Chose in Action: Your Ultimate Guide to Intangible Property Rights

LEGAL DISCLAIMER: This article provides general, informational content for educational purposes only. It is not a substitute for professional legal advice from a qualified attorney. Always consult with a lawyer for guidance on your specific legal situation.

Imagine you have a $100 digital gift card for your favorite online store. You can't physically hold the $100. It's not a stack of bills in your hand. Instead, the gift card represents a right—the right to demand $100 worth of goods from that store. You can't possess the value, but you can enforce your claim to it. That right is the essence of a chose in action. It's a legal term for a piece of property that you can't touch or hold, but that you have a legal right to claim through a lawsuit if necessary. It’s not the thing itself, but the *right to get the thing*. From the money in your bank account to the copyright on a song you wrote, choses in action are the invisible, yet incredibly valuable, assets that power our modern economy. They are property rights that exist only in the eyes of the law.

• Key Takeaways At-a-Glance:
  • What It Is: A chose in action is a form of personal_property that is intangible, meaning it cannot be physically possessed, and its value can only be realized by bringing a legal action or lawsuit.
  • Real-World Impact: Your bank account balance, rights under a contract, shares of stock, and intellectual_property like patents are all examples of a chose in action that have significant financial value.
  • Key Action: A chose in action can be sold, given away, or used as collateral for a loan through a legal process called an assignment, which transfers the right from one person to another.

The term “chose in action” sounds strange to modern ears because it's a linguistic fossil, a blend of old French and English law. “Chose” is French for “thing.” The concept emerged from English common_law hundreds of years ago to solve a fundamental problem in a growing commercial society: how to classify property. Early law was simple. It primarily recognized choses in possession—physical, tangible things you could see and touch, like a horse, a sword, or a plot of land. If someone stole your horse, you could physically recover the horse. But what about a debt? If someone owed you money, you didn't possess the money yet. You possessed a *right* to claim that money. The law needed a category for this new type of “thing.” This gave birth to the chose in action, literally a “thing which one must take action to get.” It was a revolutionary idea that allowed the law to recognize and protect intangible wealth. As commerce evolved beyond simple barter, this concept became the bedrock for modern finance. It allowed for the creation and transfer of things like promissory notes, company shares, and insurance policies. Without the legal framework of the chose in action, the complex credit systems, stock markets, and intellectual property rights that define our economy today would be impossible.

While “chose in action” is a common_law concept, its modern application in the United States is heavily influenced by statutory law, most notably the uniform_commercial_code (UCC). The UCC is a comprehensive set of laws adopted by most states that governs commercial transactions. Article 9 of the UCC, which deals with secured transactions, is particularly important. While it doesn't use the term “chose in action” frequently, it governs the underlying assets. Article 9 defines a “general intangible” as “any personal property, including things in action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-credit rights, letters of credit, money, and oil, gas, or other minerals before extraction.” In plain English: The UCC provides the rules for how you can use a chose in action (like the right to be paid under a contract) as collateral for a loan. For example, a business can get a loan from a bank and pledge its accounts receivable (the money its customers owe) as security. Those accounts receivable are classic choses in action. The UCC provides the legal mechanism for the bank to “perfect” its interest and collect that money if the business defaults on the loan.

While the UCC provides a degree of uniformity, the specific rules governing the assignment (transfer) of a chose in action can vary by state, especially for rights not covered by the UCC, like tort claims.

To truly understand a chose in action, we need to break it down into its essential components and types.

This is the most fundamental characteristic. You cannot physically possess it. A chose in possession (or “chattel”) is a physical object like your car, your laptop, or a book. A chose in action is an incorporeal, or non-physical, right.

• Example: A $100 bill in your wallet is a chose in possession. The $100 balance in your bank account is a chose in action—it represents a debt the bank owes you, a right you can enforce.

The “action” part of the name is critical. A chose in action must be a right that the law will recognize and help you enforce, ultimately through a lawsuit. If a person owes you $1,000 under a contract and refuses to pay, you can sue them to recover the money. Your contractual right to that $1,000 is the chose in action. This enforceability gives the intangible right its real-world value.

In law, property is divided into two main categories: real_property (land and anything attached to it) and personal_property (everything else). A chose in action falls under personal property. This is an important classification because it determines which laws govern its ownership, transfer, and taxation. Just like you can sell your car (tangible personal property), you can sell your shares of stock (intangible personal property).

