KRS 355.9-406: Discharge of account debtor -- Notification of assignment --

Identification and proof of assignment -- Restrictions on assignment of

accounts, chattel paper, payment intangibles, and promissory notes ineffective.

(1) Subject to subs ections (2) to (9) and (12) 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 assigno r 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.

(2) Subject to subsections (8) and (12) of this section, notification is ineffective under

subsection (1) of this section:

(a) If it does not reasonably identify the rights assigned;

(b) To the extent that an agreement betw een 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; or

(c) At the option of an account debtor, if the notificat ion notifies the account

debtor to make less than the full amount of any installment or other periodic

payment to the assignee, even if:

1. Only a portion of the account, chattel paper, or payment intangible has

been assigned to that assignee;

2. A portion has been assigned to another assignee; or

3. The account debtor knows that the assignment to that assignee is

limited.

(3) Subject to subsections (8) and (12) 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 (1) of this section.

(4) (a) In this subsection, "promissory note" includes a negotiable instrument that

evidences chattel paper.

(b) Except as otherwise provid ed in subsections (5) and (11) of this section and

KRS 355.2A-303 and 355.9-407, and subject to subsection (8) 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:

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; 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, chattel paper, payment

intangible, or promissory note.

(5) Subsection (4) 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 KRS 355.9-610 or

an acceptance of collateral under KRS 355.9-620.

(6) Except as otherwise provided in subsection (11) of this section and KRS 355.2A -

303 and 355.9 -407 and subject to subsections (8) and (9) of this section, 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:

(a) 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

(b) 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.

(7) Subject to subsections (8) and (12) of this section, an account debtor may not waive

or vary its option under subsection (2)(c) of this section.

(8) This section is subj ect 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.

(9) This section does not apply to an assignment of a health-care-insurance receivable.

(10) Reserved.

(11) Subsections (4) and (6) of this section do not apply to a security interest in an

ownership interest in a general partnership, limited partnership, or limited liability

company.

(12) Subsections (1) to (3 ) and (7) of this section do not apply to a controllable account

or controllable payment intangible.