debtor of the delegatee: he organises payment by a third party.
• The delegate is the party who undertakes to pay the delegatee: he himself either owes money to the delegator or agrees to extend credit to him.
• The delegatee is the creditor and beneficiary of the delegation.

Delegation is never presumed: it requires a clear written agreement, signed by all three parties and expressly qualified as a "delegation agreement". Although the Civil Code does not impose writing for validity, its absence makes proof almost impossible and undermines any future enforcement action.

Non-opposability of defences — article 1336 paragraph 2#

The major legal interest of delegation lies in the rule set by article 1336 paragraph 2 of the Civil Code: unless otherwise agreed, the delegate cannot raise against the delegatee the defences he holds against the delegator. In practice, even if the delegator and the delegate are in dispute over an earlier contract, the delegate cannot refuse to pay the delegatee on that ground. This mechanism makes delegation much more protective than a simple assignment of debt, where defences remain in principle enforceable against the assignee (article 1324).

Difference with novation#

Delegation may or may not involve novation. Novation (articles 1329 to 1335 of the Civil Code) substitutes a new obligation for an existing one and extinguishes the latter. It is never presumed and must result clearly from the act (article 1330). In the context of delegation, only the perfect delegation triggers novation by change of debtor: the delegator is released and the delegate becomes the sole debtor of the delegatee.

Comparative table#

Imperfect delegation — the safety reflex#

Imperfect delegation is the form retained in the vast majority of commercial situations. The delegatee adds a second debtor without giving up the first: position improves, risk does not increase. The rule is simple: unless the agreement contains an express and unambiguous release of the delegator, the delegation is imperfect (article 1338 of the Civil Code).

Perfect delegation — a restructuring tool#

Perfect delegation is used in more strategic contexts: business acquisitions with assumption of operating liabilities, intra-group reallocation of debts, or sales of goodwill where the buyer commits to suppliers of the seller. It is only justified where the solvency of the delegate is clear and durable. Forcing a perfect delegation while releasing a solvent delegator deliberately weakens the creditor's position.

Hayot Expertise Advice. In 9 cases out of 10, we recommend an imperfect delegation with an explicit clause excluding any novation ("this agreement does not entail novation and the delegator remains jointly and severally liable to the delegatee"). That precision removes any later ambiguity before a court.

Summary of the four mechanisms#

Dailly assignment — the banking mobilisation tool#

The assignment of professional receivables, known as the "Dailly assignment" (articles L. 313-23 et seq. of the Monetary and Financial Code), is reserved for transactions between a company and a credit institution. It allows the company to mobilise its client receivables with its bank via a simple slip, within a standardised framework. It is a short-term financing tool, not a payment guarantee between contracting parties. For an operational comparison with other tools, see our analysis of factoring, Dailly and revenue-based financing in 2026.

Subrogation — payment by a third party#

Subrogation, restated in articles 1346 to 1346-5 of the Civil Code by the 2016 reform, occurs when a third party pays the debtor's obligation and takes the place of the creditor. It is legal (for example when a guarantor pays in place of the debtor) or conventional (consented by the creditor at the time of payment). Unlike delegation, it does not create a new obligation: it transfers an existing claim with its accessories.

Law No. 75-1334 of 31 December 1975 — a protective framework#

The Law of 31 December 1975 on subcontracting, known as the 1975 Law, remains the founding text protecting subcontractors in France. In private construction and public works contracts, article 14 of that law requires the main contractor to provide the subcontractor, under penalty of nullity of the subcontract, with either a personal and joint and several bank guarantee or a payment delegation from the project owner. The subcontractor is entitled to refuse to start work until that guarantee has been provided.

In practice, payment delegation by the project owner is often preferred to a bank guarantee for two reasons: it does not consume a credit line at the main contractor, and it benefits from the non-opposability of defences, which truly secures the subcontractor even in the event of a dispute between the project owner and the main contractor. Drafting the agreement requires particular attention to ceilings, release procedures and articulation with retention guarantees.

