State Codes and Statutes

Statutes > California > Com > 9401-9409

COMMERCIAL CODE
SECTION 9401-9409



9401.  (a) Except as otherwise provided in subdivision (b) and in
Sections 9406, 9407, 9408, and 9409, whether a debtor's rights in
collateral may be voluntarily or involuntarily transferred is
governed by law other than this division.
   (b) An agreement between the debtor and secured party which
prohibits a transfer of the debtor's rights in collateral or makes
the transfer a default does not prevent the transfer from taking
effect.


9402.  The existence of a security interest, agricultural lien, or
authority given to a debtor to dispose of or use collateral, without
more, does not subject a secured party to liability in contract or
tort for the debtor's acts or omissions.



9403.  (a) In this section, "value" has the meaning provided in
subdivision (a) of Section 3303.
   (b) Except as otherwise provided in this section, an agreement
between an account debtor and an assignor not to assert against an
assignee any claim or defense that the account debtor may have
against the assignor is enforceable by an assignee that takes an
assignment that satisfies all of the following conditions:
   (1) It is taken for value.
   (2) It is taken in good faith.
   (3) It is taken without notice of a claim of a property or
possessory right to the property assigned.
   (4) It is taken without notice of a defense or claim in recoupment
of the type that may be asserted against a person entitled to
enforce a negotiable instrument under subdivision (a) of Section
3305.
   (c) Subdivision (b) does not apply to defenses of a type that may
be asserted against a holder in due course of a negotiable instrument
under subdivision (b) of Section 3305.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the rights of an
assignee are subject to claims or defenses that the account debtor
could assert against the original obligee, and the record does not
include such a statement, then both of the following apply:
   (1) The record has the same effect as if the record included such
a statement.
   (2) The account debtor may assert against an assignee those claims
and defenses that would have been available if the record included
such a statement.
   (e) This section is subject to law other than this division 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.
   (f) Except as otherwise provided in subdivision (d), this section
does not displace law other than this division which gives effect to
an agreement by an account debtor not to assert a claim or defense
against an assignee.



9404.  (a) Unless an account debtor has made an enforceable
agreement not to assert defenses or claims, and subject to
subdivisions (b) to (e), inclusive, the rights of an assignee are
subject to both of the following:
   (1) All terms of the agreement between the account debtor and
assignor and any defense or claim in recoupment arising from the
transaction that gave rise to the contract.
   (2) Any other defense or claim of the account debtor against the
assignor which accrues before the account debtor receives a
notification of the assignment authenticated by the assignor or the
assignee.
   (b) Subject to subdivision (c) and except as otherwise provided in
subdivision (d), the claim of an account debtor against an assignor
may be asserted against an assignee under subdivision (a) only to
reduce the amount the account debtor owes.
   (c) This section is subject to law other than this division 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.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the account debtor's
recovery against an assignee with respect to claims and defenses
against the assignor may not exceed amounts paid by the account
debtor under the record, and the record does not include such a
statement, the extent to which a claim of an account debtor against
the assignor may be asserted against an assignee is determined as if
the record included such a statement.
   (e) This section does not apply to an assignment of a health care
insurance receivable.


9405.  (a) A modification of or substitution for an assigned
contract is effective against an assignee if made in good faith. The
assignee acquires corresponding rights under the modified or
substituted contract. The assignment may provide that the
modification or substitution is a breach of contract by the assignor.
This subdivision is subject to subdivisions (b) to (d), inclusive.
   (b) Subdivision (a) applies to the extent that either of the
following apply:
   (1) The right to payment or a part thereof under an assigned
contract has not been fully earned by performance.
   (2) The right to payment or a part thereof has been fully earned
by performance and the account debtor has not received notification
of the assignment under subdivision (a) of Section 9406.
   (c) This section is subject to law other than this division 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.
   (d) This section does not apply to an assignment of a health care
insurance receivable.


