California Commercial Code 9404 – (a) Unless an account debtor has made an enforceable agreement …
(a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subdivisions (b) to (e), inclusive, the rights of an assignee are subject to both of the following:
(1) 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.
Terms Used In California Commercial Code 9404
- agreement: means the total legal obligation that results from the parties' agreement as determined by this code and as supplemented by any other applicable laws. See California Commercial Code 1201
- Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
- Record: means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. See California Commercial Code 1201
(2) Any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives a notification of the assignment signed by the assignor or the assignee.
(b) Subject to subdivision (c) and except as otherwise provided in subdivision (d), the claim of an account debtor against an assignor may be asserted against an assignee under subdivision (a) only to reduce the amount the account debtor owes.
(c) 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.
(d) In a consumer transaction, if a record evidences the account debtor’s obligation, law other than this division 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.
(e) This section does not apply to an assignment of a health care insurance receivable.
(Amended by Stats. 2023, Ch. 210, Sec. 56. (SB 95) Effective January 1, 2024.)