2023 Revised Code of Washington › Title 62A - Uniform Commercial Code › 62A.9A Secured Transactions; Sales of Accounts, Contract Rights and Chattel Paper. › 62A.9A-408 - Restrictions on assignment of promissory notes, health-care-insurance receivables, and certain general intangibles ineffective.

RCW 62A.9A-408
Restrictions on assignment of promissory notes, health-care-insurance receivables, and certain general intangibles ineffective. (Effective until January 1, 2024.)
(a) Term restricting assignment generally ineffective. Except as otherwise provided in subsection (b) of this section, 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) of this section to sales of certain rights to payment. Subsection (a) of this section 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, other than a sale pursuant to a disposition under RCW 62A.9A-610 or an acceptance of collateral under RCW 62A.9A-620.
(c) Legal restrictions on assignment generally ineffective. A rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health-care-insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:
(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.
(d) Limitation on ineffectiveness under subsections (a) and (c) of this section. 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 or a rule of law, statute, or regulation described in subsection (c) of this section would be effective under law other than this Article but is ineffective under subsection (a) or (c) of this section, 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.
(e)(1) Inapplicability of subsections (a) and (c) of this section to certain payment intangibles. After July 1, 2003, subsections (a) and (c) of this section do not apply to the assignment or transfer of or creation of a security interest in:
(A) A claim or right to receive compensation for injuries or sickness as described in 26 U.S.C. Sec. 104(a)(1) or (2); or
(B) A claim or right to receive benefits under a special needs trust as described in 42 U.S.C. Sec. 1396p(d)(4).
(2) This subsection will not affect a transfer of structured settlement payment rights under chapter 19.205 RCW.
[ 2011 c 74 § 302; 2003 c 87 § 2; 2000 c 250 § 9A-408.]
NOTES:
Application—Effective date—2011 c 74: See notes following RCW 62A.9A-102.
Effective date—2003 c 87: See note following RCW 62A.9A-406.
(a) Term restricting assignment generally ineffective. Except as otherwise provided in subsections (b) and (f) of this section, 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) of this section to sales of certain rights to payment. Subsection (a) of this section 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, other than a sale pursuant to a disposition under RCW 62A.9A-610 or an acceptance of collateral under RCW 62A.9A-620.
(c) Legal restrictions on assignment generally ineffective. Except as otherwise provided in subsection (f) of this section, a rule of law, statute, or regulation that prohibits, restricts, or requires the consent of a government, governmental body or official, person obligated on a promissory note, or account debtor to the assignment or transfer of, or creation of a security interest in, a promissory note, health-care-insurance receivable, or general intangible, including a contract, permit, license, or franchise between an account debtor and a debtor, is ineffective to the extent that the rule of law, statute, or regulation:
(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.
(d) Limitation on ineffectiveness under subsections (a) and (c) of this section. 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 or a rule of law, statute, or regulation described in subsection (c) of this section would be effective under law other than this Article but is ineffective under subsection (a) or (c) of this section, 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.
(e)(1) Inapplicability of subsections (a) and (c) of this section to certain payment intangibles. After July 1, 2003, subsections (a) and (c) of this section do not apply to the assignment or transfer of or creation of a security interest in:
(A) A claim or right to receive compensation for injuries or sickness as described in 26 U.S.C. Sec. 104(a)(1) or (2); or
(B) A claim or right to receive benefits under a special needs trust as described in 42 U.S.C. Sec. 1396p(d)(4).
(2) This subsection will not affect a transfer of structured settlement payment rights under chapter 19.205 RCW.
(f) Inapplicability to interests in certain entities. This section does not apply to a security interest in an ownership interest in a general partnership, limited partnership, or limited liability company.
(g) "Promissory note." In this section, "promissory note" includes a negotiable instrument that evidences chattel paper.
[ 2023 c 266 § 935; 2011 c 74 § 302; 2003 c 87 § 2; 2000 c 250 § 9A-408.]
NOTES:
Construction—Effective date—2023 c 266: See notes following RCW 62A.12-101.
Application—Effective date—2011 c 74: See notes following RCW 62A.9A-102.
Effective date—2003 c 87: See note following RCW 62A.9A-406.