9406.  (a) Subject to subdivisions (b) to (i), inclusive, 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, authenticated 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.
   (b) Subject to subdivision (h), notification is ineffective under
subdivision (a) as follows:
   (1) If it does not reasonably identify the rights assigned.
   (2) 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 division.
   (3) At the option of an account debtor, if the notification
notifies the account debtor to make less than the full amount of any
installment or other periodic payment to the assignee, even if any of
the following conditions is satisfied:
   (A) Only a portion of the account, chattel paper, or payment
intangible has been assigned to that assignee.
   (B) A portion has been assigned to another assignee.
   (C) The account debtor knows that the assignment to that assignee
is limited.
   (c) Subject to subdivision (h), 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
subdivision (a).
   (d) Except as otherwise provided in subdivision (e) and in
Sections 9407 and 10303, and subject to subdivision (h), a term in an
agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it does either of
the following:
   (1) Prohibits, restricts, or requires the consent of the account
debtor or person obligated on 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.
   (2) 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.
   (e) Subdivision (d) does not apply to the sale of a payment
intangible or promissory note.
   (f) Except as otherwise provided in Sections 9407 and 10303, and
subject to subdivisions (h) and (i), 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 does either of the following:
   (1) 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.
   (2) 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.
   (g) Subject to subdivision (h), an account debtor may not waive or
vary its option under paragraph (3) of subdivision (b).
   (h) This section is subject to law other than this division 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.
   (i) This section does not apply to an assignment of a health care
insurance receivable.
   (j) Subdivision (f) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (f) is inconsistent with those laws.



9407.  (a) Except as otherwise provided in subdivision (b), a term
in a lease agreement is ineffective to the extent that it does either
of the following:
   (1) Prohibits, restricts, or requires the consent of a party to
the lease to the assignment or transfer of, or the creation,
attachment, perfection, or enforcement of a security interest in, an
interest of a party under the lease contract or in the lessor's
residual interest in the goods.
   (2) 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 lease.
   (b) Except as otherwise provided in subdivision (g) of Section
10303, a term described in paragraph (2) of subdivision (a) is
effective to the extent that there is either of the following:
   (1) A transfer by the lessee of the lessee's right of possession
or use of the goods in violation of the term.
   (2) A delegation of a material performance of either party to the
lease contract in violation of the term.
   (c) The creation, attachment, perfection, or enforcement of a
security interest in the lessor's interest under the lease contract
or the lessor's residual interest in the goods is not a transfer that
materially impairs the lessee's prospect of obtaining return
performance or materially changes the duty of or materially increases
the burden or risk imposed on the lessee within the purview of
subdivision (d) of Section 10303 unless, and then only to the extent
that, enforcement actually results in a delegation of material
performance of the lessor.



9408.  (a) Except as otherwise provided in subdivision (b), a term
in a promissory note or in an agreement between an account debtor and
a debtor that 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 the 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 does, or would do, either of
the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the 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.
   (b) Subdivision (a) 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.
   (c) 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 the 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 does, or would do, either of the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the 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.
   (d) To the extent that a term in a promissory note or in an
agreement between an account debtor and a debtor that relates to a
health care insurance receivable or general intangible or a rule of
law, statute, or regulation described in subdivision (c) would be
effective under law other than this division but is ineffective under
subdivision (a) or (c), the creation, attachment, or perfection of a
security interest in the promissory note, health care insurance
receivable, or general intangible is subject to all of the following
rules:
   (1) It is not enforceable against the person obligated on the
promissory note or the account debtor.
   (2) It does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor.
   (3) It 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.
   (4) It 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.
   (5) It 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.
   (6) It does not entitle the secured party to enforce the security
interest in the promissory note, health care insurance receivable, or
general intangible.
   (e) Subdivision (c) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (c) is inconsistent with those laws.



