Does this 'no assignment without consent' clause stop the counterparty assigning the money owed under the contract?
No, not as to receivables. Under Fla. Stat. § 679.4061(4) (Florida's UCC 9-406) 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 consent to the assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, an account, chattel paper, payment intangible or promissory note, or provides that such an assignment or security interest may give rise to a default, breach, right of recoupment, claim, defence, termination or other remedy. Under § 679.4061(1), once the account debtor receives a notification (signed by the assignor or assignee) that the amount has been assigned and payment is to be made to the assignee, it may discharge its obligation by paying the assignee and may not discharge it by paying the assignor. That discharge rule is itself qualified twice over: under § 679.4061(2) a notification is ineffective if it does not reasonably identify the rights assigned, and ineffective at the account debtor's option if it calls for less than the full amount of a periodic payment to be paid to the assignee; and under § 679.4061(3) an account debtor who asks the assignee for reasonable proof that the assignment was made, and does not get it, may discharge by paying the assignor even after a notification has arrived.
The trap
The Florida section carries carve-outs a drafter relying on the general UCC rule will miss. Subsection (6) is a second, separate override, aimed not at contract terms but at a rule of law, statute or regulation that prohibits, restricts or requires a government's or an account debtor's consent to the assignment of an account or chattel paper; the carve-outs below are written against (4) and (6) together, so a drafter who reads only the contract-term limb will misread them. Subsection (12) says subsections (4), (6) and (11) do NOT apply to a security interest in an ownership interest in a general partnership, a limited partnership or a limited liability company, so an anti-assignment/consent clause in an LLC or partnership agreement is NOT overridden as to such a security interest, the opposite result from an ordinary receivable. Subsection (9) limits subsections (4), (6) and (8) to security interests created after January 1, 2002; (5) takes the sale of a payment intangible or promissory note out of (4); (8) yields to other law for an individual consumer account debtor and takes listed personal-injury, special-needs-trust and benefit claims out of (4) and (6); and (10) excludes assignments of health-care-insurance receivables. Subsection (13) takes controllable accounts and controllable payment intangibles out of subsections (1)-(3) and (7) only (the notification, discharge and no-waiver rules), not out of (4). The override is also only about receivables: it does not make a prohibition on delegating performance ineffective, and it does not reach an obligation that is not an account, chattel paper, payment intangible or promissory note. Answering certified questions from the Fifth Circuit, the Florida Supreme Court held that the predecessor provision, then § 679.318(4), did not operate to invalidate a consent-and-notation restriction on assigning a non-negotiable certificate of deposit, because the certificate was not an account, chattel paper, contract right or general intangible, so the issuing bank was not an account debtor and the transaction was not a contract between an account debtor and an assignor; the court divided four to two and expressly did not reach whether the restriction was otherwise enforceable.
14 authorities
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(4) For the purposes of this subsection, the term “promissory note” includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in subsections (5) and (12) and ss. 680.303 and 679.4071, and subject to subsection (8), a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it:(a) 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 (b) 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.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(1) Subject to subsections (2)-(9) and (13), 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.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(5) Subsection (4) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under s. 679.610 or an acceptance of collateral under s. 679.620.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(8) This section is subject to law other than this chapter 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. Subsections (4) and (6) do not apply to the creation, attachment, perfection, or enforcement of a security interest in:(a) A claim or right to receive compensation for injuries or sickness as described in 26 U.S.C. s. 104(a)(1) or (2). (b) A claim or right to receive benefits under a special needs trust as described in 42 U.S.C. s. 1396p(d)(4). (c) The interest of a debtor who is a natural person in reemployment assistance or unemployment, alimony, disability, pension, or retirement benefits or victim compensation funds. (d) The interest of a debtor who is a natural person in other benefits which are designated solely for his or her maintenance, support, or education, the assignability of which is expressly prohibited or restricted by statute.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(9) Subsections (4), (6), and (8) apply only to a security interest created after January 1, 2002.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(10) This section does not apply to an assignment of a health-care-insurance receivable. (11) This section prevails over any inconsistent statute, rule, or regulation.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(12) Subsections (4), (6), and (11) do not apply to a security interest in an ownership interest in a general partnership, a limited partnership, or a limited liability company.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(13) Subsections (1)-(3) and (7) do not apply to a controllable account or controllable payment intangible.
