State Codes and Statutes

Statutes > North-carolina > Chapter_25 > GS_25-9-406

§25‑9‑406.  Discharge of account debtor; notification of assignment;identification and proof of assignment; restrictions on assignment of accounts,chattel paper, payment intangibles, and promissory notes ineffective.

(a)        Discharge ofaccount debtor; effect of notification. – Subject to subsections (b) through(i) of this section, an account debtor on an account, chattel paper, or apayment intangible may discharge its obligation by paying the assignor until,but not after, the account debtor receives a notification, authenticated by theassignor or the assignee, that the amount due or to become due has beenassigned and that payment is to be made to the assignee.  After receipt of thenotification, the account debtor may discharge its obligation by paying theassignee and may not discharge the obligation by paying the assignor.

(b)        When notificationineffective. – Subject to subsection (h) of this section, notification isineffective under subsection (a) of this section:

(1)        If it does notreasonably identify the rights assigned;

(2)        To the extent thatan agreement between an account debtor and a seller of a payment intangiblelimits the account debtor's duty to pay a person other than the seller and thelimitation is effective under law other than this Article; or

(3)        At the option of anaccount debtor, if the notification notifies the account debtor to make lessthan the full amount of any installment or other periodic payment to theassignee, even if:

a.         Only a portion ofthe account, chattel paper, or payment intangible has been assigned to thatassignee;

b.         A portion has beenassigned to another assignee; or

c.         The account debtorknows that the assignment to that assignee is limited.

(c)        Proof ofassignment. – Subject to subsection (h) of this section, if requested by theaccount debtor, an assignee shall seasonably furnish reasonable proof that theassignment has been made.  Unless the assignee complies, the account debtor maydischarge its obligation by paying the assignor, even if the account debtor hasreceived a notification under subsection (a) of this section.

(d)        Term restrictingassignment generally ineffective. – Except as otherwise provided in subsection(e) of this section and G.S. 25‑2A‑303 and G.S. 25‑9‑407and subject to subsection (h) of this section, a term in an agreement betweenan account debtor and an assignor or in a promissory note is ineffective to theextent that it:

(1)        Prohibits,restricts, or requires the consent of the account debtor or person obligated onthe 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; or

(2)        Provides that theassignment or transfer or the creation, attachment, perfection, or enforcementof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedy underthe account, chattel paper, payment intangible, or promissory note.

(e)        Inapplicability ofsubsection (d) to certain sales. – Subsection (d) of this section does notapply to the sale of a payment intangible or promissory note.

(f)         Legal restrictionson assignment generally ineffective. – Except as otherwise provided in G.S. 25‑2A‑303and G.S. 25‑9‑407 and subject to subsections (h) and (i) of thissection, a rule of law, statute, or regulation that prohibits, restricts, orrequires the consent of a government, governmental body or official, or accountdebtor 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:

(1)        Prohibits,restricts, or requires the consent of the government, governmental body orofficial, or account debtor to the assignment or transfer of, or the creation,attachment, perfection, or enforcement of a security interest in the account orchattel paper; or

(2)        Provides that theassignment or transfer or the creation, attachment, perfection, or enforcementof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedy underthe account or chattel paper.

(g)        Subdivision (b)(3)not waivable. – Subject to subsection (h) of this section, an account debtormay not waive or vary its option under subdivision (b)(3) of this section.

(h)        Rule for individualunder other law. – This section is subject to law other than this Article whichestablishes a different rule for an account debtor who is an individual and whoincurred the obligation primarily for personal, family, or household purposes.

(i)         Inapplicability. –This section does not apply to an assignment of a health‑care‑insurancereceivable.  Subsection (f) of this section does not apply to an assignment ortransfer of, or the creation, attachment, perfection, or enforcement of asecurity interest in, a right the transfer of which is prohibited or restrictedby any of the following statutes to the extent that the statute is inconsistentwith subsection (f) of this section: North Carolina Structured Settlement Act(Article 44B of Chapter 1 of the General Statutes); North Carolina CrimeVictims Compensation Act (Chapter 15B of the General Statutes); North CarolinaConsumer Finance Act (Article 15 of Chapter 53 of the General Statutes); NorthCarolina Firemen's and Rescue Squad Workers' Pension Fund (Article 86 ofChapter 58 of the General Statutes); Employment Security Law (Chapter 96 of theGeneral Statutes); North Carolina Workers' Compensation Act (Article 1 ofChapter 97 of the General Statutes); and Programs of Public Assistance (Article2 of Chapter 108A of the General Statutes).

(j)         Section prevailsover inconsistent law. – Except to the extent otherwise provided in subsection(i) of this section, this section prevails over any inconsistent provision ofan existing or future statute, rule, or regulation of this State unless theprovision is contained in a statute of this State, refers expressly to thissection, and states that the provision prevails over this section. (1945,c. 196, s. 6; 1961, c. 574; 1965, c. 700, s. 1; 1975, c. 862, s. 7; 2000‑169,s. l.)