9409.  (a) A term in a letter of credit or a rule of law, statute,
regulation, custom, or practice applicable to the letter of credit
which prohibits, restricts, or requires the consent of an applicant,
issuer, or nominated person to a beneficiary's assignment of or
creation of a security interest in a letter-of-credit right is
ineffective to the extent that the term or rule of law, statute,
regulation, custom, or practice does, or would do, either of the
following:
   (1) It would impair the creation, attachment, or perfection of a
security interest in the letter-of-credit right.
   (2) It provides that the assignment or the 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 letter-of-credit right.
   (b) To the extent that a term in a letter of credit is ineffective
under subdivision (a) but would be effective under law other than
this division or a custom or practice applicable to the letter of
credit, to the transfer of a right to draw or otherwise demand
performance under the letter of credit, or to the assignment of a
right to proceeds of the letter of credit, all of the following rules
apply with respect to the creation, attachment, or perfection of a
security interest in the letter-of-credit right:
   (1) It is not enforceable against the applicant, issuer, nominated
person, or transferee beneficiary.
   (2) It imposes no duties or obligations on the applicant, issuer,
nominated person, or transferee beneficiary.
   (3) It does not require the applicant, issuer, nominated person,
or transferee beneficiary to recognize the security interest, pay or
render performance to the secured party, or accept payment or other
performance from the secured party.

State Codes and Statutes

Statutes > California > Com > 9401-9409

COMMERCIAL CODE
SECTION 9401-9409



9401.  (a) Except as otherwise provided in subdivision (b) and in
Sections 9406, 9407, 9408, and 9409, whether a debtor's rights in
collateral may be voluntarily or involuntarily transferred is
governed by law other than this division.
   (b) An agreement between the debtor and secured party which
prohibits a transfer of the debtor's rights in collateral or makes
the transfer a default does not prevent the transfer from taking
effect.


9402.  The existence of a security interest, agricultural lien, or
authority given to a debtor to dispose of or use collateral, without
more, does not subject a secured party to liability in contract or
tort for the debtor's acts or omissions.



9403.  (a) In this section, "value" has the meaning provided in
subdivision (a) of Section 3303.
   (b) Except as otherwise provided in this section, an agreement
between an account debtor and an assignor not to assert against an
assignee any claim or defense that the account debtor may have
against the assignor is enforceable by an assignee that takes an
assignment that satisfies all of the following conditions:
   (1) It is taken for value.
   (2) It is taken in good faith.
   (3) It is taken without notice of a claim of a property or
possessory right to the property assigned.
   (4) It is taken without notice of a defense or claim in recoupment
of the type that may be asserted against a person entitled to
enforce a negotiable instrument under subdivision (a) of Section
3305.
   (c) Subdivision (b) does not apply to defenses of a type that may
be asserted against a holder in due course of a negotiable instrument
under subdivision (b) of Section 3305.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the rights of an
assignee are subject to claims or defenses that the account debtor
could assert against the original obligee, and the record does not
include such a statement, then both of the following apply:
   (1) The record has the same effect as if the record included such
a statement.
   (2) The account debtor may assert against an assignee those claims
and defenses that would have been available if the record included
such a statement.
   (e) This section is subject to law other than this division 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.
   (f) Except as otherwise provided in subdivision (d), this section
does not displace law other than this division which gives effect to
an agreement by an account debtor not to assert a claim or defense
against an assignee.



9404.  (a) Unless an account debtor has made an enforceable
agreement not to assert defenses or claims, and subject to
subdivisions (b) to (e), inclusive, the rights of an assignee are
subject to both of the following:
   (1) All terms of the agreement between the account debtor and
assignor and any defense or claim in recoupment arising from the
transaction that gave rise to the contract.
   (2) Any other defense or claim of the account debtor against the
assignor which accrues before the account debtor receives a
notification of the assignment authenticated by the assignor or the
assignee.
   (b) Subject to subdivision (c) and except as otherwise provided in
subdivision (d), the claim of an account debtor against an assignor
may be asserted against an assignee under subdivision (a) only to
reduce the amount the account debtor owes.
   (c) This section is subject to law other than this division 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.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the account debtor's
recovery against an assignee with respect to claims and defenses
against the assignor may not exceed amounts paid by the account
debtor under the record, and the record does not include such a
statement, the extent to which a claim of an account debtor against
the assignor may be asserted against an assignee is determined as if
the record included such a statement.
   (e) This section does not apply to an assignment of a health care
insurance receivable.


