§ 9-406 — Discharge of Account Debtor; Notification of Assignment; Identification and Proof of Assignment; Restrictions on Assignment of Accounts, ...

*Section 9--406. Discharge of Account Debtor; Notification of\n Assignment; Identification and Proof of Assignment;\n Restrictions on Assignment of Accounts, Chattel Paper,\n Payment Intangibles, and Promissory Notes Ineffective.\n (a) Discharge of account debtor; effect of notification. Subject to\nsubsections (b) through (h), an account debtor on an account, chattel\npaper, or a payment intangible may discharge its obligation by paying\nthe assignor until, but not after, the account debtor receives a\nnotification, authenticated by the assignor or the assignee, that the\namount due or to become due has been assigned and that payment is to be\nmade to the assignee. After receipt of the notification, the account\ndebtor may discharge its obligation by paying the assignee and may not\ndischarge the obligation by paying the assignor.\n (b) When notification ineffective. Subject to subsection (g),\nnotification is ineffective under subsection (a):\n (1) if it does not reasonably identify the rights assigned;\n (2) to the extent that an agreement between an account debtor and\n a seller of a payment intangible limits the account debtor's\n duty to pay a person other than the seller and the limitation\n is effective under law other than this article; or\n (3) at the option of an account debtor, if the notification\n notifies the account debtor to make less than the full amount\n of any installment or other periodic payment to the assignee,\n even if:\n (A) only a portion of the account, chattel paper, or payment\n intangible has been assigned to that assignee;\n (B) a portion has been assigned to another assignee; or\n (C) the account debtor knows that the assignment to that\n assignee is limited.\n (c) Proof of assignment. Subject to subsection (g), if requested by\nthe account debtor, an assignee shall seasonably furnish reasonable\nproof that the assignment has been made. Unless the assignee complies,\nthe account debtor may discharge its obligation by paying the assignor,\neven if the account debtor has received a notification under subsection\n(a).\n (d) Term restricting assignment generally ineffective. Except as\notherwise provided in subsection (e) and Sections 2-A-303 and 9--407,\nand subject to subsection (g), a term in an agreement between an account\ndebtor and an assignor or in a promissory note is ineffective to the\nextent that it:\n (1) prohibits, restricts, or requires the consent of the account\n debtor or person obligated on the promissory note to the\n assignment or transfer of, or the creation, attachment,\n perfection, or enforcement of a security interest in, the\n account, chattel paper, payment intangible, or promissory\n note; or\n (2) provides that the assignment or transfer or the creation,\n attachment, perfection, or enforcement of the security\n interest may give rise to a default, breach, right of\n recoupment, claim, defense, termination, right of\n termination, or remedy under the account, chattel paper,\n payment intangible, or promissory note.\n (e) Inapplicability of subsection (d) to certain sales. Subsection (d)\ndoes not apply to the sale of a payment intangible or promissory note.\n (f) Subsection (b)(3) not waivable. Subject to subsection (g), an\naccount debtor may not waive or vary its option under subsection (b)(3).\n (g) Rule for individual under other law. This section is subject to a\nrule of law, statute, rule or regulation other than this article which\nestablishes a different rule for an account debtor who is an individual\nand who incurred the obligation primarily for personal, family, or\nhousehold purposes.\n (h) Inapplicability. This section does not apply to:\n (1) an assignment of a health care insurance receivable to the\n extent such assignment conflicts with other law or the\n parties have otherwise agreed in writing that such receivable\n is non-assignable,\n (2) a claim or right to receive compensation for injuries or\n sickness as described in 26 U.S.C. § 104(a)(1) and (2), as\n amended from time to time, or\n (3) a claim or right to receive benefits under a special needs\n trust as described in 42 U.S.C. § 1396p (d)(4), as amended\n from time to time.