State Codes and Statutes

Statutes > Connecticut > Title42a > Art009 > Sec42a-9-406

      Sec. 42a-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) Subject to subsections (b) to (j), 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. An assignor who receives payment after notification is given must return the payment to the account debtor or forward the payment to the assignee.

      (b) Subject to subsection (h), notification is ineffective under subsection (a):

      (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 article; or

      (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:

      (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; or

      (C) The account debtor knows that the assignment to that assignee is limited.

      (c) Subject to subsection (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 subsection (a).

      (d) Except as otherwise provided in subsection (e) and in section 42a-2A-403 and section 42a-9-407, and subject to subsection (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:

      (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; or

      (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) Subsection (d) does not apply to the sale of a payment intangible or promissory note.

      (f) Except as otherwise provided in section 42a-2A-403 and section 42a-9-407, and subject to subsections (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:

      (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; or

      (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 subsection (h), an account debtor may not waive or vary its option under subdivision (3) of subsection (b).

      (h) This section is subject to law other than this article 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) Except as provided in subsection (j) of this section, this section prevails over any inconsistent provision of any statute or regulation of this state unless the provision is contained in a statute of this state, refers expressly to this section and states that the provision prevails over this section.

      (j) (1) This section does not apply to:

      (A) An assignment of a health-care-insurance receivable;

      (B) An assignment or transfer of or creation of a security interest in:

      (i) A claim or right to receive compensation for injuries or sickness as described in 26 USC 104(a)(1) or (2), as amended from time to time, or

      (ii) A claim or right to receive benefits under a special needs trust as described in 42 USC 1396p(d)(4), as amended from time to time.

      (2) Subsection (f) of this section does not apply to an assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, a right the transfer of which is prohibited or restricted by any of the following statutes to the extent that the statute is inconsistent with said subsection: Section 12-831, 31-320 or 52-225f.

      (1959, P.A. 133, S. 9-406; P.A. 76-229, S. 4, 6; 76-369, S. 33; P.A. 80-419, S. 8; May Sp. Sess. P.A. 92-6, S. 113, 117; P.A. 01-132, S. 68; P.A. 02-131, S. 102, 103; P.A. 03-62, S. 6.)

      History: P.A. 76-229 raised fee from $3 to $5; P.A. 76-369 added provision re statements signed by person other than secured party of record and imposed $10 fee for statements in nonstandard form and additional $1 fee for indexing extra names; P.A. 80-419 raised fee for statements in standard form from $5 to $6 and for those in nonstandard form from $10 to $11; May Sp. Sess. P.A. 92-6 deleted the amount of the fees for filing and noting statements of release and added the requirement that each debtor name be set forth by the secured party; P.A. 01-132 replaced former provisions re statement of release of collateral and duties of filing officer upon presentation of such a statement with provisions re discharge of account debtor, notification of assignment, identification and proof of assignment and when restrictions on assignment are ineffective; P.A. 02-131 amended Subsecs. (d) and (f) by adding references to Sec. 42a-2A-403; P.A. 03-62 amended Subsec. (a) to replace reference to "subsections (b) to (i), inclusive" with reference to "subsections (b) to (j), inclusive" and added new Subsec. (i) re priority of section over any inconsistent provision of any statute or regulation of this state, redesignating existing Subsec. (i) as Subsec. (j).