Choses-in-action

3 key takeaways

• Choses-in-action are intangible rights that can be claimed or enforced through legal action, including debts, claims, and intellectual property.
• These rights are an important aspect of property law and are distinct from tangible property, which can be physically possessed.
• Choses-in-action can be transferred or assigned, allowing the holder to pass the right to another party.

What are choses-in-action?

Choses-in-action are legal rights to personal property that cannot be physically possessed but can be claimed or enforced through the legal system. They encompass a wide range of rights, including the right to receive payment, the right to enforce a contract, and the right to sue for damages. The term originates from English common law and is a fundamental concept in property and contract law.

Key types of choses-in-action:

• Debts: The right to receive money owed by another party, such as loans or outstanding invoices.
• Contracts: The right to enforce the terms of a contract, such as performance obligations or payment terms.
• Insurance Claims: The right to claim compensation under an insurance policy.
• Intellectual Property: Rights to intangible assets like patents, copyrights, and trademarks.
• Shares and Securities: The right to ownership in a company or financial instruments.

Example:

If a person is owed money by another party under a loan agreement, the right to receive that money is a chose-in-action. If the debtor fails to repay the loan, the creditor can enforce this right through legal action.

Importance of choses-in-action

• Legal Rights: Choses-in-action represent valuable legal rights that can be enforced to protect interests and obtain remedies.
• Economic Value: They have significant economic value, as they can be sold, transferred, or used as collateral for loans.
• Asset Management: Recognizing and managing choses-in-action is crucial for individuals and businesses in financial planning and asset management.

Advantages and disadvantages of choses-in-action

Advantages:

• Transferability: Choses-in-action can be transferred or assigned, providing flexibility in managing assets and obligations.
• Legal Protection: They offer legal mechanisms to enforce rights and obtain compensation or performance.
• Economic Utility: These rights can be used as collateral or security, enhancing financial transactions and credit arrangements.

Disadvantages:

• Enforcement Complexity: Enforcing a chose-in-action often requires legal action, which can be time-consuming and costly.
• Intangible Nature: Their intangible nature makes them less straightforward to manage compared to physical assets.
• Uncertainty: The outcome of legal enforcement can be uncertain, depending on the nature of the claim and the legal system.

Real-world application

Choses-in-action are relevant in various legal and financial contexts, such as:

• Debt Collection: Creditors use their rights to collect debts through legal proceedings if debtors fail to pay.
• Business Transactions: Companies regularly deal with choses-in-action in the form of accounts receivable, intellectual property, and contractual rights.
• Insurance Claims: Policyholders claim compensation for losses covered under their insurance policies, enforcing their rights as choses-in-action.
• Investment and Securities: Investors hold rights to dividends, interest, and capital gains through their ownership of shares and bonds.

Related topics

• Intangible property
• Property law
• Contract law
• Debt collection
• Intellectual property rights
• Legal enforcement

Understanding choses-in-action is essential for navigating the legal and financial landscapes, as these intangible rights play a critical role in property law and commercial transactions. Recognizing their value and knowing how to enforce and transfer them can significantly impact financial and legal outcomes.