N.Y. Uniform Commercial Code Law § 12-106: Discharge of Account Debtor on Controllable Account or Controllable Payment Intangible

Section 12--106. Discharge of Account Debtor on Controllable Account or

Controllable Payment Intangible.

(a) Discharge of account debtor. An account debtor on a controllable

account or controllable payment intangible may discharge its obligation

by paying:

(1) the person having control of the controllable electronic record

that evidences the controllable account or controllable payment

intangible; or

(2) except as provided in subsection (b), a person that formerly had

control of the controllable electronic record.

(b) Content and effect of notification. Subject to subsection (d), the

account debtor may not discharge its obligation by paying a person that

formerly had control of the controllable electronic record if the

account debtor receives a notification that:

(1) is signed by a person that formerly had control or the person to

which control was transferred;

(2) reasonably identifies the controllable account or controllable

payment intangible;

(3) notifies the account debtor that control of the controllable

electronic record that evidences the controllable account or

controllable payment intangible was transferred;

(4) identifies the transferee, in any reasonable way, including by

name, identifying number, cryptographic key, office, or account number;

and

(5) provides a commercially reasonable method by which the account

debtor is to pay the transferee.

(c) Discharge following effective notification. After receipt of a

notification that complies with subsection (b), the account debtor may

discharge its obligation by paying in accordance with the notification

and may not discharge the obligation by paying a person that formerly

had control.

(d) When notification ineffective. Subject to subsection (h),

notification is ineffective under subsection (b):

(1) unless, before the notification is sent, the account debtor and

the person that, at that time, had control of the controllable

electronic record that evidences the controllable account or

controllable payment intangible agree in a signed record to a

commercially reasonable method by which a person may furnish reasonable

proof that control has been transferred;

(2) to the extent an agreement between the account debtor and 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

(3) at the option of the account debtor, if the notification notifies

the account debtor to:

(A) divide a payment;

(B) make less than the full amount of an installment or other periodic

payment; or

(C) pay any part of a payment by more than one method or to more than

one person.

(e) Proof of transfer of control. Subject to subsection (h), if

requested by the account debtor, the person giving the notification

under subsection (b) seasonably shall furnish reasonable proof, using

the method in the agreement referred to in subsection (d)(1), that

control of the controllable electronic record has been transferred.

Unless the person complies with the request, the account debtor may

discharge its obligation by paying a person that formerly had control,

even if the account debtor has received a notification under subsection

(b).

(f) What constitutes reasonable proof. A person furnishes reasonable

proof under subsection (e) that control has been transferred if the

person demonstrates, using the method in the agreement referred to in

subsection (d)(1), that the transferee has the power to:

(1) avail itself of substantially all the benefit from the

controllable electronic record;

(2) prevent others from availing themselves of substantially all the

benefit from the controllable electronic record; and

(3) transfer the powers specified in paragraphs (1) and (2) to another

person.

(g) Rights not waivable. Subject to subsection (h), an account debtor

may not waive or vary its rights under subsections (d)(1) and (e) or its

option under subsection (d)(3).

(h) Rule for individual under other law. This 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.