Does this 'no assignment without our consent' clause stop the counterparty from assigning the money we owe it?
No, as to money, subject to the section's own exceptions. Under 810 ILCS 5/9-406(d) (which opens 'Except as otherwise provided in subsection (e) and Sections 2A-303 and 9-407, 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 it prohibits, restricts or requires consent to the assignment of, or the creation or enforcement of a security interest in, an account, chattel paper, payment intangible or promissory note, or provides that such an assignment is a default, breach, right of recoupment, defence, termination or remedy. The account debtor's real protection is the notification machinery of § 9-406(a)-(c): it may keep paying the assignor until it 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, and that notification is ineffective if it does not reasonably identify the rights assigned (§ 9-406(b)(1)) or, at the account debtor's option, if it directs less than the full amount of an installment or other periodic payment to the assignee (§ 9-406(b)(3)); on request the assignee must seasonably furnish reasonable proof that the assignment was made, and until it does the account debtor may still discharge by paying the assignor. Two more limbs of the section: subject to §§ 2A-303 and 9-407 and to subsections (h) and (i), a rule of law, statute or regulation that prohibits, restricts or requires the consent of a government, governmental body or official, or of the account debtor, to the assignment of or creation of a security interest in an account or chattel paper is ineffective to the same extent as a contract term (§ 9-406(f)), and the account debtor's option under (b)(3) (to disregard a notification directing less than the full periodic payment to the assignee) may not be waived or varied (§ 9-406(g)).
The trap
The clause does not merely become unenforceable in damages: it is ineffective, so the transfer happens and after a proper notification the account debtor discharges only by paying the assignee. Two Illinois-specific edges on top of the uniform text: § 9-406(e) pulls an outright SALE of a payment intangible or promissory note back out of subsection (d), so a no-assignment clause can still bite there; and the published section (source line P.A. 103-1036, eff. 1-1-25) carries subsection (l), under which (a), (b), (c) and (g) do not apply to a controllable account or controllable payment intangible. Section 9-406 does nothing for non-monetary rights, and the section that does reach them cuts the other way: under § 9-408(a) (which opens 'Except as otherwise provided in subsection (b)') a term in a general intangible "including a contract, permit, license, or franchise" that restricts assignment is ineffective only to the extent it would impair the creation, attachment or perfection of a SECURITY INTEREST, § 9-408(b) narrows that further for paper (as to a payment intangible or promissory note, (a) reaches a security interest only if it arises out of a SALE of the paper, other than a disposition under § 9-610 or an acceptance of collateral under § 9-620), § 9-408(c) does the same job as (a) against a rule of law, statute or regulation, and § 9-408(d) then strips the resulting security interest of every right against the account debtor. It is not enforceable against it, imposes no duty on it, and does not entitle the secured party to use or assign the debtor's rights or to enforce. So a no-assignment clause in a licence still stops the licence itself from moving; what it cannot stop is a lender taking a paper interest in it. Subsection (h) makes the section subject to other law for an account debtor who is an individual who incurred the obligation primarily for personal, family or household purposes, and under subsection (i) the section does not apply to an assignment of a health-care-insurance receivable.
12 authorities
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(b) When notification ineffective. Subject to subsections (h) and (l), notification is ineffective under subsection (a): (1) if it does not reasonably identify the rights assigned; (2) 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 Article; or (3) 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: (A) only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee; (B) a portion has been assigned to another assignee; or (C) the account debtor knows that the assignment to that assignee is limited.
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(d) Term restricting assignment generally ineffective. In this subsection, "promissory note" includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in subsection (e) and Sections 2A-303 and 9-407, 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.
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(e) Inapplicability of subsection (d) to certain sales. 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 9-610 or an acceptance of collateral under Section 9-620.
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(a) Discharge of account debtor; effect of notification. Subject to subsections (b) through (i) and (l), 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.
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(c) Proof of assignment. Subject to subsections (h) and (l), 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 (a).
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(g) Subsection (b)(3) not waivable. Subject to subsections (h) and (l), an account debtor may not waive or vary its option under subsection (b)(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. (i) Inapplicability to health-care-insurance receivable. This Section does not apply to an assignment of a health-care-insurance receivable.
- statute810 ILCS 5/9-408enactment date not established
The words that state the rule
(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.
- statute810 ILCS 5/9-408enactment date not established
The words that state the rule
(d) Limitation on ineffectiveness under subsections (a) and (c). 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) would be effective under law other than this Article but is ineffective under subsection (a) or (c), 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.
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(f) Legal restrictions on assignment generally ineffective. Except as otherwise provided in Sections 2A-303 and 9-407 and subject to subsections (h) and (i), 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: (1) 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 (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 or chattel paper.
- statute810 ILCS 5/9-406enactment date not established
The words that state the rule
(l) Inapplicability of certain subsections. Subsections (a), (b), (c), and (g) do not apply to a controllable account or controllable payment intangible.
- statute810 ILCS 5/9-408enactment date not established
The words that state the rule
(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, other than a sale pursuant to a disposition under Section 9-610 or an acceptance of collateral under Section 9-620.
- statute810 ILCS 5/9-408enactment date not established
The words that state the rule
(c) Legal restrictions on assignment generally ineffective. A rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health-care-insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation: (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.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.