2023 New York Laws › UCC - Uniform Commercial Code › Article 9 - Secured Transactions › Part 4 - Rights of Third Parties › 9-408 - Restrictions on Assignment of Promissory Notes, Health-Care-Insurance Receivables, and Certain General Intangibles Ineffective

Section 9--408. Restrictions   on   Assignment   of   Promissory  Notes,
Health-care-insurance Receivables, and Certain General
Intangibles Ineffective.
(a) Term  restricting  assignment  generally  ineffective.  Except  as
otherwise  provided in subsection (b), 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) Applicability of subsection (a) to  sales  of  certain  rights  to
payment.  Subsection  (a)  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.
(c) Limitation  on ineffectiveness under subsection (a). 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 would be  effective  under  law  other  than  this
article   but   is  ineffective  under  subsection  (a),  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.
(d) Inapplicability. This section does not apply to:
(1)  a  claim  or  right  to receive compensation for injuries or
sickness as described in 26 U.S.C. § 104(a)(1)  and  (2),  as
amended from time to time, or
(2) a  claim  or  right to receive benefits under a special needs
trust as described in 42 U.S.C. § 1396p  (d)(4),  as  amended
from time to time.