§ 4-9-408 — Restrictions on assignment of promissory notes, health-care-insurance receivables, and certain general intangibles ineffective

Colorado § 4-9-408

• Jurisdiction: Colorado
• Title 04: Uniform
• Art.: Secured Transactions

Text

(a) Except as
otherwise provided in subsection (b) of this section, a term in a promissory note or in
an agreement between an account debtor and a debtor which relates to a health-care-insurance receivable or a general intangible, including a contract, permit,
license, or franchise, and which term prohibits, restricts, or requires the consent of
the person obligated on the promissory note or the account debtor to, the
assignment or transfer of, or creation, attachment, or perfection of a security
interest in, the promissory note, health-care-insurance receivable, or general
intangible, is ineffective to the extent that the term:

(1) Would impair the creation, attachment, or perfection of a security
interest; or

(2) Provides that the assignment or transfer or the creation, attachment, or
perfection of the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination, or remedy under the
promissory note, health-care-insurance receivable, or general intangible.

(b) Subsection (a) of this section applies to a security interest in a payment
intangible or promissory note only if the security interest arises out of a sale of the
payment intangible or promissory note, other than a sale pursuant to a disposition
under section 4-9-610 or an acceptance of collateral under section 4-9-620.

(c) Except as provided in sections 8-80-103 and 8-42-124, C.R.S., a rule of
law, statute, or regulation that prohibits, restricts, or requires the consent of a
government, governmental body or official, person obligated on a promissory note,
or account debtor to the assignment or transfer of, or creation of a security interest
in, a promissory note, health-care-insurance receivable, or general intangible,
including a contract, permit, license, or franchise between an account debtor and a
debtor, is ineffective to the extent that the rule of law, statute, or regulation:

(1) Would impair the creation, attachment, or perfection of a security
interest; or

(2) Provides that the assignment or transfer or the creation, attachment, or
perfection of the security interest may give rise to a default, breach, right of
recoupment, claim, defense, termination, right of termination, or remedy under the
promissory note, health-care-insurance receivable, or general intangible.

(d) To the extent that a term in a promissory note or in an agreement
between an account debtor and a debtor which relates to a health-care-insurance
receivable or general intangible or a rule of law, statute, or regulation described in
subsection (c) of this section would be effective under law other than this article
but is ineffective under subsection (a) or (c) of this section, the creation,
attachment, or perfection of a security interest in the promissory note, health-care-insurance receivable, or general intangible:

(1) Is not enforceable against the person obligated on the promissory note or
the account debtor;

(2) Does not impose a duty or obligation on the person obligated on the
promissory note or the account debtor;

(3) Does not require the person obligated on the promissory note or the
account debtor to recognize the security interest, pay or render performance to the
secured party, or accept payment or performance from the secured party;

(4) Does not entitle the secured party to use or assign the debtor's rights
under the promissory note, health-care-insurance receivable, or general intangible,
including any related information or materials furnished to the debtor in the
transaction giving rise to the promissory note, health-care-insurance receivable, or
general intangible;

(5) Does not entitle the secured party to use, assign, possess, or have access
to any trade secrets or confidential information of the person obligated on the
promissory note or the account debtor; and

(6) Does not entitle the secured party to enforce the security interest in the
promissory note, health-care-insurance receivable, or general intangible.

(e) Reserved.

(f) Subsections (a) and (c) of this section do not apply to the assignment or
the transfer of, or the creation of a security interest in:

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

(2) A claim or right to receive benefits under a special needs trust as
described in 42 U.S.C. sec. 1396p (d)(4), as amended.

(g) As specified in section 7-90-104, C.R.S., this section does not apply to the
assignment or the transfer of, or the creation of a security interest in, an owner's
interest as defined in section 7-90-102 (44), C.R.S.

(h) In this section, promissory note includes a negotiable instrument that
evidences chattel paper.

Legislative History

Source: L. 2001: Entire article R&RE, p. 1376, � 1, effective July 1. L. 2012: (b) amended, (HB 12-1262), ch. 170, p. 599, � 9, effective July 1, 2013. L. 2016: IP(f) amended and (g) added, (HB 16-1270), ch. 119, p. 339, � 2, effective August 10. L. 2023: (h) added, (SB 23-090), ch. 136, p. 559, � 73, effective August 7.