Public contracts — direct payment to the subcontractor#

In public contracts, a subcontractor accepted by the public project owner and whose payment terms have been approved benefits from the direct payment mechanism set out in the French Public Procurement Code. This direct payment produces legal effects very close to an imperfect delegation: the subcontractor is paid directly by the public entity, up to the approved amount, regardless of the financial difficulties of the main contractor. This specific regime combines with the general Civil Code rules on delegation.

Articulation with invoicing and VAT reverse charge#

Invoicing among the subcontractor, the main contractor and the project owner follows its own rules, independent of delegation. As regards VAT, the reverse charge mechanism of article 283-2 nonies of the General Tax Code applies to construction work carried out by a subcontractor for a taxable purchaser, which impacts the net invoicing and the payment circuit. We address these issues in detail in our article on the invoicing of subcontracting. The progressive rollout of electronic invoicing 2026 for SMEs will further strengthen the traceability of delegation agreements.

Six steps to a secure delegation:

1. Identify the opportunity. The delegate must already be (or be about to become) a debtor of the delegator, or willing to extend credit. Without this economic basis, the delegation has no cause.
2. Obtain the delegate's consent. This is the most delicate point. A delegate has no legal obligation to accept, except in construction subcontracting (1975 Law) or in public contracts. The negotiation may require an argued business case (operational risk reduction, simplification of the payment circuit, supply chain security).
3. Expressly qualify the regime. The written agreement must state whether it is a perfect delegation (with express release of the delegator) or an imperfect one. Otherwise, the delegation is presumed to be imperfect (article 1338).
4. Stipulate or exclude defences. By default, the delegate cannot raise his defences against the delegator. The clause may be reversed if the parties wish to allow some defences (rare in practice).
5. Define the implementation terms. Amount, schedule, payment methods (transfer, cheque), delegatee bank details, dispute handling, applicable law and competent court.
6. Sign three originals. One copy for each party. Keep the agreement in the client file until full extinction of the obligations, and beyond depending on limitation periods (5 years in commercial law).

Accounting at the delegatee level#

Under the French General Chart of Accounts, an imperfect delegation does not modify the initial entry: the receivable remains booked in account 411 "Clients" in the name of the delegator until effective payment. Opening a "Delegated clients" sub-account is good practice to track receivables under delegation and record the commitments given by the delegates. On collection, account 512 "Banks" is debited against account 411.

In a perfect delegation, the novation justifies an immediate transfer: the old receivable (on the delegator) is extinguished by crediting account 411 delegator, and a new receivable is opened by debiting account 411 delegate. The treatment is more visible in analysis but requires rigorous documentation.

VAT treatment — the BOFiP rule#

Delegation is a payment mechanism, not a VAT event. VAT becomes due according to the regime applicable to the underlying economic transaction, in accordance with article 269 of the General Tax Code and the BOFiP BOI-TVA-BASE-20 doctrine. For supplies of goods, VAT is due on delivery. For services taxable under the cash receipts regime, it is the date of effective payment, here by the delegate, that triggers the tax point.

Particular care must be taken with services invoiced in year N and paid by delegation in year N+1: the gap between the tax event and the tax point must be traced in the VAT return and in the income tax return.

Links with working capital and trade receivables#

Delegation is primarily a security tool: it does not mechanically shorten payment time, unless combined with a shorter schedule negotiated with the delegate. It does, however, significantly reduce the probability of bad debt, which feeds into forward-looking working capital assessments. We cover complementary levers in our briefing on the 9 levers to free up cash without borrowing and more broadly in our outsourced CFO missions for SMEs.

