9408 - Restrictions on assignment of promissory notes, health-care-insurance receivables and certain general intangibles ineffective.
§ 9408. Restrictions on assignment of promissory notes, health- care-insurance receivables and certain general intangibles ineffective. (a) Term restricting assignment generally ineffective.-- Except as otherwise provided in subsections (b) and (e), 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, is 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 or transfer or the 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. (b) Applicability of subsection (a) to sales of certain rights to payment.--Subsection (a) 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. (c) Legal restrictions on assignment generally ineffective.--Except as otherwise provided in subsection (e), a rule of law, statute or regulation which 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, is 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 or transfer or the 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. (d) Limitation on ineffectiveness under subsections (a) and (c).--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) would be effective under law other than this division but is ineffective under subsection (a) or (c), 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. (e) Section prevails over inconsistent law.-- (1) Except as set forth in paragraphs (2), (3) and (4), this section prevails over any inconsistent provision of any existing or future statute or regulation of the Commonwealth unless the provision is contained in a statute of the Commonwealth, refers expressly to this section and states that the provision prevails over this section. (2) Subsection (c) does not apply to the provisions, claims and rights listed in section 9406(j)(3) (relating to 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). (3) Subsections (a) and (c) do not apply to the claims and rights described in section 9406(j)(4). (4) The limitations on restrictions of assignments contained in this section are inapplicable to transfers of structured settlement payment rights pursuant to the act of February 11, 2000 (P.L.1, No.1), known as the Structured Settlement Protection Act. Cross References. Section 9408 is referred to in section 9401 of this title.