CO Code § 4-9-404 (2021)
2021 Colorado Code|Title 4 - Uniform Commercial Code|Article 9 - Secured Transactions|Part 4 - Rights of Third Parties|§ 4-9-404. Rights Acquired by Assignee; Claims and Defenses Against Assignee

  Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) to (e) of this section, the rights of an assignee are subject to:   All terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction that gave rise to the contract; and    Any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives a notification of the assignment authenticated by the assignor or the assignee.       Subject to subsection (c) of this section and except as otherwise provided in subsection (d) of this section, the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) of this section only to reduce the amount the account debtor owes.    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.    In a consumer transaction, if a record evidences the account debtor's obligation, law other than this article requires that the record include a statement to the effect that the account debtor's recovery against an assignee with respect to claims and defenses against the assignor may not exceed amounts paid by the account debtor under the record, and the record does not include such a statement, the extent to which a claim of an account debtor against the assignor may be asserted against an assignee is determined as if the record included such a statement.    This section does not apply to an assignment of a health-care-insurance receivable.     History. Source: L. 2001: Entire article R&RE, p. 1372, § 1, effective July 1.    Editor's note:   This section is similar to former § 4-9-318 (1) as it existed prior to 2001.   OFFICIAL COMMENT   1. Source. Former Section 9-318(1).   2. Purpose; Rights of Assignee in General. Subsection (a), like former Section 9- 318(1), provides that an assignee generally takes an assignment subject to defenses and claims of an account debtor. Under subsection (a)(1), if the account debtor's defenses on an assigned claim arise from the transaction that gave rise to the contract with the assignor, it makes no difference whether the defense or claim accrues before or after the account debtor is notified of the assignment. Under subsection (a)(2), the assignee takes subject to other defenses or claims only if they accrue before the account debtor has been notified of the assignment. Of course, an account debtor may waive its right to assert defenses or claims against an assignee under Section 9-403 or other applicable law. Subsection (a) tracks Section 3-305(a)(3) more closely than its predecessor.   3. Limitation on Affirmative Claims. Subsection (b) is new. It limits the claim that the account debtor may assert against an assignee. Borrowing from Section 3-305(a)(3) and cases construing former Section 9-318, subsection (b) generally does not afford the account debtor the right to an affirmative recovery from an assignee.   4. Consumer Account Debtors; Relationship to Federal Trade Commission Rule. Subsections (c) and (d) also are new. Subsection (c) makes clear that the rules of this section are subject to other law establishing special rules for consumer account debtors. An “account debtor who is an individual” as used in subsection (c) includes individuals who are jointly or jointly and severally obligated. Subsection (d) applies to rights evidenced by a record that is required to contain, but does not contain, the notice set forth in Federal Trade Commission Rule 433, 16 C.F.R. Part 433 (the “Holder-in-Due-Course Regulations”). Under subsection (d), a consumer account debtor has the same right to an affirmative recovery from an assignee of such a record as the consumer would have had against the assignee had the record contained the required notice.   5. Scope; Application to “Account Debtor.” This section deals only with the rights and duties of “account debtors” and for the most part only with account debtors on accounts, chattel paper, and payment intangibles. Subsection (e) provides that the obligation of an insurer with respect to a health-care-insurance receivable is governed by other law. References in this section to an “account debtor” include account debtors on collateral that is proceeds. Neither this section nor any other provision of this Article, including Sections 9-408 and 9-409, provides analogous regulation of the rights and duties of other obligors on collateral, such as the maker of a negotiable instrument (governed by Article 3), the issuer of or nominated person under a letter of credit (governed by Article 5), or the issuer of a security (governed by Article 8). Article 9 leaves those rights and duties untouched; however, Section 9-409 deals with the special case of letters of credit. When chattel paper is composed in part of a negotiable instrument, the obligor on the instrument is not an “account debtor,” and Article 3 governs the rights of the assignee of the chattel paper with respect to the issues that this section addresses. See, e.g., Section 3-601 (dealing with discharge of an obligation to pay a negotiable instrument).   ANNOTATION   Annotator's note. Since § 4-9-404 is similar to § 4-9-318 (1) as it existed prior to the 2001 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.   This section includes set-offs and counter claims. Farmers Acceptance Corp. v. DeLozier, 179 Colo. 291 , 496 P.2d 1016.   The right to receive money due or to become due under an existing contract may be assigned even though the contract itself may not be assignable. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291 , 496 P.2d 1016 (1972).   Assignee is subject to defenses against assignor. An assignee of contract rights stands in the shoes of the assignor, has no greater rights against a debtor than does the assignor, and is subject to all equities and defenses which can be raised by a debtor against the assignor, with the exception of those claims and defenses which are both unrelated to the underlying contract and arise after a debtor is notified of the assignment. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291 , 496 P.2d 1016 (1972).   Where an assignee obtains money which the assignor could only retain upon performance of a contract and the assignor fails to perform the contract, an assignee cannot retain mistaken, or even negligent, payments made to it by a debtor, unless there has been a subsequent change of position by assignee. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291 , 496 P.2d 1016 (1972).   Where there is no evidence that an assignee relies to his detriment upon such a payment made by a debtor, the judgment of the trial court against him is proper in light of this section. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291 , 496 P.2d 1016 (1972).   Agency relationship between dairyman debtor and agent responsible for marketing milk does not discharge debt to assignee. Mid-States Sales v. Mt. Empire Dairymen's, 741 P.2d 342 (Colo. App. 1987).