Historically, there were separate courts for “law” and “equity.” This division created two categories of choses in action.

• Legal Chose in Action: This is a right that was traditionally recognized and enforced by the courts of law. These are the most common types.
  • Examples:
    • A commercial debt (e.g., an unpaid invoice).
    • Rights under a contract.
    • A claim for damages from a breach of contract.
    • A negotiable_instrument like a check or promissory note.
    • Intellectual property rights like copyrights and patents.
• Equitable Chose in Action: This is a right that was only recognized by the courts of equity, which were designed to provide fairness when the strict legal rules were too rigid. These rights are often related to trusts and estates.
  • Examples:
    • A beneficiary's interest in a trust fund.
    • A legacy or inheritance under a will that has not yet been paid out.
    • A partner's interest in the assets of a partnership.

Today, most U.S. courts merge law and equity, but the distinction is still legally relevant, particularly in the context of trusts and the specific formalities required for assignment.

Unlike a simple sale of a physical good, transferring a chose in action involves three key roles:

• The Assignor: This is the person who originally owns the right (the chose in action). For example, a business that is owed money by a customer.
• The Assignee: This is the person to whom the right is transferred. For example, a financing company that buys the business's right to collect the debt.
• The Obligor (or Debtor): This is the person or entity who owes the original duty or debt. In our example, this is the customer who must now pay the financing company instead of the original business.

Assigning a chose in action is how you unlock its value. This is the legal process for selling it, giving it away, or using it as collateral.

Not all rights can be assigned.

• Check the Contract: Many contracts have an “anti-assignment” clause. Review the original agreement to see if it prohibits or restricts assignment.
• Check the Law: As shown in the table above, public_policy prohibits the assignment of certain claims, most commonly personal injury tort claims. You cannot sell your right to sue the person who caused your car accident.
• Personal Services Contracts: Contracts for unique personal services (e.g., hiring a specific famous artist to paint a portrait) are generally not assignable because the identity of the person performing the service is central to the contract.

While some assignments can be verbal, it is always best practice to have a written agreement. This is often called a Deed of Assignment or Assignment Agreement. The agreement should clearly state:

• The names of the assignor and the assignee.
• A clear and unambiguous description of the chose in action being transferred. (e.g., “all rights, title, and interest in and to the payment of $5,000 owed by ABC Corp under invoice #12345 dated January 1, 2024”).
• The consideration (the price paid for the assignment). It might state “for the sum of $4,500” or “for one dollar and other good and valuable consideration.”
• Words showing a clear intent to transfer the right immediately and unconditionally.
• The signatures of both the assignor and assignee.

This is a critically important step. You must notify the person who owes the debt (the obligor) that the right to collect has been transferred to a new party (the assignee).

• Why is this crucial? Until the obligor receives notice, they are legally entitled to continue paying the original creditor (the assignor). If they pay the assignor after the assignment but before being notified, their debt is discharged, and the assignee's only recourse is to sue the assignor.
• How to give notice? Notice should be in writing and delivered in a verifiable way (e.g., certified mail). It should clearly identify the assigned debt and instruct the obligor to make all future payments to the assignee.

This is a core legal principle. The assignee gets no better rights than the assignor had. This means if the obligor had a valid defense against the assignor (e.g., the original work was defective), they can use that same defense against the assignee. The assignee takes the chose in action subject to all existing equities and defenses.

• Assignment Agreement: This is the foundational document. It is the legal instrument that effects the transfer. For significant commercial transactions, this should always be drafted by a qualified attorney.
• Written Notice of Assignment: This is the formal communication sent to the obligor informing them of the transfer and directing them where to send future payments. This document protects the assignee by ensuring the obligor can no longer legally pay the original creditor.
• UCC-1 Financing Statement: If a chose in action (like accounts receivable) is being used as collateral for a loan, the lender (assignee) will file a ucc-1_financing_statement with the secretary of state. This public filing “perfects” the lender's security interest, giving them priority over other creditors in case of bankruptcy.

While no single case “created” the chose in action, numerous rulings have defined its boundaries and importance.

This English case is often cited for providing one of the most comprehensive definitions.

• Backstory: A contract was made for the sale of an interest in some cotton. The rights under this contract were then assigned to a third party.
• The Legal Question: What exactly is a “chose in action”?
• The Court's Holding: The court defined it as “a legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession.” This classic definition separated the legal world into things you can hold (choses in possession) and rights you must sue to get (choses in action).
• Impact Today: This fundamental definition remains the starting point for any legal analysis of the term. It establishes the core concept of an intangible, enforceable right.

