2023 California Code › Commercial Code - COM › DIVISION 12 - CONTROLLABLE ELECTRONIC RECORDS › Section 12106.

12106. (a) An account debtor on a controllable account or controllable payment intangible may discharge its obligation by paying either of the following:
(1) The person having control of the controllable electronic record that evidences the controllable account or controllable payment intangible.
(2) Except as provided in subdivision (b), a person that formerly had control of the controllable electronic record.
(b) Subject to subdivision (d), the account debtor shall 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 meets all of the following:
(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.
(5) Provides a commercially reasonable method by which the account debtor is to pay the transferee.
(c) After receipt of a notification that complies with subdivision (b), the account debtor may discharge its obligation by paying in accordance with the notification and shall not discharge the obligation by paying a person that formerly had control.
(d) Subject to subdivision (h), notification is ineffective under subdivision (b) if any of the following apply:
(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 division.
(3) At the option of the account debtor, if the notification notifies the account debtor to do any of the following:
(A) Divide the payment.
(B) Make less than the full amount of an installment or other periodic payment.
(C) Pay any part of a payment by more than one method or to more than one person.
(e) Subject to subdivision (h), if requested by the account debtor, the person giving the notification under subdivision (b) seasonably shall furnish reasonable proof, using the method in the agreement referred to in paragraph (1) of subdivision (d), 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 subdivision (b).
(f) A person furnishes reasonable proof under subdivision (e) that control has been transferred if the person demonstrates, using the method in the agreement referred to in paragraph (1) of subdivision (d), that the transferee has the power to do all of the following:
(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.
(3) Transfer the powers specified in paragraphs (1) and (2) to another person.
(g) Subject to subdivision (h), an account debtor may not waive or vary its rights under paragraph (1) of subdivision (d) or under subdivision (e), or its option under paragraph (3) of subdivision (d).
(h) This section is subject to law other than this division 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.
(Added by Stats. 2023, Ch. 210, Sec. 90. (SB 95) Effective January 1, 2024.)