Skip to Content

General Laws

[ Text of section effective until July 1, 2013. For text effective July 1, 2013, see below.]

  Section 9-405. (a) Discharge of account debtor; effect of notification. Subject to subsections (b) through (i), an account debtor on an account, chattel paper, or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, authenticated by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor.

  (b) When notification ineffective. Subject to subsection (h), notification is ineffective under subsection (a):

  (1) if it does not reasonably identify the rights assigned;

  (2) to the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than this article; or

  (3) at the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee, even if:

  (A) only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee;

  (B) a portion has been assigned to another assignee; or

  (C) the account debtor knows that the assignment to that assignee is limited.

  (c) Proof of assignment. Subject to subsection (h), if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor, even if the account debtor has received a notification under subsection (a).

  (d) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (e) and Sections 2A-303 and 9-406, and subject to subsection (h), a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:

  (1) prohibits, restricts, or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in, the account, chattel paper, payment intangible, or promissory note; or

  (2) provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account, chattel paper, payment intangible, or promissory note.

  (e) Inapplicability of subsection (d) to certain sales. Subsection (d) does not apply to the sale of a payment intangible or promissory note.

  (f) Legal restrictions on assignment generally ineffective. Except as otherwise provided in Sections 2A-303 and 9-406 and subject to subsections (h) and (i), a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:

  (1) prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in the account or chattel paper; or

  (2) provides that the assignment or transfer or the creation, attachment, perfection, or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy under the account or chattel paper.

  (g) Subsection (b)(3) not waivable. Subject to subsection (h), an account debtor may not waive or vary its option under subsection (b)(3).

  (h) Rule for individual under other law. This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

  (i) Inapplicability. This section does not apply to:

  (1) an assignment of a health-care-insurance receivable, or

  (2) an assignment or transfer of or creation of a security interest in:

  (A) a claim or right to receive compensation for injuries or sickness as described in 26 U.S.C. § 104(a)(1) or (2), as amended from time to time, or

  (B) a claim or right to receive benefits under a special needs trust as described in 42 U.S.C. § 1396p(d)(4), as amended from time to time.

  (j) Section prevails over inconsistent law. Except as otherwise provided in subsection (i), this section prevails over any inconsistent provision of an existing or future statute, rule or regulation of the commonwealth unless the provision is contained in a statute of the commonwealth, refers expressly to this section and states that the provision prevails over this section.

Chapter 106: Section 9-405. Modification of Assigned Contract

[ Text of section as recodified by 2013, 30, Sec. 75C effective July 1, 2013 applicable as provided by 2013, 30, Sec. 116. For text effective until July 1, 2013, see above.]

  Section 9-405. (a) Effect of modification on assignee. A modification of or substitution for an assigned contract is effective against an assignee if made in good faith. The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that the modification or substitution is a breach of contract by the assignor. This subsection is subject to subsections (b) to (d), inclusive.

  (b) Applicability of subsection (a). Subsection (a) applies to the extent that:

  (1) the right to payment or a part thereof under an assigned contract has not been fully earned by performance; or

[ Paragraph (2) of subsection (b) as recodified by 2013, 30, Sec. 75C and amended by 2013, 30, Sec. 76 effective July 1, 2013 applicable as provided by 2013, 30, Sec. 116.]

  (2) the right to payment or a part thereof has been fully earned by performance and the account debtor has not received notification of the assignment under Section 9-406(a).

  (c) Rule for individual under other law. This section is subject to law other than this article which establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.

  (d) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.

Error