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This entry was published on 2014-09-22
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SECTION 9-408
Restrictions on Assignment of Promissory Notes, Health-care-insurance Receivables, and Certain General Intangibles Ineffective
Uniform Commercial Code (UCC) CHAPTER 38, ARTICLE 9, PART 4
Section 9--408. Restrictions on Assignment of Promissory Notes,

Health-care-insurance Receivables, and Certain General

Intangibles Ineffective.

(a) Term restricting assignment generally ineffective. Except as
otherwise provided in subsection (b), 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:

(1) would impair the creation, attachment, or perfection of a

security interest; or

(2) provides that the assignment or transfer or the 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.

(b) Applicability of subsection (a) to sales of certain rights to
payment. Subsection (a) 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.

(c) Limitation on ineffectiveness under subsection (a). 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 would be effective under law other than this
article but is ineffective under subsection (a), the creation,
attachment, or perfection of a security interest in the promissory note,
health-care-insurance receivable, or general intangible:

(1) is not enforceable against the person obligated on the

promissory note or the account debtor;

(2) does not impose a duty or obligation on the person obligated

on the promissory note or the account debtor;

(3) 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;

(4) 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;

(5) 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

(6) does not entitle the secured party to enforce the security

interest in the promissory note, health-care-insurance

receivable, or general intangible.

(d) Inapplicability. This section does not apply to:

(1) a claim or right to receive compensation for injuries or

sickness as described in 26 U.S.C. § 104(a)(1) and (2), as

amended from time to time, or

(2) a claim or right to receive benefits under a special needs

trust as described in 42 U.S.C. § 1396p (d)(4), as amended

from time to time.