2023 New York Laws › UCC - Uniform Commercial Code › Article 9 - Secured Transactions › Part 4 - Rights of Third Parties › 9-403 - Agreement Not to Assert Defenses Against Assignee

Section 9--403. Agreement Not to Assert Defenses Against Assignee.
(a) "Value."  In  this  section,  "value"  has the meaning provided in
Section 3--303. In this section the meaning of "obligor" is not  limited
to  the  meaning  given it in Section 9--102(a)(59). In this section the
term "person entitled to enforce the instrument" means (i) the holder of
the instrument, (ii) a nonholder in possession of the instrument who has
the rights of a holder, or (iii) a  person  not  in  possession  of  the
instrument who is entitled to enforce the instrument pursuant to Article
3  of  this  chapter.  A  person may be a person entitled to enforce the
instrument even though the person is not the owner of the instrument  or
is in wrongful possession of the instrument.
(b) Agreement  not  to  assert  claim  or defense. Except as otherwise
provided in this section, an agreement between an account debtor and  an
assignor not to assert against an assignee any claim or defense that the
account  debtor  may  have  against  the  assignor  is 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) a  defense  of  the  obligor  based on (i) infancy of the
obligor to the  extent  it  is  a  defense  to  a  simple
contract,   (ii)  duress,  lack  of  legal  capacity,  or
illegality of the transaction  which,  under  other  law,
nullifies the obligation of the obligor, (iii) fraud that
induced  the  obligor to sign the instrument with neither
knowledge nor reasonable  opportunity  to  learn  of  its
character  or  its  essential terms, or (iv) discharge of
the obligor in solving proceedings;
(B) a defense of the obligor stated anywhere in Article 3  of
this  chapter  or  a defense of the obligor that would be
available  if  the  person  entitled   to   enforce   the
instrument  were  enforcing  a  right  to payment under a
simple contract; and
(C) a claim in recoupment of the obligor against the assignor
if the claim arose from the transaction that gave rise to
the assigned obligation, but the claim of the obligor may
be asserted against an assignee only to reduce the amount
owing on the assigned obligation at the time  the  action
is brought.
(c) When  subsection  (b) not applicable. An assignee takes subject to
the defenses listed in  paragraph  (b)(4)(A),  but  is  not  subject  to
defenses  of  the  obligor  stated  in  paragraph (b)(4)(B) or claims in
recoupment stated in paragraph (b)(4)(C) against a person other than the
enforcing assignee.
(d) Omission of required  statement  in  consumer  transaction.  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 rights of an assignee are subject  to
claims  or  defenses  that  the  account debtor could assert against the
original obligee, and the record does not include such a statement:
(1) the record has the same effect as if the record included such
a statement; and
(2) the account debtor  may  assert  against  an  assignee  those
claims  and  defenses  that  would have been available if the
record included such a statement.
(e) Rule for individual under other law. 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.
(f) Other   law   not  displaced.  Except  as  otherwise  provided  in
subsection (d), this section does  not  displace  law  other  than  this
article  which  gives effect to an agreement by an account debtor not to
assert a claim or defense against an assignee.