State Codes and Statutes

Statutes > North-carolina > Chapter_25 > GS_25-9-406

§25‑9‑406.  Discharge of account debtor; notification of assignment;identification and proof of assignment; restrictions on assignment of accounts,chattel paper, payment intangibles, and promissory notes ineffective.

(a)        Discharge ofaccount debtor; effect of notification. – Subject to subsections (b) through(i) of this section, an account debtor on an account, chattel paper, or apayment intangible may discharge its obligation by paying the assignor until,but not after, the account debtor receives a notification, authenticated by theassignor or the assignee, that the amount due or to become due has beenassigned and that payment is to be made to the assignee.  After receipt of thenotification, the account debtor may discharge its obligation by paying theassignee and may not discharge the obligation by paying the assignor.

(b)        When notificationineffective. – Subject to subsection (h) of this section, notification isineffective under subsection (a) of this section:

(1)        If it does notreasonably identify the rights assigned;

(2)        To the extent thatan agreement between an account debtor and a seller of a payment intangiblelimits the account debtor's duty to pay a person other than the seller and thelimitation is effective under law other than this Article; or

(3)        At the option of anaccount debtor, if the notification notifies the account debtor to make lessthan the full amount of any installment or other periodic payment to theassignee, even if:

a.         Only a portion ofthe account, chattel paper, or payment intangible has been assigned to thatassignee;

b.         A portion has beenassigned to another assignee; or

c.         The account debtorknows that the assignment to that assignee is limited.

(c)        Proof ofassignment. – Subject to subsection (h) of this section, if requested by theaccount debtor, an assignee shall seasonably furnish reasonable proof that theassignment has been made.  Unless the assignee complies, the account debtor maydischarge its obligation by paying the assignor, even if the account debtor hasreceived a notification under subsection (a) of this section.

(d)        Term restrictingassignment generally ineffective. – Except as otherwise provided in subsection(e) of this section and G.S. 25‑2A‑303 and G.S. 25‑9‑407and subject to subsection (h) of this section, a term in an agreement betweenan account debtor and an assignor or in a promissory note is ineffective to theextent that it:

(1)        Prohibits,restricts, or requires the consent of the account debtor or person obligated onthe 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; or

(2)        Provides that theassignment or transfer or the creation, attachment, perfection, or enforcementof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedy underthe account, chattel paper, payment intangible, or promissory note.

(e)        Inapplicability ofsubsection (d) to certain sales. – Subsection (d) of this section does notapply to the sale of a payment intangible or promissory note.

(f)         Legal restrictionson assignment generally ineffective. – Except as otherwise provided in G.S. 25‑2A‑303and G.S. 25‑9‑407 and subject to subsections (h) and (i) of thissection, a rule of law, statute, or regulation that prohibits, restricts, orrequires the consent of a government, governmental body or official, or accountdebtor 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:

(1)        Prohibits,restricts, or requires the consent of the government, governmental body orofficial, or account debtor to the assignment or transfer of, or the creation,attachment, perfection, or enforcement of a security interest in the account orchattel paper; or

(2)        Provides that theassignment or transfer or the creation, attachment, perfection, or enforcementof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedy underthe account or chattel paper.

(g)        Subdivision (b)(3)not waivable. – Subject to subsection (h) of this section, an account debtormay not waive or vary its option under subdivision (b)(3) of this section.

(h)        Rule for individualunder other law. – This section is subject to law other than this Article whichestablishes a different rule for an account debtor who is an individual and whoincurred the obligation primarily for personal, family, or household purposes.

(i)         Inapplicability. –This section does not apply to an assignment of a health‑care‑insurancereceivable.  Subsection (f) of this section does not apply to an assignment ortransfer of, or the creation, attachment, perfection, or enforcement of asecurity interest in, a right the transfer of which is prohibited or restrictedby any of the following statutes to the extent that the statute is inconsistentwith subsection (f) of this section: North Carolina Structured Settlement Act(Article 44B of Chapter 1 of the General Statutes); North Carolina CrimeVictims Compensation Act (Chapter 15B of the General Statutes); North CarolinaConsumer Finance Act (Article 15 of Chapter 53 of the General Statutes); NorthCarolina Firemen's and Rescue Squad Workers' Pension Fund (Article 86 ofChapter 58 of the General Statutes); Employment Security Law (Chapter 96 of theGeneral Statutes); North Carolina Workers' Compensation Act (Article 1 ofChapter 97 of the General Statutes); and Programs of Public Assistance (Article2 of Chapter 108A of the General Statutes).

(j)         Section prevailsover inconsistent law. – Except to the extent otherwise provided in subsection(i) of this section, this section prevails over any inconsistent provision ofan existing or future statute, rule, or regulation of this State unless theprovision is contained in a statute of this State, refers expressly to thissection, and states that the provision prevails over this section. (1945,c. 196, s. 6; 1961, c. 574; 1965, c. 700, s. 1; 1975, c. 862, s. 7; 2000‑169,s. l.)


