Restrictions on Assignment of Promissory Notes, Health Care Insurance Receivables, and Certain General Intangibles Ineffective

  1. Law
  2. Georgia Code
  3. Commercial Code
  4. Secured Transactions
  5. Rights of Third Parties
  6. Restrictions on Assignment of Promissory Notes, Health Care Insurance Receivables, and Certain General Intangibles Ineffective

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  1. Term restricting assignment generally ineffective. Except as otherwise provided in subsection (b) of this Code section or in Code Section 53-12-80, 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, shall be 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, transfer, 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.
  2. Applicability of subsection (a) of this Code section to sales of certain rights to payment. Subsection (a) of this Code section 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 Code Section 11-9-610 or an acceptance of collateral under Code Section 11-9-620.
  3. Legal restrictions on assignment generally ineffective. Except as otherwise provided in Code Section 53-12-80, 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, shall be 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, transfer, 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.
  4. Limitation on ineffectiveness under subsections (a) and (c) of this Code section. 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) of this Code section would be effective under law other than this article but is ineffective under subsection (a) or (c) of this Code section, 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.

(Code 1981, §11-9-408, enacted by Ga. L. 2001, p. 362, § 1; Ga. L. 2010, p. 579, § 7/SB 131; Ga. L. 2013, p. 690, § 9/SB 185.)

The 2010 amendment, effective July 1, 2010, in the introductory paragraphs of subsections (a) and (c), substituted "Code Section 53-12-80" for "Code Section 53-12-28" and substituted "shall be ineffective" for "is ineffective" near the end; deleted "assignment, transfer," preceding "creation, attachment," in paragraph (c)(1); and inserted "assignment, transfer," near the beginning of paragraph (c)(2).

The 2013 amendment, effective July 1, 2013, added ", other than a sale pursuant to a disposition under Code Section 11-9-610 or an acceptance of collateral under Code Section 11-9-620" at the end of subsection (b).

RESEARCH REFERENCES

U.L.A.

- Uniform Commercial Code (U.L.A.) § 9-408.


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