9405.  (a) A modification of or substitution for an assigned
contract is effective against an assignee if made in good faith. The
assignee acquires corresponding rights under the modified or
substituted contract. The assignment may provide that the
modification or substitution is a breach of contract by the assignor.
This subdivision is subject to subdivisions (b) to (d), inclusive.
   (b) Subdivision (a) applies to the extent that either of the
following apply:
   (1) The right to payment or a part thereof under an assigned
contract has not been fully earned by performance.
   (2) The right to payment or a part thereof has been fully earned
by performance and the account debtor has not received notification
of the assignment under subdivision (a) of Section 9406.
   (c) This section is subject to law other than this division 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.
   (d) This section does not apply to an assignment of a health care
insurance receivable.


9406.  (a) Subject to subdivisions (b) to (i), inclusive, 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, authenticated 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.
   (b) Subject to subdivision (h), notification is ineffective under
subdivision (a) as follows:
   (1) If it does not reasonably identify the rights assigned.
   (2) 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 division.
   (3) At the option of an account debtor, if the notification
notifies the account debtor to make less than the full amount of any
installment or other periodic payment to the assignee, even if any of
the following conditions is satisfied:
   (A) Only a portion of the account, chattel paper, or payment
intangible has been assigned to that assignee.
   (B) A portion has been assigned to another assignee.
   (C) The account debtor knows that the assignment to that assignee
is limited.
   (c) Subject to subdivision (h), 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
subdivision (a).
   (d) Except as otherwise provided in subdivision (e) and in
Sections 9407 and 10303, and subject to subdivision (h), a term in an
agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it does either of
the following:
   (1) Prohibits, restricts, or requires the consent of the account
debtor or person obligated on 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.
   (2) 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.
   (e) Subdivision (d) does not apply to the sale of a payment
intangible or promissory note.
   (f) Except as otherwise provided in Sections 9407 and 10303, and
subject to subdivisions (h) and (i), 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 does either of the following:
   (1) 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.
   (2) 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.
   (g) Subject to subdivision (h), an account debtor may not waive or
vary its option under paragraph (3) of subdivision (b).
   (h) This section is subject to law other than this division 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.
   (i) This section does not apply to an assignment of a health care
insurance receivable.
   (j) Subdivision (f) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (f) is inconsistent with those laws.



9407.  (a) Except as otherwise provided in subdivision (b), a term
in a lease agreement is ineffective to the extent that it does either
of the following:
   (1) Prohibits, restricts, or requires the consent of a party to
the lease to the assignment or transfer of, or the creation,
attachment, perfection, or enforcement of a security interest in, an
interest of a party under the lease contract or in the lessor's
residual interest in the goods.
   (2) 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 lease.
   (b) Except as otherwise provided in subdivision (g) of Section
10303, a term described in paragraph (2) of subdivision (a) is
effective to the extent that there is either of the following:
   (1) A transfer by the lessee of the lessee's right of possession
or use of the goods in violation of the term.
   (2) A delegation of a material performance of either party to the
lease contract in violation of the term.
   (c) The creation, attachment, perfection, or enforcement of a
security interest in the lessor's interest under the lease contract
or the lessor's residual interest in the goods is not a transfer that
materially impairs the lessee's prospect of obtaining return
performance or materially changes the duty of or materially increases
the burden or risk imposed on the lessee within the purview of
subdivision (d) of Section 10303 unless, and then only to the extent
that, enforcement actually results in a delegation of material
performance of the lessor.



