§ 12-106 — Discharge of Account Debtor on Controllable Account or Controllable Payment Intangible

* Section 12--106. Discharge of Account Debtor on Controllable Account\nor Controllable Payment Intangible.\n (a) Discharge of account debtor. An account debtor on a controllable\naccount or controllable payment intangible may discharge its obligation\nby paying:\n (1) the person having control of the controllable electronic record\nthat evidences the controllable account or controllable payment\nintangible; or\n (2) except as provided in subsection (b), a person that formerly had\ncontrol of the controllable electronic record.\n (b) Content and effect of notification. Subject to subsection (d), the\naccount debtor may not discharge its obligation by paying a person that\nformerly had control of the controllable electronic record if the\naccount debtor receives a notification that:\n (1) is signed by a person that formerly had control or the person to\nwhich control was transferred;\n (2) reasonably identifies the controllable account or controllable\npayment intangible;\n (3) notifies the account debtor that control of the controllable\nelectronic record that evidences the controllable account or\ncontrollable payment intangible was transferred;\n (4) identifies the transferee, in any reasonable way, including by\nname, identifying number, cryptographic key, office, or account number;\nand\n (5) provides a commercially reasonable method by which the account\ndebtor is to pay the transferee.\n (c) Discharge following effective notification. After receipt of a\nnotification that complies with subsection (b), the account debtor may\ndischarge its obligation by paying in accordance with the notification\nand may not discharge the obligation by paying a person that formerly\nhad control.\n (d) When notification ineffective. Subject to subsection (h),\nnotification is ineffective under subsection (b):\n (1) unless, before the notification is sent, the account debtor and\nthe person that, at that time, had control of the controllable\nelectronic record that evidences the controllable account or\ncontrollable payment intangible agree in a signed record to a\ncommercially reasonable method by which a person may furnish reasonable\nproof that control has been transferred;\n (2) to the extent an agreement between the account debtor and seller\nof a payment intangible limits the account debtor's duty to pay a person\nother than the seller and the limitation is effective under law other\nthan this article; or\n (3) at the option of the account debtor, if the notification notifies\nthe account debtor to:\n (A) divide a payment;\n (B) make less than the full amount of an installment or other periodic\npayment; or\n (C) pay any part of a payment by more than one method or to more than\none person.\n (e) Proof of transfer of control. Subject to subsection (h), if\nrequested by the account debtor, the person giving the notification\nunder subsection (b) seasonably shall furnish reasonable proof, using\nthe method in the agreement referred to in subsection (d)(1), that\ncontrol of the controllable electronic record has been transferred.\nUnless the person complies with the request, the account debtor may\ndischarge its obligation by paying a person that formerly had control,\neven if the account debtor has received a notification under subsection\n(b).\n (f) What constitutes reasonable proof. A person furnishes reasonable\nproof under subsection (e) that control has been transferred if the\nperson demonstrates, using the method in the agreement referred to in\nsubsection (d)(1), that the transferee has the power to:\n (1) avail itself of substantially all the benefit from the\ncontrollable electronic record;\n (2) prevent others from availing themselves of substantially all the\nbenefit from the controllable electronic record; and\n (3) transfer the powers specified in paragraphs (1) and (2) to another\nperson.\n (g) Rights not waivable. Subject to subsection (h), an account debtor\nmay not waive or vary its rights under subsections (d)(1) and (e) or its\noption under subsection (d)(3).\n (h) Rule for individual under other law. This section is subject to\nlaw other than this article which establishes a different rule for an\naccount debtor who is an individual and who incurred the obligation\nprimarily for personal, family, or household purposes.\n * NB Effective June 3, 2026\n