Does our no-assignment clause stop the other side from assigning its rights to be paid, or its rights under a license, permit or franchise?
Mostly no, for the categories Idaho's secured-transactions article protects. Idaho Code § 28-9-406(d) steps aside for subsection (e) and for §§ 28-9-407 and 28-12-303, subjects itself to subsection (h), and then provides that "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... 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... may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination, or remedy." Idaho Code § 28-9-408(a), "[e]xcept as otherwise provided in subsection (b) of this section," extends the same override to promissory notes, health care insurance receivables, and GENERAL INTANGIBLES (expressly "including a contract, permit, license, or franchise"), making an anti-assignment clause ineffective to the extent it would impair the creation, attachment, or perfection of a security interest, or trigger a default merely because of the assignment. What the override does not do by itself is reroute the money. That is § 28-9-406(a)'s job, and it lets the account debtor keep 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."
The trap
Both overrides are narrower than a blanket rule that every anti-assignment clause is unenforceable. § 28-9-406(e) carves the override BACK OUT for a straight sale of a payment intangible or promissory note (as opposed to a security interest arising from one), "other than a sale pursuant to a disposition under section 28-9-610... or an acceptance of collateral under section 28-9-620", so an outright sale of a promissory note can still be blocked by a no-assignment clause in a fact pattern the statute does not reach. § 28-9-408 has the mirror-image limit in its own subsection (b): as to a payment intangible or a promissory note, subsection (a) applies "only if the security interest arises out of a sale" of it, outside the § 28-9-610 disposition and § 28-9-620 acceptance cases. § 28-9-408(d) is a further trap in the anti-assignment drafter's favor: even where subsection (a) makes the restriction "ineffective," the assignee still gets no enforcement right against the account debtor, no duty runs to the assignee, and the account debtor need not recognize the security interest or pay the assignee at all: the statute strips the anti-assignment clause of its power to create a DEFAULT, but does not force the account debtor to deal with a stranger. Subsection (d) goes further than that summary suggests: the secured party is also not entitled to use or assign the debtor's own rights, to reach "any trade secrets or confidential information" of the obligor, or "to enforce the security interest" in the note, receivable or intangible at all. § 28-9-406(h) separately preserves other law's protection for an individual account debtor who incurred the obligation for personal, family or household purposes: the consumer carve-out is not overridden by this section. And neither section reaches LETTER-OF-CREDIT RIGHTS; Idaho Code § 28-9-409 does that job on parallel terms, making a letter-of-credit term or a rule of law ineffective to the extent it "[w]ould impair the creation, attachment or perfection of a security interest in the letter of credit right" or would turn the assignment into a default. No Idaho appellate decision construes §§ 28-9-406(d), 28-9-408 or 28-9-409 as they now read, so every answer here comes from the statutory text. The section also excludes particular receivables outright: “This section does not apply to an assignment of a health care insurance receivable, an award of compensation made pursuant to the crime victims compensation act, chapter 10, title 72, Idaho Code, or a lottery prize subject to the provisions of chapter 74, title 67, Idaho Code.”
9 authorities
- statuteIdaho Code § 28-9-406enactment date not established
The words that state the rule
(a) Subject to subsections (b) through (i) 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.
- statuteIdaho Code § 28-9-406enactment date not established
The words that state the rule
Except as otherwise provided in subsection (e) of this section and sections 28-9-407 and 28-12-303, Idaho Code, and subject to subsection (h) 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.
- statuteIdaho Code § 28-9-406enactment date not established
The words that state the rule
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 section 28-9-610, Idaho Code, or an acceptance of collateral under section 28-9-620, Idaho Code.
- statuteIdaho Code § 28-9-408enactment date not established
The words that state the rule
Except as otherwise provided in subsection (b) of this section, 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.
- statuteIdaho Code § 28-9-408enactment date not established
The words that state the rule
(b) Subsection (a) of this section 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, other than a sale pursuant to a disposition under section 28-9-610, Idaho Code, or an acceptance of collateral under section 28-9-620, Idaho Code.
- statuteIdaho Code § 28-9-408enactment date not established
The words that state the rule
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 or a rule of law, statute or regulation described in subsection (c) of this section would be effective under law other than this chapter but is ineffective under subsection (a) or (c) of this section, 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.
- statuteIdaho Code § 28-9-409enactment date not established
The words that state the rule
A term in a letter of credit or a rule of law, statute, rule, regulation, custom or practice applicable to the letter of credit which prohibits, restricts or requires the consent of an applicant, issuer or nominated person to a beneficiary’s assignment of or creation of a security interest in a letter of credit right is ineffective to the extent that the term or rule of law, statute, rule, regulation, custom or practice: (1) Would impair the creation, attachment or perfection of a security interest in the letter of credit right; or (2) Provides that the assignment 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 letter of credit right.
- statuteIdaho Code § 28-9-406enactment date not established
The words that state the rule
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.
- statuteIdaho Code § 28-9-406enactment date not established
The words that state the rule
This section does not apply to an assignment of a health care insurance receivable, an award of compensation made pursuant to the crime victims compensation act, chapter 10, title 72, Idaho Code, or a lottery prize subject to the provisions of chapter 74, title 67, Idaho Code.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.