9408.  (a) Except as otherwise provided in subdivision (b), a term
in a promissory note or in an agreement between an account debtor and
a debtor that 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 the 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 does, or would do, either of
the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the 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.
   (b) Subdivision (a) 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.
   (c) 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 the 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 does, or would do, either of the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the 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.
   (d) To the extent that a term in a promissory note or in an
agreement between an account debtor and a debtor that relates to a
health care insurance receivable or general intangible or a rule of
law, statute, or regulation described in subdivision (c) would be
effective under law other than this division but is ineffective under
subdivision (a) or (c), the creation, attachment, or perfection of a
security interest in the promissory note, health care insurance
receivable, or general intangible is subject to all of the following
rules:
   (1) It is not enforceable against the person obligated on the
promissory note or the account debtor.
   (2) It does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor.
   (3) It 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.
   (4) It 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.
   (5) It 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.
   (6) It does not entitle the secured party to enforce the security
interest in the promissory note, health care insurance receivable, or
general intangible.
   (e) Subdivision (c) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (c) is inconsistent with those laws.



9409.  (a) A term in a letter of credit or a rule of law, statute,
regulation, custom, or practice applicable to the letter of credit
which prohibits, restricts, or requires the consent of an applicant,
issuer, or nominated person to a beneficiary's assignment of or
creation of a security interest in a letter-of-credit right is
ineffective to the extent that the term or rule of law, statute,
regulation, custom, or practice does, or would do, either of the
following:
   (1) It would impair the creation, attachment, or perfection of a
security interest in the letter-of-credit right.
   (2) It provides that the assignment or the 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 letter-of-credit right.
   (b) To the extent that a term in a letter of credit is ineffective
under subdivision (a) but would be effective under law other than
this division or a custom or practice applicable to the letter of
credit, to the transfer of a right to draw or otherwise demand
performance under the letter of credit, or to the assignment of a
right to proceeds of the letter of credit, all of the following rules
apply with respect to the creation, attachment, or perfection of a
security interest in the letter-of-credit right:
   (1) It is not enforceable against the applicant, issuer, nominated
person, or transferee beneficiary.
   (2) It imposes no duties or obligations on the applicant, issuer,
nominated person, or transferee beneficiary.
   (3) It does not require the applicant, issuer, nominated person,
or transferee beneficiary to recognize the security interest, pay or
render performance to the secured party, or accept payment or other
performance from the secured party.


State Codes and Statutes

State Codes and Statutes

Statutes > California > Com > 9401-9409

COMMERCIAL CODE
SECTION 9401-9409



9401.  (a) Except as otherwise provided in subdivision (b) and in
Sections 9406, 9407, 9408, and 9409, whether a debtor's rights in
collateral may be voluntarily or involuntarily transferred is
governed by law other than this division.
   (b) An agreement between the debtor and secured party which
prohibits a transfer of the debtor's rights in collateral or makes
the transfer a default does not prevent the transfer from taking
effect.


9402.  The existence of a security interest, agricultural lien, or
authority given to a debtor to dispose of or use collateral, without
more, does not subject a secured party to liability in contract or
tort for the debtor's acts or omissions.



9403.  (a) In this section, "value" has the meaning provided in
subdivision (a) of Section 3303.
   (b) Except as otherwise provided in this section, an agreement
between an account debtor and an assignor not to assert against an
assignee any claim or defense that the account debtor may have
against the assignor is enforceable by an assignee that takes an
assignment that satisfies all of the following conditions:
   (1) It is taken for value.
   (2) It is taken in good faith.
   (3) It is taken without notice of a claim of a property or
possessory right to the property assigned.
   (4) It is taken without notice of a defense or claim in recoupment
of the type that may be asserted against a person entitled to
enforce a negotiable instrument under subdivision (a) of Section
3305.
   (c) Subdivision (b) does not apply to defenses of a type that may
be asserted against a holder in due course of a negotiable instrument
under subdivision (b) of Section 3305.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the rights of an
assignee are subject to claims or defenses that the account debtor
could assert against the original obligee, and the record does not
include such a statement, then both of the following apply:
   (1) The record has the same effect as if the record included such
a statement.
   (2) The account debtor may assert against an assignee those claims
and defenses that would have been available if the record included
such a statement.
   (e) This section is subject to law other than this division 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.
   (f) Except as otherwise provided in subdivision (d), this section
does not displace law other than this division which gives effect to
an agreement by an account debtor not to assert a claim or defense
against an assignee.



