---
title: "The Factoring Contract — Types, Form and Conditions"
url: "https://legal.ge/en/service/banking-and-finance-law-en/factoring-contract-en"
field: "Banking & Finance Law"
description: "The factoring contract in Georgia: types (with and without recourse, reverse), written form, mandatory terms and nullity. Legal.ge."
updated: "2026-10-14"
publisher: "legal.ge"
---

# The Factoring Contract — Types, Form and Conditions

> Source: legal.ge, https://legal.ge/en/service/banking-and-finance-law-en/factoring-contract-en

## The Concept and Object of Factoring

Factoring is a transaction that involves the transfer of accounts receivable arising from an underlying contract and the registration of that transaction in the factoring register. As a result of the registration, the ownership of the claim arising from the accounts receivable passes to the respective factor. The essence of the transaction therefore rests on two interconnected elements — the transfer of the receivable to the factor and its entry in the factoring register; without registration, ownership of the claim does not pass.

Accounts receivable means any existing short-term unconditional right to claim payment of a sum of money arising from the supply of goods or the provision of services under an underlying contract — including the supply of a product or service related to intellectual property — in whole or in part. Rights to payment arising from a cheque, a promissory note, a security, a letter of credit or a deposit account are excluded from this definition. The term short-term means that the payment period of the receivable does not exceed 1 year from its origination. It is also important that, for the purposes of the law, the provision of services does not cover employment relationships, so claims related to wages remain outside the scope of factoring.

The object of factoring may only be the transfer of accounts receivable. It is impermissible for the object of factoring to be the transfer of accounts receivable arising from the supply of goods or provision of services for personal or household needs, except where trading in goods or the provision of services forms part of the entrepreneurial activity of the assignor.

For the purposes of factoring, the document confirming the existence of a claim against the debtor is a tax invoice issued in electronic form. Where, in cases determined by Georgian legislation, a tax invoice is not issued, an invoice serves as the confirming document. The identification of an invoice must be simple: it must bear a unique identification code assigned by the issuer of the invoice.

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### What is factoring and what may be its object?

Factoring is a transaction involving the transfer of accounts receivable arising from an underlying contract and its registration in the factoring register — as a result, ownership of the claim passes to the factor. The object may only be the transfer of accounts receivable; receivables related to personal or household consumption cannot become the object of factoring unless they form part of the assignor's entrepreneurial activity. The existence of the claim is established by a tax invoice or, in cases provided for by legislation, by an invoice bearing a unique code.

### What is the difference between factoring with and without recourse?

Under factoring without recourse, if the debtor fails to cover the receivable, the factor has no right of claim against the assignor. Under factoring with recourse, the factor may demand satisfaction both from the debtor and from the assignor; the assignor may refuse until the factor attempts enforcement against the debtor. If the type cannot be established, factoring is deemed to be without recourse.

### What is reverse factoring?

It is a type of factoring initiated by the debtor. Its implementation requires the prior written consent of the creditor, and as a result the factor assumes the obligation to cover the receivable towards the creditor, which it does within the period determined by the written agreement between the debtor and the creditor, or before that period.

### What must be indicated in the factoring contract?

The written, including electronic, contract must contain the names, identification numbers, legal addresses and representative information of the parties, the type of factoring, the grounds and volume of the receivable together with the payment procedure, the amount of the factor's benefit and its payment procedure, the conclusion dates of both contracts and the validity period, signatures, and, where the claim is secured, information about the objects of security. The underlying contract, the claim-confirming document, and information on the amount and payment date are attached as annexes; in reverse factoring — also the creditor's written consent.

### When is a factoring contract void?

The transfer of one and the same accounts receivable to several factors is impermissible, except for transfers of parts of it. In addition, any factoring contract concluded by the assignor after the receivable has been transferred, concerning that same receivable, is void.