Agreement Not to Assert Defenses Against Assignee

  1. Law
  2. Georgia Code
  3. Commercial Code
  4. Secured Transactions
  5. Rights of Third Parties
  6. Agreement Not to Assert Defenses Against Assignee

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  1. "Value." As used in this Code section, the term "value" has the meaning provided in subsection (a) of Code Section 11-3-303.
  2. Agreement not to assert claim or defense. Except as otherwise provided in this Code section, an agreement between an account debtor and an assignor not to assert against an assignee any claim or defense that the account debtor may have against the assignor is enforceable by an assignee that takes an assignment:
    1. For value;
    2. In good faith;
    3. Without notice of a claim of a property or possessory right to the property assigned; and
    4. Without notice of a defense or claim in recoupment of the type that may be asserted against a person entitled to enforce a negotiable instrument under subsection (a) of Code Section 11-3-305.
  3. When subsection (b) of this Code section not applicable. Subsection (b) of this Code section does not apply to defenses of a type that may be asserted against a holder in due course of a negotiable instrument under subsection (b) of Code Section 11-3-305.
  4. Omission of required statement in consumer transaction. In a consumer transaction, if a record evidences the account debtor's obligation, law other than this article requires that the record include a statement to the effect that the rights of an assignee are subject to claims or defenses that the account debtor could assert against the original obligee, and the record does not include such a statement:
    1. The record has the same effect as if the record included such a statement; and
    2. The account debtor may assert against an assignee those claims and defenses that would have been available if the record included such a statement.
  5. Rule for individual under other law. This Code 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.
  6. Other law not displaced. Except as otherwise provided in subsection (d) of this Code section, this Code section does not displace law other than this article which gives effect to an agreement by an account debtor not to assert a claim or defense against an assignee.

(Code 1981, §11-9-403, enacted by Ga. L. 2001, p. 362, § 1.)

Law reviews.

- For article supporting the retention of waiver of defense clauses in credit card agreements, see 10 Ga. St. B.J. 17 (1973). For article discussing the implied warranty of fitness for a particular purpose, see 9 Ga. L. Rev. 149 (1974). For article, "The Good Faith Purchase Idea and the Uniform Commercial Code," see 15 Ga. L. Rev. 605 (1981). For note analyzing consumer protection in retail installment contracts with reference to waiver of defenses by purchaser and the denial of holder in due course status to assignee of contract, in light of Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971), see 23 Mercer L. Rev. 673 (1972). For comment on Geiger Fin. Co. v. Graham, 123 Ga. App. 771, 182 S.E.2d 521 (1971), see 8 Ga. St. B.J. 400 (1972).

JUDICIAL DECISIONS

Editor's notes.

- In the light of the similarity of the provisions, decisions under former Article 9 are included in the annotations for this Code section. For a table of comparable provisions, see the table at the beginning of the Article.

Applicability of section.

- Former Section 11-9-206 is applicable to all transactions unless there is a different provision for consumer goods. Massey-Ferguson Credit Corp. v. Wiley, 655 F. Supp. 655 (M.D. Ga. 1987) (decided under former Code Section 11-9-206).

Assignment of security interest.

- Former Section 11-9-206 created holder in due course status for an assignee who takes a security agreement with a "waiver of defenses" clause even if the security agreement is assigned in the absence of the assignment of an Article III negotiable instrument in the same transaction. Massey-Ferguson Credit Corp. v. Wiley, 655 F. Supp. 655 (M.D. Ga. 1987) (decided under former Code Section 11-9-206).

Breach of warranty.

- Claim for breach of warranty is assertable only against the manufacturer and not against an assignee. Harrison v. Massey-Ferguson Credit Corp., 168 Ga. App. 788, 310 S.E.2d 544 (1983) (decided under former Code Section11-9-206).

Sale-lease back agreements.

- Fact that sale-lease back agreement was not a secured transaction did not preclude application of the former provisions of this section. United Counties Trust Co. v. Mac Lum, Inc., 643 F.2d 1140 (5th Cir. 1981) (decided under former Code Section 11-9-206).

Common law governs waiver of defense clauses in leases.

- Georgia's version of § 9-206 (former § 11-9-206, see now § 11-9-406) of Uniform Commercial Code does not include phrases "or lessee(s)" and "or lessor" because Georgia did not adopt 1962 revision of Uniform Commercial Code which extended § 9-206 (former § 11-9-206, see now § 11-9-406) to leases; thus, in Georgia, common law rather than § 9-206 (former § 11-9-206, see now § 11-9-406) governs effect of waiver of defense clauses in leases. United Counties Trust Co. v. Mac Lum, Inc., 643 F.2d 1140 (5th Cir. 1981) (decided under former Code Section 11-9-206).

Party-to-the-transaction rule.

- For a discussion of the party-to-the-transaction rule as a defense to the holder in due course status, see Design Eng'g, Constr. Int'l, Inc. v. Cessna Fin. Corp., 164 Ga. App. 159, 296 S.E.2d 195 (1982) (decided under former Code Section11-9-206).

RESEARCH REFERENCES

Am. Jur. 2d.

- 68A Am. Jur. 2d, Secured Transactions, §§ 13, 14, 65-67, 106, 110-112, 145, 192 et seq., 282-284, 514, 538 et seq.

U.L.A.

- Uniform Commercial Code (U.L.A.) § 9-403.

ALR.

- Validity, in contract for installment sale of consumer goods, or commercial paper given in connection therewith, of provision waiving, as against assignee, defenses good against seller, 39 A.L.R.3d 518.


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