9404.  (a) Unless an account debtor has made an enforceable
agreement not to assert defenses or claims, and subject to
subdivisions (b) to (e), inclusive, the rights of an assignee are
subject to both of the following:
   (1) All terms of the agreement between the account debtor and
assignor and any defense or claim in recoupment arising from the
transaction that gave rise to the contract.
   (2) Any other defense or claim of the account debtor against the
assignor which accrues before the account debtor receives a
notification of the assignment authenticated by the assignor or the
assignee.
   (b) Subject to subdivision (c) and except as otherwise provided in
subdivision (d), the claim of an account debtor against an assignor
may be asserted against an assignee under subdivision (a) only to
reduce the amount the account debtor owes.
   (c) This section is subject to law other than this division 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.
   (d) In a consumer transaction, if a record evidences the account
debtor's obligation, law other than this division requires that the
record include a statement to the effect that the account debtor's
recovery against an assignee with respect to claims and defenses
against the assignor may not exceed amounts paid by the account
debtor under the record, and the record does not include such a
statement, the extent to which a claim of an account debtor against
the assignor may be asserted against an assignee is determined as if
the record included such a statement.
   (e) This section does not apply to an assignment of a health care
insurance receivable.


9405.  (a) A modification of or substitution for an assigned
contract is effective against an assignee if made in good faith. The
assignee acquires corresponding rights under the modified or
substituted contract. The assignment may provide that the
modification or substitution is a breach of contract by the assignor.
This subdivision is subject to subdivisions (b) to (d), inclusive.
   (b) Subdivision (a) applies to the extent that either of the
following apply:
   (1) The right to payment or a part thereof under an assigned
contract has not been fully earned by performance.
   (2) The right to payment or a part thereof has been fully earned
by performance and the account debtor has not received notification
of the assignment under subdivision (a) of Section 9406.
   (c) This section is subject to law other than this division 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.
   (d) This section does not apply to an assignment of a health care
insurance receivable.


9406.  (a) Subject to subdivisions (b) to (i), inclusive, 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, authenticated 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.
   (b) Subject to subdivision (h), notification is ineffective under
subdivision (a) as follows:
   (1) If it does not reasonably identify the rights assigned.
   (2) 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 division.
   (3) At the option of an account debtor, if the notification
notifies the account debtor to make less than the full amount of any
installment or other periodic payment to the assignee, even if any of
the following conditions is satisfied:
   (A) Only a portion of the account, chattel paper, or payment
intangible has been assigned to that assignee.
   (B) A portion has been assigned to another assignee.
   (C) The account debtor knows that the assignment to that assignee
is limited.
   (c) Subject to subdivision (h), 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
subdivision (a).
   (d) Except as otherwise provided in subdivision (e) and in
Sections 9407 and 10303, and subject to subdivision (h), a term in an
agreement between an account debtor and an assignor or in a
promissory note is ineffective to the extent that it does either of
the following:
   (1) Prohibits, restricts, or requires the consent of the account
debtor or person obligated on 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.
   (2) 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.
   (e) Subdivision (d) does not apply to the sale of a payment
intangible or promissory note.
   (f) Except as otherwise provided in Sections 9407 and 10303, and
subject to subdivisions (h) and (i), 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 does either of the following:
   (1) 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.
   (2) 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.
   (g) Subject to subdivision (h), an account debtor may not waive or
vary its option under paragraph (3) of subdivision (b).
   (h) This section is subject to law other than this division 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.
   (i) This section does not apply to an assignment of a health care
insurance receivable.
   (j) Subdivision (f) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (f) is inconsistent with those laws.



