Source: http://www.icemiller.com/ice-on-fire-insights/publications/sixth-circuit-holds-that-assignee-is-subject-to-co/
Timestamp: 2016-10-27 16:52:03
Document Index: 536775547

Matched Legal Cases: ['§9', '§9', '§9', '§9', '§9', '§336', '§336', '§336', '§1', '§34', '§9']

Sixth Circuit Holds that Assignee is Subject to Contractual Netting Provision, Ice Miller LLP
(a) the terms of the assigned contract;
(b) defenses or claims in recoupment arising from the transaction that gave rise to the assigned contract; and
(c) other defenses or claims (such as claims arising from transactions unrelated to the assigned contract).
To learn more, please contact John Lawlor or any member of Ice Miller’s Banking and Financial Services practice. This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances. [1] 2015 WL 664406 (6th Cir. Feb. 13, 2015).
[2] UCC §9-102(a)(3) defines “account debtor” as “a person obligated on an account, chattel paper, or general intangible. The term does not include persons obligated to pay a negotiable instrument, even if the instrument constitutes part of chattel paper.” Persons that are not account debtors include tortfeasors with respect to commercial tort claims, banks with respect to deposit accounts and issuers of letters of credit. See Official Comments 5.f and 5.h to UCC §9-102. UCC §9-404(e) provides that UCC §9-404 does not apply to health-case-insurance receivables. The rule in UCC §9-404(a) also does not apply to payment rights that are excluded from the scope of Article 9 of the UCC.
[3] See Restatement (Second) Contracts §336(1) (“By an assignment the assignee acquires a right against the obligor only to the extent that the obligor is under a duty to the assignor . . . .“) and §336(2) (“The right of an assignee is subject to any defense or claim of the obligor which accrues before the obligor receives notification of the assignment, but not to defenses or claims which accrue thereafter except as stated in this Section or as provided by statute.”) See also Restatement (Second) Contracts §336, comment b (“Unlike the negotiation of a negotiable instrument, the assignment of a non-negotiable contractual right ordinarily transfers what the assignor has but only what he has. The assignee's right depends on the validity and enforceability of the contract creating the right, and is subject to limitations imposed by the terms of that contract and to defenses which would have been available against the obligee had there been no assignment.”)
[4] The requirements for giving notice under the UCC are set forth in UCC §1-202.
[5] “The cases generally hold that a defense or claim ‘accrues’ when it would give rise to a cause of action.” White, Summers & Hillman, Uniform Commercial Code §34-6 (footnote omitted).
[6] The enforceability of agreements by account debtors not to assert defenses against assignees is discussed in UCC §9-403(b). Such agreements are enforceable by an assignee that takes an assignment: “(1) for value; (2) in good faith; (3) without notice of a claim of a property or possessory right to the property assigned; and (4) without notice of a defense or claim in recoupment of the type that may be asserted against a person entitled to enforce a negotiable instrument under Section 3-305(a).”