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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 - 13 Pa. Cons. Stat. § 9406

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     § 9406.  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 of account debtor; effect of notification.--
     Subject to subsections (b) through (i), 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)  When notification ineffective.--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
        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:
                (i)  only a portion of the account, chattel paper or
            payment intangible has been assigned to that assignee;
                (ii)  a portion has been assigned to another
            assignee; or
                (iii)  the account debtor knows that the assignment
            to that assignee is limited.
        (c)  Proof of assignment.--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)  Term restricting assignment generally ineffective.--
     Except as otherwise provided in subsections (e) and (j) and
     sections 2A303 (relating to alienability of party's interest
     under lease contract or of lessor's residual interest in goods;
     delegation of performance; transfer of rights) and 9407
     (relating to restrictions on creation or enforcement of security
     interest in leasehold interest or in lessor's residual interest)
     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)  Inapplicability of subsection (d) to certain sales.--
     Subsection (d) does not apply to the sale of a payment
     intangible or promissory note.
        (f)  Legal restrictions on assignment generally
     ineffective.--Except as otherwise provided in subsection (j) and
     sections 2A303 and 9407 and subject to subsections (h) and (i),
     a rule of law, statute or regulation which 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)  Subsection (b)(3) not waivable.--Subject to subsection
     (h), an account debtor may not waive or vary its option under
     subsection (b)(3).
        (h)  Rule for individual under other law.--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)  Inapplicability to health-care-insurance receivable.--
     This section does not apply to an assignment of a health-care-
     insurance receivable.
        (j)  Section prevails over inconsistent law.--
            (1)  Except as set forth in paragraphs (2), (3), (4) and
        (5), this section prevails over any inconsistent provision of
        any existing or future statute or regulation of the
        Commonwealth unless the provision is contained in a statute
        of the Commonwealth, refers expressly to this section and
        states that the provision prevails over this section.
            (2)  Subsection (f) does not apply to an account or
        chattel paper if the account debtor is the Commonwealth.
            (3)  Subsection (f) does not apply to the following:
                (i)  A claim or right to receive benefits under a
            workers' compensation act as compensation for personal
            injury or sickness, including a claim or right to receive
            benefits under the act of June 2, 1915 (P.L.736, No.338),
            known as the Workers' Compensation Act.
                (ii)  The act of June 21, 1939 (P.L.566, No.284),
            known as The Pennsylvania Occupational Disease Act.
                (iii)  Section 306 of the act of August 26, 1971
            (P.L.351, No.91), known as the State Lottery Law.
            (4)  Subsections (d) and (f) do not apply to a claim or
        right to receive benefits from a special needs trust
        described in section 1917(d)(4) of the Social Security Act
        (49 Stat. 620, 42 U.S.C. § 1396p(d)(4)).
            (5)  The limitations on restrictions of assignments
        contained in this section are inapplicable to transfers of
        structured settlement payment rights pursuant to the act of
        February 11, 2000 (P.L.1, No.1), known as the Structured
        Settlement Protection Act.

        Cross References.  Section 9406 is referred to in sections
     2210, 9209, 9401, 9405, 9408 of this title.

Last modified: November 27, 2007