§ 41-09-70 — (9-408) Restrictions on assignment of promissory notes, health care insurance receivables, and certain general intangibles ineffective

insurance receivables, and certain general intangibles ineffective.
1. Except as otherwise provided in subsections 2 and 6, 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:
a. Would impair the creation, attachment, or perfection of a security interest; or
b. Provides that the assignment, transfer, 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.
2. Subsection 1 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 41-09-107 or an
acceptance of collateral under section 41-09-115.
3. Except as otherwise provided in subsection 6, 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:
a. Would impair the creation, attachment, or perfection of a security interest; or
b. Provides that the assignment, transfer, 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.
4. 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 3 would be
effective under law other than this chapter but is ineffective under subsection 1 or 3,
the creation, attachment, or perfection of a security interest in the promissory note,
health care insurance receivable, or general intangible:
a. Is not enforceable against the person obligated on the promissory note or the
account debtor;
b. Does not impose a duty or obligation on the person obligated on the promissory
note or the account debtor;
c. 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;
d. 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;

e. 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
f. Does not entitle the secured party to enforce the security interest in the
promissory note, health care insurance receivable, or general intangible.
5. This section prevails over any inconsistent statute, rule, or regulation.
6. This section does not apply to a security interest in an ownership interest in a general
partnership, limited partnership, or limited liability company.
7. In this section, "promissory note" includes a negotiable instrument that evidences
chattel paper.