Will a Kansas court give effect to a clause barring assignment or requiring the other side's consent?
Not as to receivables and promissory notes. Except as subsection (e), K.S.A. 17-76,134(g), K.S.A. 84-2a-303 and K.S.A. 84-9-407 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 consent of the account debtor or the person obligated on the 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 provides that such an assignment or security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or remedy (K.S.A. 84-9-406(d)). Subsection (d) does not apply to the sale of a payment intangible or promissory note other than a sale on a disposition under K.S.A. 84-9-610 or an acceptance of collateral under K.S.A. 84-9-620 (subsection (e)); the section is subject to law other than article 9 setting a different rule for an account debtor who is an individual who incurred the obligation primarily for personal, family or household purposes (subsection (h)); and it does not apply to an assignment of a health-care-insurance receivable (subsection (i)). Subsection (f) does against law what subsection (d) does against contract: subject to subsections (h) and (i), and except as K.S.A. 17-76,134(g), K.S.A. 84-2a-303 and K.S.A. 84-9-407 provide, 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 same extent. Subsection (j) provides that the section prevails over any inconsistent provisions of any laws, rules and regulations.
The trap
A consent-to-assign clause in the contract that generates the receivable does not stop the counterparty's lender from taking or enforcing a security interest in it, and the assignment cannot be converted into a default or a right of termination. What subsection (d) does not disable is a restriction on rights that are not accounts, chattel paper, payment intangibles or promissory notes; a sale of a payment intangible or note outside K.S.A. 84-9-610 and 84-9-620; an individual consumer account debtor governed by other law; and a health-care-insurance receivable. Note which subsection answers which obstacle: a term in the contract is dealt with by subsection (d), a rule of law, statute or regulation by subsection (f), and the two do not have the same reach - subsection (f) covers an account or chattel paper and not a payment intangible or promissory note. Kansas also writes in a carve-out other states do not: subsection (d) is expressly subject to K.S.A. 17-76,134(g), the limited liability company provision, as well as to K.S.A. 84-2a-303 and 84-9-407. Two of those three are now read. K.S.A. 84-9-407 is the lease analogue: a term in a lease agreement restricting assignment or the creation, attachment, perfection or enforcement of a security interest in a party's interest under the lease or in the lessor's residual interest in the goods is equally ineffective, except that a term making such a transfer a default IS effective where there is a transfer by the lessee of the right of possession or use of the goods in violation of the term, or a delegation of a material performance in violation of it. And K.S.A. 84-2a-303(2) answers, for leases, the question a general no-assignment clause raises everywhere: a provision prohibiting a transfer or making it an event of default gives the other party the rights and remedies of subsection (4), "but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective" - a breach, not a nullity. K.S.A. 17-76,134(g), the limited liability company provision, is named rather than described.
11 authorities
- statuteK.S.A. 84-9-406enactment date not established
The words that state the rule
Except as otherwise provided in subsection (e), subsection (g) of K.S.A. 17-76,134, K.S.A. 84-2a-303 and K.S.A. 2025 Supp. 84-9-407, and amendments thereto, 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:
- statuteK.S.A. 84-9-406enactment date not established
The words that state the rule
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
- statuteK.S.A. 84-9-406enactment 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 K.S.A. 2025 Supp. 84-9-610, and amendments thereto, or an acceptance of collateral under K.S.A. 2025 Supp. 84-9-620, and amendments thereto.
- statuteK.S.A. 84-9-406enactment date not established
The words that state the rule
(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.
- statuteK.S.A. 84-9-406enactment 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.
- statuteK.S.A. 84-9-406enactment date not established
The words that state the rule
(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.
- statuteK.S.A. 84-9-406enactment date not established
The words that state the rule
(j) Section prevails over specified inconsistent law. This section prevails over any inconsistent provisions of any laws, rules, and regulations.
- statuteK.S.A. 84-9-406enactment date not established
The words that state the rule
(f) Legal restrictions on assignment generally ineffective. Except as otherwise provided in subsection (g) of K.S.A. 17-76,134, K.S.A. 84-2a-303 and K.S.A. 2025 Supp. 84-9-407, and amendments thereto, 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.
- statuteK.S.A. 84-9-407enactment 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 lease agreement is ineffective to the extent that it: (1) Prohibits, restricts, or requires the consent of a party to the lease to the assignment or transfer or the creation, attachment, perfection, or enforcement of a security interest in an interest of a party under the lease contract or in the lessor's residual interest in the goods; 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 lease.
- statuteK.S.A. 84-9-407enactment date not established
The words that state the rule
(b) Effectiveness of certain terms. Except as otherwise provided in K.S.A. 84-2a-303(7), and amendments thereto, a term described in subsection (a)(2) is effective to the extent that there is: (1) A transfer by the lessee of the lessee's right of possession or use of the goods in violation of the term; or (2) a delegation of a material performance of either party to the lease contract in violation of the term.
- statuteK.S.A. 84-2a-303enactment date not established
The words that state the rule
(2) Except as provided in subsection 3 and K.S.A. 2025 Supp. 84-9-407 and amendments thereto, a provision in a lease agreement which (a) prohibits the voluntary or involuntary transfer, including a transfer by sale, sublease, creation or enforcement of a security interest, or attachment, levy, or other judicial process, of an interest of a party under the lease contract or of the lessor's residual interest in the goods, or (b) makes such a transfer an event of default, gives rise to the rights and remedies provided in subsection (4), but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.