Will an Alabama court give effect to a clause barring assignment or requiring consent?
Not as to receivables. Except as subsection (e) and Sections 7-2A-303 and 7-9A-407 provide, 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 it prohibits, restricts or requires the account debtor's consent 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 provides that the assignment may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or remedy (Ala. Code § 7-9A-406(d)). Subsection (d) does not reach the sale of a payment intangible or promissory note other than a sale on a disposition under § 7-9A-610 or an acceptance of collateral under § 7-9A-620 (§ 7-9A-406(e)), and the whole section yields to other law that sets a different rule for an account debtor who is an individual and incurred the obligation primarily for personal, family or household purposes (§ 7-9A-406(h)). The section prevails over any inconsistent Alabama statute, rule or regulation unless that provision refers expressly to § 7-9A-406 and says it prevails (§ 7-9A-406(j)). Two further limits: the section does not apply at all to an assignment of a health-care-insurance receivable (§ 7-9A-406(i)), and within subsection (d) "promissory note" includes a negotiable instrument that evidences chattel paper.
The trap
A consent-to-assign clause in the contract that generates the receivable does not stop the customer's lender from taking or enforcing a security interest in it, and the assignment cannot be turned into a default or a right of termination. What the subsection does not reach is a sale of a payment intangible or promissory note, an individual consumer account debtor governed by other law, and rights that are not accounts, chattel paper, payment intangibles or promissory notes, for those, the clause is not disabled by this section. One more carve-out sits outside that list: § 7-9A-406(i) says the section does not apply to an assignment of a health-care-insurance receivable, even though a health-care-insurance receivable is itself within the Article 9A definition of an account.
6 authorities
- statuteAla. Code § 7-9A-406enactment date not established
The words that state the rule
In this subsection, “promissory note” includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in subsection (e) and Sections 7-2A-303 and 7-9A-407, 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.
- statuteAla. Code § 7-9A-406enactment date not established
The words that state the rule
Subsection (d) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under Section 7-9A-610 or an acceptance of collateral under Section 7-9A-620.
- statuteAla. Code § 7-9A-406enactment date not established
The words that state the rule
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.
- statuteAla. Code § 7-9A-406enactment date not established
The words that state the rule
This section prevails over any inconsistent provision of an existing or future statute, rule, or regulation of this State unless the provision is contained in a statute of this State, refers expressly to this section, and states that the provision prevails over this section.
- statuteAla. Code § 7-9A-406enactment date not established
The words that state the rule
(i) Inapplicability to health-care-insurance receivable. This section does not apply to an assignment of a health-care-insurance receivable.
- statuteAla. Code § 7-9A-102enactment date not established
The words that state the rule
(2) “Account,” except as used in “account for,” “account statement,” “account to,” “commodity account” in paragraph (14), “customer’s account,” “deposit account” in paragraph (29), “on account of,” and “statement of account,” means a right to payment of a monetary obligation, whether or not earned by performance, (i) for property that has been or is to be sold, leased, licensed, assigned, or otherwise disposed of, (ii) for services rendered or to be rendered, (iii) for a policy of insurance issued or to be issued, (iv) for a secondary obligation incurred or to be incurred, (v) for energy provided or to be provided, (vi) for the use or hire of a vessel under a charter or other contract, (vii) arising out of the use of a credit or charge card or information contained on or for use with the card, or (viii) as winnings in a lottery or other game of chance operated or sponsored by a State, governmental unit of a State, or person licensed or authorized to operate the game by a State or governmental unit of a State. The term includes controllable accounts and health-care-insurance receivables. The term does not include (i) chattel paper , (ii) commercial tort claims, (iii) deposit accounts, (iv) investment property, (v) letter-of-credit rights or letters of credit, (vi) rights to payment for money or funds advanced or sold, other than rights arising out of the use of a credit or charge card or information contained on or for use with the card , or (vii) rights to payment evidenced by an instrument .
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.