\n * NB Effective until June 3, 2026\n* Section 9--406. Discharge of Account Debtor; Notification of\n Assignment; Identification and Proof of Assignment;\n Restrictions on Assignment of Accounts, Chattel Paper,\n Payment Intangibles, and Promissory Notes Ineffective.\n(a) Discharge of account debtor; effect of notification. Subject to\nsubsections (b) through (i), an account debtor on an account, chattel\npaper, or a payment intangible may discharge its obligation by paying\nthe assignor until, but not after, the account debtor receives a\nnotification, signed by the assignor or the assignee, that the amount\ndue or to become due has been assigned and that payment is to be made to\nthe assignee. After receipt of the notification, the account debtor may\ndischarge its obligation by paying the assignee and may not discharge\nthe obligation by paying the assignor.\n(b) When notification ineffective. Subject to subsections (g) and (i),\nnotification is ineffective under subsection (a):\n (1) if it does not reasonably identify the rights assigned;\n (2) to the extent that an agreement between an account debtor and\n a seller of a payment intangible limits the account debtor's\n duty to pay a person other than the seller and the limitation\n is effective under law other than this article; or\n (3) at the option of an account debtor, if the notification\n notifies the account debtor to make less than the full amount\n of any installment or other periodic payment to the assignee,\n even if:\n (A) only a portion of the account, chattel paper, or payment\n intangible has been assigned to that assignee;\n (B) a portion has been assigned to another assignee; or\n (C) the account debtor knows that the assignment to that\n assignee is limited.\n(c) Proof of assignment. Subject to subsections (g) and (i), if\nrequested by the account debtor, an assignee shall seasonably furnish\nreasonable proof that the assignment has been made. Unless the assignee\ncomplies, the account debtor may discharge its obligation by paying the\nassignor, even if the account debtor has received a notification under\nsubsection (a).\n(d) Term restricting assignment generally ineffective. For purposes of\nthis subsection, "promissory note" includes a negotiable instrument that\nevidences chattel paper. Except as otherwise provided in subsection (e)\nand Sections 2-A-303 and 9--407, and subject to subsection (g), a term\nin an agreement between an account debtor and an assignor or in a\npromissory note is ineffective to the extent that it:\n (1) prohibits, restricts, or requires the consent of the account\n debtor or person obligated on the promissory note to the\n assignment or transfer of, or the creation, attachment,\n perfection, or enforcement of a security interest in, the\n account, chattel paper, payment intangible, or promissory\n note; or\n (2) provides that the assignment or transfer or the creation,\n attachment, perfection, or enforcement of the security\n interest may give rise to a default, breach, right of\n recoupment, claim, defense, termination, right of\n termination, or remedy under the account, chattel paper,\n payment intangible, or promissory note.\n(e) Inapplicability of subsection (d) to certain sales. Subsection (d)\ndoes not apply to the sale of a payment intangible or promissory note.\n(f) Subsection (b)(3) not waivable. Subject to subsections (g) and (i),\nan account debtor may not waive or vary its option under subsection\n(b)(3).\n(g) Rule for individual under other law. This section is subject to a\nrule of law, statute, rule or regulation other than this article which\nestablishes a different rule for an account debtor who is an individual\nand who incurred the obligation primarily for personal, family, or\nhousehold purposes.\n (h) Inapplicability. This section does not apply to:\n (1) an assignment of a health care insurance receivable to the\n extent such assignment conflicts with other law or the\n parties have otherwise agreed in writing that such receivable\n is non-assignable,\n (2) a claim or right to receive compensation for injuries or\n sickness as described in 26 U.S.C. § 104(a)(1) and (2), as\n amended from time to time, or\n (3) a claim or right to receive benefits under a special needs\n trust as described in 42 U.S.C. § 1396p (d)(4), as amended\n from time to time.\n(i) Inapplicability of certain subsections. Subsections (a), (b), (c)\nand (f) do not apply to a controllable account or controllable payment\nintangible.\n * NB Effective June 3, 2026\n