9407.  (a) Except as otherwise provided in subdivision (b), a term
in a lease agreement is ineffective to the extent that it does either
of the following:
   (1) Prohibits, restricts, or requires the consent of a party to
the lease to the assignment or transfer of, or the creation,
attachment, perfection, or enforcement of a security interest in, an
interest of a party under the lease contract or in the lessor's
residual interest in the goods.
   (2) 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 lease.
   (b) Except as otherwise provided in subdivision (g) of Section
10303, a term described in paragraph (2) of subdivision (a) is
effective to the extent that there is either of the following:
   (1) A transfer by the lessee of the lessee's right of possession
or use of the goods in violation of the term.
   (2) A delegation of a material performance of either party to the
lease contract in violation of the term.
   (c) The creation, attachment, perfection, or enforcement of a
security interest in the lessor's interest under the lease contract
or the lessor's residual interest in the goods is not a transfer that
materially impairs the lessee's prospect of obtaining return
performance or materially changes the duty of or materially increases
the burden or risk imposed on the lessee within the purview of
subdivision (d) of Section 10303 unless, and then only to the extent
that, enforcement actually results in a delegation of material
performance of the lessor.



9408.  (a) Except as otherwise provided in subdivision (b), a term
in a promissory note or in an agreement between an account debtor and
a debtor that 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 the 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 does, or would do, either of
the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the 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.
   (b) Subdivision (a) 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.
   (c) 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 the 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 does, or would do, either of the following:
   (1) It would impair the creation, attachment, or perfection of a
security interest.
   (2) It provides that the assignment or transfer or the 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.
   (d) To the extent that a term in a promissory note or in an
agreement between an account debtor and a debtor that relates to a
health care insurance receivable or general intangible or a rule of
law, statute, or regulation described in subdivision (c) would be
effective under law other than this division but is ineffective under
subdivision (a) or (c), the creation, attachment, or perfection of a
security interest in the promissory note, health care insurance
receivable, or general intangible is subject to all of the following
rules:
   (1) It is not enforceable against the person obligated on the
promissory note or the account debtor.
   (2) It does not impose a duty or obligation on the person
obligated on the promissory note or the account debtor.
   (3) It 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.
   (4) It 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.
   (5) It 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.
   (6) It does not entitle the secured party to enforce the security
interest in the promissory note, health care insurance receivable, or
general intangible.
   (e) Subdivision (c) does not apply to an assignment or transfer
of, or the creation, attachment, perfection, or enforcement of a
security interest in, a claim or right to receive compensation for
injuries or sickness as described in paragraph (1) or (2) of
subdivision (a) of Section 104 of Title 26 of the United States Code,
as amended, or a claim or right to receive benefits under a special
needs trust as described in paragraph (4) of subdivision (d) of
Section 1396p of Title 42 of the United States Code, as amended, to
the extent that subdivision (c) is inconsistent with those laws.



9409.  (a) A term in a letter of credit or a rule of law, statute,
regulation, custom, or practice applicable to the letter of credit
which prohibits, restricts, or requires the consent of an applicant,
issuer, or nominated person to a beneficiary's assignment of or
creation of a security interest in a letter-of-credit right is
ineffective to the extent that the term or rule of law, statute,
regulation, custom, or practice does, or would do, either of the
following:
   (1) It would impair the creation, attachment, or perfection of a
security interest in the letter-of-credit right.
   (2) It provides that the assignment or the 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 letter-of-credit right.
   (b) To the extent that a term in a letter of credit is ineffective
under subdivision (a) but would be effective under law other than
this division or a custom or practice applicable to the letter of
credit, to the transfer of a right to draw or otherwise demand
performance under the letter of credit, or to the assignment of a
right to proceeds of the letter of credit, all of the following rules
apply with respect to the creation, attachment, or perfection of a
security interest in the letter-of-credit right:
   (1) It is not enforceable against the applicant, issuer, nominated
person, or transferee beneficiary.
   (2) It imposes no duties or obligations on the applicant, issuer,
nominated person, or transferee beneficiary.
   (3) It does not require the applicant, issuer, nominated person,
or transferee beneficiary to recognize the security interest, pay or
render performance to the secured party, or accept payment or other
performance from the secured party.