Washington Code 62A.9A-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
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(a) Discharge of account debtor; effect of notification. Subject to subsections (b) through (j) of this section, 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.
Terms Used In Washington Code 62A.9A-406
- Attachment: A procedure by which a person's property is seized to pay judgments levied by the court.
- 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.
- 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.
- person: may be construed to include the United States, this state, or any state or territory, or any public or private corporation or limited liability company, as well as an individual. See Washington Code 1.16.080
- Settlement: Parties to a lawsuit resolve their difference without having a trial. Settlements often involve the payment of compensation by one party in satisfaction of the other party's claims.
(b) When notification ineffective. Subject to subsection (h) of this section, notification is ineffective under subsection (a) of this section:
(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) Proof of assignment. Subject to subsection (h) of this section, 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) of this section.
(d) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (e) of this section and RCW 62A.2A-303 and 62A.9A-407, and subject to subsections (h) and (j) of this section, 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) of this section to certain sales. Subsection (d) of this section does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under RCW 62A.9A-610 or an acceptance of collateral under RCW 62A.9A-620.
(f) [Reserved]
(g) Subsection (b)(3) of this section not waivable. Subject to subsection (h) of this section, an account debtor may not waive or vary its option under subsection (b)(3) of this section.
(h) Rule for individual under other law. 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) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.
(j)(1) Inapplicability of subsection (d) of this section to certain transactions. After July 1, 2003, subsection (d) of this section does not apply to the assignment or transfer of or creation of a security interest in:
(A) A claim or right to receive compensation for injuries or sickness as described in 26 U.S.C. § 104(a)(1) or (2); or
(B) A claim or right to receive benefits under a special needs trust as described in 42 U.S.C. § 1396p(d)(4).
(2) This subsection will not affect a transfer of structured settlement payment rights under chapter 19.205 RCW.
NOTES:
Application—Effective date—2011 c 74: See notes following RCW 62A.9A-102.
Effective date—2003 c 87: “This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2003.” [ 2003 c 87 § 3.]
Effective date—2001 c 32: See note following RCW 62A.9A-102.
PDFRCW 62A.9A-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. (Effective January 1, 2024.)
(a) Discharge of account debtor; effect of notification. Subject to subsections (b) through (l) of this section, 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.
(b) When notification ineffective. Subject to subsections (h) and (l) of this section, notification is ineffective under subsection (a) of this section:
(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) Proof of assignment. Subject to subsections (h) and (l) of this section, 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) of this section.
(d) Term restricting assignment generally ineffective. In this subsection, “promissory note” includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in subsections (e) and (k) of this section and RCW 62A.2A-303 and 62A.9A-407, and subject to subsections (h) and (j) of this section, 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) of this section to certain sales. Subsection (d) of this section does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under RCW 62A.9A-610 or an acceptance of collateral under RCW 62A.9A-620.
(f) [Reserved.]
(g) Subsection (b)(3) of this section not waivable. Subject to subsections (h) and (l) of this section, an account debtor may not waive or vary its option under subsection (b)(3) of this section.
(h) Rule for individual under other law. 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) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.
(j)(1) Inapplicability of subsection (d) of this section to certain transactions. After July 1, 2003, subsection (d) of this section does not apply to the assignment or transfer of or creation of a security interest in:
(A) A claim or right to receive compensation for injuries or sickness as described in 26 U.S.C. § 104(a)(1) or (2); or
(B) A claim or right to receive benefits under a special needs trust as described in 42 U.S.C. § 1396p(d)(4).
(2) This subsection will not affect a transfer of structured settlement payment rights under chapter 19.205 RCW.
(k) Inapplicability to interests in certain entities. Subsection (d) of this section does not apply to a security interest in an ownership interest in a general partnership, limited partnership, or limited liability company.
(l) Inapplicability of certain subsections. Subsections (a), (b), (c), and (g) of this section do not apply to a controllable account or controllable payment intangible.
NOTES:
Construction—Effective date—2023 c 266: See notes following RCW 62A.12-101.
Application—Effective date—2011 c 74: See notes following RCW 62A.9A-102.
Effective date—2003 c 87: “This act is necessary for the immediate preservation of the public peace, health, or safety, or support of the state government and its existing public institutions, and takes effect July 1, 2003.” [ 2003 c 87 § 3.]
Effective date—2001 c 32: See note following RCW 62A.9A-102.