State Codes and Statutes

State Codes and Statutes

Statutes > North-carolina > Chapter_25 > GS_25-9-406

§25‑9‑406.  Discharge of account debtor; notification of assignment;identification and proof of assignment; restrictions on assignment of accounts,chattel paper, payment intangibles, and promissory notes ineffective.

(a)        Discharge ofaccount debtor; effect of notification. – Subject to subsections (b) through(i) of this section, an account debtor on an account, chattel paper, or apayment intangible may discharge its obligation by paying the assignor until,but not after, the account debtor receives a notification, authenticated by theassignor or the assignee, that the amount due or to become due has beenassigned and that payment is to be made to the assignee.  After receipt of thenotification, the account debtor may discharge its obligation by paying theassignee and may not discharge the obligation by paying the assignor.

(b)        When notificationineffective. – Subject to subsection (h) of this section, notification isineffective under subsection (a) of this section:

(1)        If it does notreasonably identify the rights assigned;

(2)        To the extent thatan agreement between an account debtor and a seller of a payment intangiblelimits the account debtor's duty to pay a person other than the seller and thelimitation is effective under law other than this Article; or

(3)        At the option of anaccount debtor, if the notification notifies the account debtor to make lessthan the full amount of any installment or other periodic payment to theassignee, even if:

a.         Only a portion ofthe account, chattel paper, or payment intangible has been assigned to thatassignee;

b.         A portion has beenassigned to another assignee; or

c.         The account debtorknows that the assignment to that assignee is limited.

(c)        Proof ofassignment. – Subject to subsection (h) of this section, if requested by theaccount debtor, an assignee shall seasonably furnish reasonable proof that theassignment has been made.  Unless the assignee complies, the account debtor maydischarge its obligation by paying the assignor, even if the account debtor hasreceived a notification under subsection (a) of this section.

(d)        Term restrictingassignment generally ineffective. – Except as otherwise provided in subsection(e) of this section and G.S. 25‑2A‑303 and G.S. 25‑9‑407and subject to subsection (h) of this section, a term in an agreement betweenan account debtor and an assignor or in a promissory note is ineffective to theextent that it:

(1)        Prohibits,restricts, or requires the consent of the account debtor or person obligated onthe 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; or

(2)        Provides that theassignment or transfer or the creation, attachment, perfection, or enforcementof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedy underthe account, chattel paper, payment intangible, or promissory note.

(e)        Inapplicability ofsubsection (d) to certain sales. – Subsection (d) of this section does notapply to the sale of a payment intangible or promissory note.

(f)         Legal restrictionson assignment generally ineffective. – Except as otherwise provided in G.S. 25‑2A‑303and G.S. 25‑9‑407 and subject to subsections (h) and (i) of thissection, a rule of law, statute, or regulation that prohibits, restricts, orrequires the consent of a government, governmental body or official, or accountdebtor 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:

(1)        Prohibits,restricts, or requires the consent of the government, governmental body orofficial, or account debtor to the assignment or transfer of, or the creation,attachment, perfection, or enforcement of a security interest in the account orchattel paper; or

(2)        Provides that theassignment or transfer or the creation, attachment, perfection, or enforcementof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedy underthe account or chattel paper.

(g)        Subdivision (b)(3)not waivable. – Subject to subsection (h) of this section, an account debtormay not waive or vary its option under subdivision (b)(3) of this section.

(h)        Rule for individualunder other law. – This section is subject to law other than this Article whichestablishes a different rule for an account debtor who is an individual and whoincurred the obligation primarily for personal, family, or household purposes.

(i)         Inapplicability. –This section does not apply to an assignment of a health‑care‑insurancereceivable.  Subsection (f) of this section does not apply to an assignment ortransfer of, or the creation, attachment, perfection, or enforcement of asecurity interest in, a right the transfer of which is prohibited or restrictedby any of the following statutes to the extent that the statute is inconsistentwith subsection (f) of this section: North Carolina Structured Settlement Act(Article 44B of Chapter 1 of the General Statutes); North Carolina CrimeVictims Compensation Act (Chapter 15B of the General Statutes); North CarolinaConsumer Finance Act (Article 15 of Chapter 53 of the General Statutes); NorthCarolina Firemen's and Rescue Squad Workers' Pension Fund (Article 86 ofChapter 58 of the General Statutes); Employment Security Law (Chapter 96 of theGeneral Statutes); North Carolina Workers' Compensation Act (Article 1 ofChapter 97 of the General Statutes); and Programs of Public Assistance (Article2 of Chapter 108A of the General Statutes).

(j)         Section prevailsover inconsistent law. – Except to the extent otherwise provided in subsection(i) of this section, this section prevails over any inconsistent provision ofan existing or future statute, rule, or regulation of this State unless theprovision is contained in a statute of this State, refers expressly to thissection, and states that the provision prevails over this section. (1945,c. 196, s. 6; 1961, c. 574; 1965, c. 700, s. 1; 1975, c. 862, s. 7; 2000‑169,s. l.)