§ 9—408. Restrictions on assignment of promissory notes, health care insurance receivables,
and certain general intangibles ineffective
(a) Except as otherwise provided in subsections (b) and (f) of this section, 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) Subsection (a) of this 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 section 9—610 of this title or an acceptance of collateral under section 9—620 of this title.
(c) Except as otherwise provided in subsection (f) of this section, 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) 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 section would be effective under law other than this article but is ineffective
under subsection (a) or (c) of this 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.
(e) This section prevails over any inconsistent provisions of this title.
(f) This section does not apply to a security interest in an ownership interest in a general
partnership, limited partnership, or limited liability company.
(g) In this section, “promissory note” includes a negotiable instrument that evidences
chattel paper. (Added 1999, No. 106 (Adj. Sess.), § 2, eff. July 1, 2001; amended 2013, No. 157 (Adj. Sess.), § 1; 2025, No. 17, § 9, eff. July 1, 2025.)