North Dakota Code 41-09-70 – (9-408) Restrictions on assignment of promissory notes, health care insurance receivables, and certain general intangibles ineffective
1. Except as otherwise provided in subsections 2 and 6, a term in a promissory note or in an agreement between an account debtor and a debtor which 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 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:
Terms Used In North Dakota Code 41-09-70
- Attachment: A procedure by which a person's property is seized to pay judgments levied by the court.
- Contract: A legal written agreement that becomes binding when signed.
- Debtor: means a natural person whose name was provided in a financing statement record as an individual debtor or one of the types of persons listed in section 41-09-76. See North Dakota Code 41-10-01
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- paper: means any flexible material upon which it is usual to write. See North Dakota Code 1-01-27
- Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
- Partnership: includes a limited liability partnership registered under chapter 45-22. See North Dakota Code 1-01-49
- Person: means an individual, organization, government, political subdivision, or government agency or instrumentality. See North Dakota Code 1-01-49
- Rule: includes regulation. See North Dakota Code 1-01-49
- Statute: A law passed by a legislature.
a. Would impair the creation, attachment, or perfection of a security interest; or
b. Provides that the assignment, transfer, 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.
2. Subsection 1 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, other than a sale pursuant to a disposition under section 41-09-107 or an acceptance of collateral under section 41-09-115.
3. Except as otherwise provided in subsection 6, 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 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:
a. Would impair the creation, attachment, or perfection of a security interest; or
b. Provides that the assignment, transfer, 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.
4. To the extent that a term in a promissory note or in an agreement between an account debtor and a debtor which relates to a health care insurance receivable or general intangible or a rule of law, statute, or regulation described in subsection 3 would be effective under law other than this chapter but is ineffective under subsection 1 or 3, the creation, attachment, or perfection of a security interest in the promissory note, health care insurance receivable, or general intangible:
a. Is not enforceable against the person obligated on the promissory note or the account debtor; b. Does not impose a duty or obligation on the person obligated on the promissory note or the account debtor; c. 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; d. 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; e. 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; and
f. Does not entitle the secured party to enforce the security interest in the promissory note, health care insurance receivable, or general intangible.
5. This section prevails over any inconsistent statute, rule, or regulation.
6. This section does not apply to a security interest in an ownership interest in a general partnership, limited partnership, or limited liability company.
7. In this section, “promissory note” includes a negotiable instrument that evidences chattel paper.