Does a 'no assignment without consent' clause stop the counterparty from assigning the money we owe it under Utah law?
No, as to receivables. Under Utah Code § 70A-9a-406, except as otherwise provided in subsection (5) and in §§ 70A-2a-303 and 70A-9a-407, 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 it prohibits, restricts or requires the account debtor's consent 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 makes that assignment a default, breach, right of recoupment, claim, defense, termination or remedy. The account debtor's protection is notification: it may discharge its obligation by paying the assignor until it receives an authenticated notification that the amount has been assigned and payment is to be made to the assignee, and after that it may not discharge by paying the assignor. Notification is ineffective, though, if it does not reasonably identify the rights assigned, if an agreement between the account debtor and a seller of a payment intangible limits the duty to pay anyone other than the seller and that limit is effective under other law, or, at the account debtor's option, if it directs payment of less than the full amount of an instalment or other periodic payment. And if the account debtor asks, the assignee must seasonably furnish reasonable proof that the assignment was made; until it does, the account debtor may still discharge by paying the assignor even after notification.
The trap
The clause is ineffective, not merely a covenant: after a proper notification, paying the original counterparty does not discharge the debt. The override does not reach the SALE of a payment intangible or promissory note (other than a disposition under § 70A-9a-610 or an acceptance under § 70A-9a-620), so an anti-assignment term can still matter there. And § 70A-9a-406 says nothing about assignment of non-monetary contract rights, which this rule does not address. Three further limits sit at the end of the section: it defers to law outside the chapter for an account debtor who is an individual and incurred the obligation primarily for personal, family or household purposes, it does not apply to an assignment of a health-care-insurance receivable, and the discharge, notification and proof subsections do not apply to a controllable account or controllable payment intangible.
5 authorities
- statuteUtah Code § 70A-9a-406enactment date not established
The words that state the rule
Except as otherwise provided in Subsection (5) and Sections 70A-2a-303 and 70A-9a-407 , 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: 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 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
- statuteUtah Code § 70A-9a-406enactment date not established
The words that state the rule
Subsection (4) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under Section 70A-9a-610 or an acceptance of collateral under Section 70A-9a-620
- statuteUtah Code § 70A-9a-406enactment date not established
The words that state the rule
Subject to Subsections (2) through (9) , 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.
- statuteUtah Code § 70A-9a-406enactment date not established
The words that state the rule
Subject to Subsections (8) and (10), notification is ineffective under Subsection (1) : if it does not reasonably identify the rights assigned; 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 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: only a portion of the account, chattel paper, or payment intangible has been assigned to that assignee; a portion has been assigned to another assignee; or the account debtor knows that the assignment to that assignee is limited. Subject to Subsection (8) , 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) .
- statuteUtah Code § 70A-9a-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. This section does not apply to an assignment of a health-care-insurance receivable. Subsections (1) through (3) and (7) do not apply to a controllable account or controllable payment intangible.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.