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. N.C.G.S. § 25-9-406(d) (which opens 'Except as otherwise provided in subsection (e) of this section and G.S. 25-2A-303 and G.S. 25-9-407, and subject to subsection (h) of this section') makes a term in an agreement between an account debtor and an assignor, or in a promissory note, INEFFECTIVE to the extent that 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 may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or remedy. What the account debtor actually gets is the notification machinery of § 25-9-406(a)-(c), read in full: it may discharge by paying the assignor until, but not after, it receives a notification signed by the assignor or the assignee that the amount due has been assigned and that payment is to be made to the assignee; the notification is ineffective if it does not reasonably identify the rights assigned; and if the account debtor requests it, an assignee that does not seasonably furnish reasonable proof of the assignment leaves the account debtor free to keep paying the assignor.
The trap
The clause is not merely a breach that sounds in damages: it is ineffective, so the transfer happens and after a proper notification the account debtor discharges only by paying the assignee. Four limits in the same section, and one outside it, decide whether that is so. Subsection (e) pulls an outright SALE of a payment intangible or promissory note back out of subsection (d), other than a sale on a Section 9-610 disposition or a Section 9-620 acceptance of collateral, so a no-assignment clause can still bite there. Subsection (h) makes the whole section subject to other law that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family or household purposes. Subsection (i) takes two things out of the section altogether (an assignment of a health-care-insurance receivable, and an interest in a partnership or limited liability company), so a transfer restriction on LLC membership interests is outside § 25-9-406 entirely. Subsection (l) switches off subsections (a), (b), (c) and (g) for a controllable account or controllable payment intangible. And because subsection (d) is itself subject to G.S. 25-2A-303 and G.S. 25-9-407, leases have their own rules: under § 25-2A-303(g), in a CONSUMER lease the language prohibiting transfer or making a transfer an event of default must be specific, by a writing, and conspicuous. Section 25-9-406 does nothing for non-monetary rights (a licence, a services obligation, or a change-of-control transfer) none of which is verified here.
13 authorities
- statuteN.C.G.S. § 25-9-406enactment 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) of this section and G.S. 25-2A-303 and G.S. 25-9-407, 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 does either of the following: (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.
- statuteN.C.G.S. § 25-9-406enactment 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 G.S. 25-9-610 or an acceptance of collateral under G.S. 25-9-620.
- statuteN.C.G.S. § 25-9-406enactment date not established
The words that state the rule
This section is subject to law other than this Article that establishes a different rule for an account debtor who is an individual and who incurred the obligation primarily for personal, family, or household purposes.
- statuteN.C.G.S. § 25-9-406enactment date not established
The words that state the rule
This section does not apply to an assignment of a health-care-insurance receivable or an interest in a partnership or limited liability company.
- statuteN.C.G.S. § 25-2A-303enactment date not established
The words that state the rule
(b) Except as provided in subsection (c) of this section and G.S. 25-9-407, a provision in a lease agreement which (i) 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 (ii) makes such a transfer an event of default, gives rise to the rights and remedies provided in subsection (d) of this section, but a transfer that is prohibited or is an event of default under the lease agreement is otherwise effective.
- statuteN.C.G.S. § 25-2A-303enactment date not established
The words that state the rule
(c) A provision in a lease agreement which (i) prohibits a transfer of a right to damages for default with respect to the whole lease contract or of a right to payment arising out of the transferor's due performance of the transferor's entire obligation, or (ii) makes such a transfer an event of default, is not enforceable, and such a transfer is not a transfer that materially impairs the prospect of obtaining return performance by, materially changes the duty of, or materially increases the burden or risk imposed on, the other party to the lease contract within the purview of subsection (d) of this section.
- statuteN.C.G.S. § 25-2A-303enactment date not established
The words that state the rule
In a consumer lease, to prohibit the transfer of an interest of a party under the lease contract or to make a transfer an event of default, the language must be specific, by a writing, and conspicuous.
- statuteN.C.G.S. § 25-9-406enactment 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.
- statuteN.C.G.S. § 25-9-406enactment 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 ) 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, 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 shall not discharge the obligation by paying the assignor.
- statuteN.C.G.S. § 25-9-406enactment date not established
The words that state the rule
(b) When Notification Ineffective. - Subject to subsections (h) and ( l ) of this section, notification is ineffective under subsection (a) of this section under any of the following conditions: (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. (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 any of the following applies: 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. c. The account debtor knows that the assignment to that assignee is limited.
- statuteN.C.G.S. § 25-9-406enactment date not established
The words that state the rule
(c) Proof of Assignment. - Subject to subsections (h) and ( l ) of this section, 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) of this section.
- statuteN.C.G.S. § 25-9-406enactment date not established
The words that state the rule
Subsections (a), (b), (c), and (g) of this section do not apply to a controllable account or controllable payment intangible.
- statuteN.C.G.S. § 25-9-406enactment date not established
The words that state the rule
(g) Subdivision (b)(3) Not Waivable. - Subject to subsections (h) and ( l ) of this section, an account debtor shall not waive or vary its option under subdivision (b)(3) of this section.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.