§ 10:12-106 — Discharge of account debtor on controllable account or controllable payment

§12-106. Discharge of account debtor on controllable account or controllable payment
intangible
(a) Discharge of account debtor. An account debtor on a controllable account or
controllable payment intangible may discharge its obligation by paying:
(1) the person having control of the controllable electronic record that evidences the
controllable account or controllable payment intangible; or
(2) except as provided in Subsection (b) of this Section, a person that formerly had
control of the controllable electronic record.
(b) Content and effect of notification. Subject to Subsection (d) of this Section, the
account debtor may not discharge its obligation by paying a person that formerly had control
of the controllable electronic record if the account debtor receives a notification that:
(1) is signed by a person that formerly had control or the person to which control was
transferred;
(2) reasonably identifies the controllable account or controllable payment intangible;
(3) notifies the account debtor that control of the controllable electronic record that
evidences the controllable account or controllable payment intangible was transferred;
(4) identifies the transferee, in any reasonable way, including by name, identifying
number, cryptographic key, office, or account number; and
(5) provides a commercially reasonable method by which the account debtor is to pay
the transferee.
(c) Discharge following effective notification. After receipt of a notification that
complies with Subsection (b) of this Section, the account debtor may discharge its obligation
by paying in accordance with the notification and may not discharge the obligation by paying
a person that formerly had control.
(d) When notification ineffective. Subject to Subsection (h) of this Section,
notification is ineffective under Subsection (b) of this Section:
(1) unless, before the notification is sent, the account debtor and the person that, at
that time, had control of the controllable electronic record that evidences the controllable
account or controllable payment intangible agree in a signed record to a commercially
reasonable method by which a person may furnish reasonable proof that control has been
transferred;
(2) to the extent an agreement between the account debtor and 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 Chapter; or
(3) at the option of the account debtor, if the notification notifies the account debtor
to:
(A) divide a payment;
(B) make less than the full amount of an installment or other periodic payment; or
(C) pay any part of a payment by more than one method or to more than one person.
(e) Proof of transfer of control. Subject to Subsection (h) of this Section, if requested
by the account debtor, the person giving the notification under Subsection (b) of this Section
seasonably shall furnish reasonable proof, using the method in the agreement referred to in
Paragraph (d)(1) of this Section, that control of the controllable electronic record has been
transferred. Unless the person complies with the request, the account debtor may discharge
its obligation by paying a person that formerly had control, even if the account debtor has
received a notification under Subsection (b) of this Section.
(f) What constitutes reasonable proof. A person furnishes reasonable proof under
Subsection (e) of this Section that control has been transferred if the person demonstrates,
using the method in the agreement referred to in Paragraph (d)(1) of this Section, that the
transferee has the power to:
(1) avail itself of substantially all the benefit from the controllable electronic record;
(2) prevent others from availing themselves of substantially all the benefit from the
controllable electronic record; and
(3) transfer the powers specified in Paragraphs (1) and (2) of this Subsection to
another person.
(g) Rights not waivable. Subject to Subsection (h) of this Section, an account debtor
may not waive or vary its rights under Paragraph (d)(1) and Subsection (e) of this Section or
its option under Paragraph (d)(3) of this Section.
(h) Rule for individual under other law. This Section is subject to law other than this
Chapter 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.

Legislative History

Acts 2024, No. 773, §1.