- case374 So. 2d 6Citizens Nat. Bank of Orlando v. BornsteinFla.decided 1979-07-18read it at the source ↗
The words that state the rule
We conclude that the certificate of deposit is not properly classified as an account, chattel paper, contract right, or general intangible. The Bank is, therefore, not an "account debtor" as defined in section 679.105(1)(a). Accordingly, it may not avail itself of the article 9 defenses delineated in section 679.318(1). By the same token, since the transaction does not amount to a "contract between an account debtor and an assignor," section 679.318(4) does not operate to invalidate the restrictions on assignment here.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(2) Subject to subsections (8) and (13), notification is ineffective under subsection (1):(a) If it does not reasonably identify the rights assigned; (b) 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 chapter; or (c) 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:1. Only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee; 2. A portion has been assigned to another assignee; or 3. The account debtor knows that the assignment to that assignee is limited. (3) Subject to subsections (8) and (13), 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 (1).
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(6) Except as otherwise provided in subsection (12) and ss. 680.303 and 679.4071, and subject to subsections (8) and (9), a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute, or regulation:(a) Prohibits, restricts, or requires the consent of the government, governmental body or official, or account debtor to the assignment or transfer of, or the creation, attachment, perfection, or enforcement of a security interest in the account or chattel paper; or (b) 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 or chattel paper.
- statuteFla. Stat. § 679.4061enactment date not established
The words that state the rule
(7) Subject to subsections (8) and (13), an account debtor may not waive or vary its option under paragraph (2)(c).
- case374 So. 2d 6Citizens Nat. Bank of Orlando v. BornsteinFla.decided 1979-07-18read it at the source ↗
The words that state the rule
We have before us certified questions from the United States Court of Appeals for the Fifth Circuit, concerning the set-off rights and defenses available to an obligor against the assignee of a non-negotiable certificate of deposit. Bornstein v. Citizens National Bank of Orlando, 564 F.2d 721 (5th Cir.1977). This proceeding is authorized by section 25.031, Florida Statutes (1977) and Fla.R.App.P. 9.510. We conclude: (1) that the transfer of the certificate of deposit as security for the purchase of a bond was the assignment of a non-negotiable instrument entitled to secured transaction treatment under article 9 of the Florida Uniform Commercial Code, sections 679.101 et seq., Florida Statutes (1973); (2) that neither the provisions of section 679.104(9) nor section 679.104(11) exclude the transfer from coverage under article 9; (3) that section 679.318(4) does not invalidate the prohibitions against assignment; and (4) that the obligor, "Bank," is not an "account debtor" entitled to any article 9 defenses under section 679.318(1). We do not reach certified question III.
- case374 So. 2d 6Citizens Nat. Bank of Orlando v. BornsteinFla.decided 1979-07-18read it at the source ↗
The words that state the rule
Summarizing our answers to the questions certified, we find that the assignment by Milford of the certificate of deposit as security for the payment of a bond purchased from National Indemnity was the assignment of a non-negotiable instrument entitled to secured transaction treatment under article 9; that neither the provisions of section 679.104(9) nor section 679.104(11) exclude the transfer from coverage under article 9; that section 679.318(4) does not invalidate the restrictions on assignment since the transaction is not a "contract between an account debtor and an assignor;" and that neither by incorporation through section 673.306 nor by the express terms of article 9 is the Bank's asserted right to set-off established under section 679.318(1). ENGLAND, C.J., and ADKINS and BOYD, JJ., concur. OVERTON and ALDERMAN, JJ., dissent.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.