41-09-68. (9-406) Discharge of account debtor - Notification of assignment -
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Identification and proof of assignment - Restrictions on assignment of accounts, chattel paper, payment intangibles, and promissory notes ineffective.
1. Subject to subsections 2 through 9 and 12, 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, signed 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.
2. Subject to subsections 8 and 12, notification is ineffective under subsection 1:
a. If it does not reasonably identify the rights assigned;
b. 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 chapter; or
c. 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:
(1)Only a portion of the account, chattel paper, or payment intangible has been
assigned to that assignee;
(2)A portion has been assigned to another assignee; or
(3)The account debtor knows that the assignment to that assignee is limited.
3. Subject to subsections 8 and 12, 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 1.
4. In this subsection, "promissory note" includes a negotiable instrument that evidences
chattel paper. Except as otherwise provided in subsections 5 and 11 and sections
41-02.1-33 and 41-09-69, and subject to subsection 8, a term in an agreement
between an account debtor and an assignor or in a promissory note is ineffective to
the extent that it:
a. 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
b. 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.
5. Subsection 4 does not apply to the sale of a payment intangible or promissory note,
other than a sale pursuant to a disposition under section 41-09-107 or an acceptance
of collateral under section 41-09-115.
6. Except as otherwise provided in subsection 11 and sections 41-02.1-33 and 41-09-69
and subject to subsections 8 and 9, 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:
a. 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
b. Provides that the assignment, transfer, 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.
7. Subject to subsections 8 and 12, an account debtor may not waive or vary its option
under subdivision c of subsection 2.
8. This section is subject to law other than this chapter 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.
9. This section does not apply to an assignment of a health care insurance receivable.
10. This section prevails over any inconsistent statute, rule, or regulation.
11. Subsections 4, 6, and 10 do not apply to a security interest in an ownership interest in
a general partnership, limited partnership, or limited liability company.
12. Subsections 1, 2, 3, and 7 do not apply to a controllable account or controllable
payment intangible.