• Goodwill sale. The buyer may, through a delegation agreement, accept to pay the seller's habitual suppliers whose receivables are outstanding, in place of the seller. If the delegation is perfect, the seller is released, which reassures suppliers and accelerates the transition.
• Second-tier subcontracting. In cascading subcontracting, the delegation by the project owner only covers the directly approved subcontractor. Second-tier subcontractors must obtain a separate delegation, usually from the main contractor, and negotiate their own guarantee.
• Factoring and delegation. A receivable already mobilised with a factor (conventional subrogation in favour of the factor) cannot, in practice, be the subject of a delegation in favour of another creditor without the factor's consent. The conflict between the two mechanisms must be addressed contractually upfront.
• Holding and intra-group operations. A perfect delegation can be used to reallocate a debt from a subsidiary to a holding company, for example as part of a cash pooling agreement. The tax treatment (abnormal management act, transfer pricing) must be documented.
• Insolvency. A delegation concluded during the suspect period preceding a court-ordered reorganisation may be challenged under article L. 632-1 of the Commercial Code if it impoverished the delegator without consideration. Vigilance is required when there are signs of financial stress at the delegator.

• Confusing delegation and payment instruction. A simple "payment order" given by a client to its bank creates no right for the beneficiary: it is revocable at any time. Only a delegation accepted by the delegate generates a binding commitment.
• Omitting the novation clause. Without an express clause, delegation is imperfect. Conversely, believing that a perfect delegation results from a verbal agreement alone exposes the parties to litigation.
• Skipping the written agreement in construction subcontracting. The absence of writing compliant with the 1975 Law can trigger nullity of the subcontract at the subcontractor's request.
• Failing to anticipate VAT. The gap between the tax event and the cash receipt can generate discrepancies between bookkeeping and VAT returns, a frequent source of reassessment.
• Underestimating delegate solvency. A badly negotiated imperfect delegation with an insufficiently solvent delegate adds little protection. Financial analysis of the delegate remains essential.

In the construction and industry assignments we accompany in Paris and the Île-de-France region, the imperfect delegation is, in our view, the best compromise between security and acceptability for the three parties. It is cheaper than a bank guarantee — it consumes no credit line at the main contractor — and it benefits from a presumption of non-opposability of defences that genuinely secures the delegatee.

A frequent mistake we correct is the confusion between delegation and Dailly assignment. For a subcontractor seeking direct payment from a solvent project owner, delegation is the tool. For the same company seeking to mobilise its receivable with its bank, Dailly is the banking instrument. The two can coexist but must be distinguished in the financial strategy and in the contract.

Perfect delegation, more rarely used, retains its full relevance in goodwill sales and intra-group restructurings. We systematically rule it out for ordinary commercial relationships: no reasonable creditor voluntarily gives up an additional debtor.

Hayot Expertise Advice. Before each material delegation (over €50,000), we recommend a cold analysis of the delegate's solvency (balance sheet, debt ratios, known banking exposure), the drafting of the agreement by a lawyer or in-house counsel, and the integration of the agreement into the permanent file. An audit of the delegation set-up process can be carried out as part of a trade receivables steering mission.

• Payment delegation, articles 1336 to 1340 of the French Civil Code since the reform of 10 February 2016, is a tripartite operation that creates a direct commitment from the delegate to the delegatee.
• Imperfect delegation adds a second debtor without releasing the delegator: the safety reflex in 9 out of 10 cases. Perfect delegation releases the delegator by novation and should be reserved for strategic operations with a highly solvent delegate.
• In private construction subcontracting, the Law of 31 December 1975 imposes a payment guarantee, of which delegation by the project owner is the most common form.
• The non-opposability of defences (article 1336 paragraph 2) makes delegation more protective than a simple assignment of debt.
• In bookkeeping, the receivable remains in account 411 until effective payment in an imperfect delegation. VAT follows the regime applicable to the underlying transaction, independently of the payment mechanism.

Official sources#

• Légifrance — French Civil Code, articles 1336 to 1340 (delegation)
• Légifrance — Law No. 75-1334 of 31 December 1975 on subcontracting
• Légifrance — Order No. 2016-131 of 10 February 2026 reforming contract law
• BOFiP — BOI-TVA-BASE-20 — VAT chargeable event and tax point (French tax doctrine)
• Légifrance — Monetary and Financial Code, articles L. 313-23 et seq. (Dailly assignment)
• Service-public.fr — Subcontracting in private and public contracts