§ 554.9406 — Discharge of account debtor — notification of assignment — identification and proof of assignment — restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective

Iowa § 554.9406

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 554: UNIFORM COMMERCIAL CODE

Text

proof of assignment — restrictions on assignment of accounts, chattel paper, payment
intangibles, and promissory notes ineffective.
1. Discharge of account debtor — effect of notification. Subject to subsections 2 through
9 and 11, 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, signed 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.
2. When notification ineffective. Subject to subsections 8 and 11, notification is
ineffective under subsection 1:
a. if it does not reasonably identify the rights assigned;
b. 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
c. at the option of an account debtor, if the notification notifies the account debtor to make
lessthanthefullamountofanyinstallmentorotherperiodicpaymenttotheassignee, evenif:
(1) only a portion of the account, chattel paper, or payment intangible has been assigned
to that assignee;
(2) a portion has been assigned to another assignee; or
(3) the account debtor knows that the assignment to that assignee is limited.
3. Proof of assignment. Subject to subsections 8 and 11, 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 1.
4. Term restricting assignment generally ineffective. In this subsection, “promissory
note” includes a negotiable instrument that evidences chattel paper. Except as otherwise
provided in subsections 5 and 10A and sections 554.9407 and 554.13303, and subject to
subsection 8, a term in an agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it:

a. prohibits, restricts, orrequirestheconsentoftheaccountdebtororpersonobligatedon
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
b. 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.
5. Inapplicability of subsection 4 to certain sales. Subsection 4 does not apply to the sale
of a payment intangible or promissory note, other than a sale pursuant to a disposition under
section 554.9610 or an acceptance of collateral under section 554.9620.
6. Legal restrictions on assignment generally ineffective. Except as otherwise provided
in subsection 10A and sections 554.9407 and 554.13303 and subject to subsections 8 and
9, 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:
a. 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
b. 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.
7. Subsection2,paragraph“c”,notwaivable. Subjecttosubsections8and11,anaccount
debtor shall not waive or vary its option under subsection 2, paragraph “c”.
8. Ruleforindividualunderotherlaw. ThissectionissubjecttolawotherthanthisArticle
whichestablishesadifferentruleforanaccountdebtorwhoisanindividualandwhoincurred
the obligation primarily for personal, family, or household purposes.
9. Inapplicability to health care insurance receivable. This section does not apply to an
assignment of a health care insurance receivable.
10. Section prevails over specified inconsistent law. This section prevails over any
inconsistent provision of an existing or future statute, rule, or regulation of this state unless
the provision is contained in a statute of this state, refers expressly to this section, and states
that the provision prevails over this section.
10A. Inapplicability to interests in certain entities. Subsections 4, 6, and 10 do not apply
to a security interest in an ownership interest in a general partnership, limited partnership,
or limited liability company.
11. Inapplicability of certain subsections. Subsections 1, 2, 3, and 7 do not apply to a
controllable account or controllable payment intangible.