Legislation

* Section 12--106. Discharge of Account Debtor on Controllable Account
or Controllable Payment Intangible.

(a) Discharge of account debtor. An account debtor on a controllable
account or controllable payment intangible may discharge its obligation
by paying:

(1) the person having control of the controllable electronic record
that evidences the controllable account or controllable payment
intangible; or

(2) except as provided in subsection (b), a person that formerly had
control of the controllable electronic record.

(b) Content and effect of notification. Subject to subsection (d), the
account debtor may not discharge its obligation by paying a person that
formerly had control of the controllable electronic record if the
account debtor receives a notification that:

(1) is signed by a person that formerly had control or the person to
which control was transferred;

(2) reasonably identifies the controllable account or controllable
payment intangible;

(3) notifies the account debtor that control of the controllable
electronic record that evidences the controllable account or
controllable payment intangible was transferred;

(4) identifies the transferee, in any reasonable way, including by
name, identifying number, cryptographic key, office, or account number;
and

(5) provides a commercially reasonable method by which the account
debtor is to pay the transferee.

(c) Discharge following effective notification. After receipt of a
notification that complies with subsection (b), the account debtor may
discharge its obligation by paying in accordance with the notification
and may not discharge the obligation by paying a person that formerly
had control.

(d) When notification ineffective. Subject to subsection (h),
notification is ineffective under subsection (b):

(1) unless, before the notification is sent, the account debtor and
the person that, at that time, had control of the controllable
electronic record that evidences the controllable account or
controllable payment intangible agree in a signed record to a
commercially reasonable method by which a person may furnish reasonable
proof that control has been transferred;

(2) to the extent an agreement between the account debtor and 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 the account debtor, if the notification notifies
the account debtor to:

(A) divide a payment;

(B) make less than the full amount of an installment or other periodic
payment; or

(C) pay any part of a payment by more than one method or to more than
one person.

(e) Proof of transfer of control. Subject to subsection (h), if
requested by the account debtor, the person giving the notification
under subsection (b) seasonably shall furnish reasonable proof, using
the method in the agreement referred to in subsection (d)(1), that
control of the controllable electronic record has been transferred.
Unless the person complies with the request, the account debtor may
discharge its obligation by paying a person that formerly had control,
even if the account debtor has received a notification under subsection
(b).

(f) What constitutes reasonable proof. A person furnishes reasonable
proof under subsection (e) that control has been transferred if the
person demonstrates, using the method in the agreement referred to in
subsection (d)(1), that the transferee has the power to:

(1) avail itself of substantially all the benefit from the
controllable electronic record;

(2) prevent others from availing themselves of substantially all the
benefit from the controllable electronic record; and

(3) transfer the powers specified in paragraphs (1) and (2) to another
person.

(g) Rights not waivable. Subject to subsection (h), an account debtor
may not waive or vary its rights under subsections (d)(1) and (e) or its
option under subsection (d)(3).

(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.

* NB Effective June 3, 2026