What Makes a Receivable… Receivable?

Or: When “Pay Me” Isn’t Legally Binding

Let’s set the scene. You’ve delivered the goods, sent the invoice, maybe even thrown in a “Please pay within 30 days or I’ll cry”. But in the eyes of English law, is that enough? Can you really treat that piece of paper as an asset? Spoiler alert: probably not.

That question becomes especially important in a securitisation context, where those receivables aren’t just balance sheet clutter – they’re the main event. We explored how that works in Securitisation of Receivables under English Law. But before you can package and sell a receivable, you need to be sure it’s enforceable – and that’s what we’re tackling here.

What Is a Receivable?

In securitisation terms, a receivable is a right to get paid. That right is owed by the obligor (aka the poor soul who owes money) to the seller (the originator, creditor, or “person trying to get paid without sending too many follow-ups”). It typically arises from something sensible like providing a loan, selling a product, or offering a service – less so from betting someone £100 they couldn’t eat twelve Jaffa Cakes in under a minute.

Legally, a receivable is a chose in action, which sounds like a dramatic ITV legal drama but is in fact just a fancy term for a personal property right you can’t physically touch, but you can sue someone over. Which is, arguably, better.

Receivables come in all flavours:

• Trade receivables – sold something, want the money
• Loan receivables – lent something, want the money
• Lease receivables – let someone use something, want the money
• Credit card receivables – bought things you regret, still owe the money

But here’s the legal plot twist: just because someone should pay you doesn’t mean they must – not unless the obligation is legally binding and enforceable. Otherwise, you’re just waving a wish list in court.

What Makes a Receivable Enforceable?

Contrary to what Hollywood might suggest, you don’t need a dramatic courtroom scene, or a contract signed in blood. Under English law, all you need is a proper contract. And by “proper” we mean one that ticks these delightfully sensible boxes:

1. Offer and Acceptance

A proposal from one party, accepted by the other.
“I’ll sell you 100 teapots.” “Lovely, I’ll take them.” Boom – off to a flying start.

2. Consideration

No, not good manners. This means both sides give something of value. You provide goods or services, they promise to pay. A fair trade. Unless they offer “exposure” as payment. In which case, run.

3. Intention to Create Legal Relations

You both intended this to be a proper business arrangement –not a handshake over a pint, a nod in the car park, or a “go on then, I owe you one”.

4. Certainty of Terms

Price, quantity, what’s being sold – these should be clear enough that a judge doesn’t need a psychic.

If these elements are present, congrats – you’ve got a contract. Whether it’s written on headed paper, scribbled on a napkin, or agreed over the phone while stuck on the M25.

Is a Formal Contract Required?

Not always. But don’t get too excited.

English law is wonderfully relaxed about form – less about how it’s dressed, more about what it’s doing. A contract can be:

• Written
• Oral
• A bit of both
• Entirely implied from how people behave

That said, if your receivable involves things like consumer credit or land, there are stricter rules. But for your everyday trade or loan receivables, enforceability isn’t about format – it’s about whether the key contractual ingredients are present.

For securitisation purposes, though, a bit of formality goes a long way. Written contracts are easier to review, simpler to assign, and far less likely to result in your legal team weeping over vague email trails and missing signatures.

Can You Just Send an Invoice and Call It a Day?

Alas, no. An invoice alone is like a party invitation: just because you sent it doesn’t mean anyone said yes.

An invoice might show:

• That you believe you’re owed money
• That you’ve performed your side of the bargain

But unless there’s evidence the obligor agreed to the deal, it’s not proof of a contract. For a receivable to be enforceable, you’ll need something more persuasive than a PDF with a due date and passive-aggressive payment terms.

That “something more” might include:

• An email saying “thanks, we’ll pay shortly”
• Part-payment
• No dispute or objection
• A history of repeated dealing on the same terms

That kind of behaviour can establish a binding agreement – even if the formal contract is missing or buried in someone’s inbox under “Miscellaneous 2022”.

Implied Contracts: The Law’s Version of “We All Knew What Was Happening, Right?”

Sometimes, the law doesn’t need your paperwork. If the way you and your customer behave clearly points to an agreement, the courts may well join the dots themselves.

This is especially handy when:

• You’ve worked with someone for years without formalities
• Someone starts performance (e.g. delivering goods, making payments) before the contract is signed
• There’s mutual understanding, even if no one can remember who said what

But beware: if there’s already a written contract in place, you can’t pretend it doesn’t exist just because things started getting messy later. Implied terms won’t override what’s been explicitly agreed – even if everyone’s pretending otherwise.

Why This Actually Matters (a.k.a. Why Everyone Cares If You Got It in Writing)

In a securitisation, enforceable receivables aren’t just helpful – they’re the whole point. They’re what’s meant to generate the cash to pay investors. If those receivables aren’t legally sound, you don’t have a transaction. You’ve got a structure that’s all show and no trousers.

Here’s what enforceability affects:

• Asset selection – Can the receivable be included in the deal?
• Legal review – Will the lawyers sign off without reaching for the paracetamol?
• True sale – Has the receivable really been transferred, or is it still hanging around like an unpaid bar tab?
• Investor confidence – Will people believe the cashflows are solid, or suspect they’re being sold a dream?

So, what should investors and sponsors be doing about it? Here’s your common-sense checklist:

✅ Use written contracts wherever possible

Even if it’s just an email chain or a signed delivery note – it’s clearer, neater, and far easier to enforce.

✅Get clear evidence the debtor accepted the deal

Ideally before you send in the bailiffs. Payment, acknowledgement, or a long-standing pattern of behaviour all help.

✅ Don’t rely solely on invoices

Unless you’ve got a well-established course of dealing. A PDF on its own won’t cut it.

✅ Make sure your standard terms are properly incorporated

Don’t bury them on page four of a document no one opened. Get them in front of the counterparty – ideally with a signature.

✅ Treat enforceability as part of your core due diligence

Not something you panic about two days before closing. Start early, sleep better.

The Last Word

 Hope Is Not a Legal Strategy

You can have the most beautifully modelled cashflows in the world, but if your underlying receivables aren’t enforceable, you’re building a house on sand. Possibly quicksand.

So, remember:

• A receivable without a valid contract is just wishful thinking
• An invoice without acceptance is just stationery
• A handshake deal might work at the village fête, but not in a £300m ABS transaction

And finally – if in doubt, write it down. Or better still, get it signed. Preferably by the person with the legal obligation to pay. Imagine that.