This U.S. case addressed the modern, high-stakes issue of intellectual property as a chose in action.

• Backstory: Two glass companies merged. The question was whether the patent licenses held by the acquired company automatically transferred to the acquiring company.
• The Legal Question: Is a patent license a freely assignable chose in action, or is it personal to the licensee?
• The Court's Holding: The court held that federal patent policy overrides state contract law. A patent license is personal to the licensee and cannot be assigned to another party without the express consent of the patent owner.
• Impact Today: This case shows that not all choses in action are created equal. Public policy, as expressed in federal statutes like the patent_act, can place significant restrictions on the assignability of certain valuable rights. It's a crucial reminder to check for specific laws governing the type of asset you're dealing with.

This famous “swimming pool” case from the UK House of Lords explores the *value* of a chose in action.

• Backstory: A man contracted for a swimming pool to be built to a specific depth. The finished pool was perfectly safe and usable but was slightly shallower than specified. He sued for the cost of completely rebuilding the pool.
• The Legal Question: When you sue to enforce a chose in action (the contractual right to a pool of a certain depth), what are your damages? Is it the cost to fix the defect, or the loss of value?
• The Court's Holding: The court awarded only a small amount for “loss of amenity,” not the huge cost of rebuilding. They reasoned that the cost of cure was wholly disproportionate to the actual loss suffered.
• Impact Today: This case illustrates a critical point: owning a chose in action (a right to sue) doesn't guarantee a massive payout. The value of that right is determined by the actual, provable damages you have suffered. The law aims for compensation, not a windfall.

The ancient concept of a chose in action is at the center of several modern legal debates.

• Litigation Finance: A growing industry involves “litigation funders” who invest in commercial lawsuits in exchange for a share of the proceeds. Opponents argue this is a modern form of champerty_and_maintenance (the old crime of meddling in someone else's lawsuit) and can prolong litigation. Proponents argue it provides access to justice for claimants who couldn't otherwise afford to pursue a valid claim (a chose in action).
• Assignment of Torts: While personal injury claims remain unassignable, there's an ongoing debate about whether commercial tort claims, like for fraud or unfair business practices, should be more freely transferable. Allowing assignment could create a market for these claims, but critics fear it could lead to predatory behavior.

Digital assets are posing fascinating new questions for this old legal category.

• Cryptocurrency and NFTs: Is your holding of Bitcoin or an NFT a chose in possession or a chose in action? You “possess” the private key, which feels tangible. But your ownership is recorded on a distributed ledger, and your right to it might ultimately depend on enforcing it against others on the network. Courts are currently grappling with how to classify these new digital assets, which will have massive implications for bankruptcy, theft, and taxation.
• In-Game Assets and Digital Goods: The “skins,” weapons, and currency you own in a video game are valuable. Are they property? The terms of service often say they belong to the game company. But as these virtual economies grow, there's increasing pressure to recognize players' rights as a form of chose in action—a right that they can own, transfer, and protect in the real world. The law is still catching up to this digital reality.

• assignment: The legal transfer of a right or property from one person (the assignor) to another (the assignee).
• assignee: The person or entity who receives a right through an assignment.
• assignor: The person or entity who transfers a right through an assignment.
• chattel: An item of tangible, movable personal property; another term for a chose in possession.
• chose_in_possession: A physical item of personal property that can be physically held and possessed.
• common_law: The body of law derived from judicial decisions of courts rather than from statutes.
• contract: A legally enforceable agreement between two or more parties.
• copyright: A legal right that grants the creator of an original work exclusive rights for its use and distribution.
• debt: An obligation owed by one party (the debtor) to another party (the creditor).
• equity: A set of legal principles that supplement strict rules of law to provide fairness and justice.
• intangible_property: Property that does not have a physical form, such as patents, copyrights, and trademarks.
• obligor: A person who is bound by a legal obligation or debt.
• patent: An exclusive right granted for an invention.
• personal_property: All property that is not real property (land).
• uniform_commercial_code: A comprehensive set of laws governing commercial transactions in the United States.

• personal_property
• intangible_property
• contract_law
• assignment
• uniform_commercial_code
• intellectual_property
• trusts_and_estates