(a) A modification of or substitution for an assigned contract is effective against an assignee if made in good faith. The assignee acquires corresponding rights under the modified or substituted contract. The assignment may provide that the modification or substitution is a breach of contract by the assignor. This subdivision is subject to subdivisions (b) to (d), inclusive.

(b) Subdivision (a) applies to the extent that either of the following apply:

Terms Used In California Commercial Code 9405

  • contract: means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1303. See California Commercial Code 1201
  • Contract: A legal written agreement that becomes binding when signed.
  • 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.
  • Right: includes remedy. See California Commercial Code 1201

(1) The right to payment or a part thereof under an assigned contract has not been fully earned by performance.

(2) The right to payment or a part thereof has been fully earned by performance and the account debtor has not received notification of the assignment under subdivision (a) of Section 9406.

(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) This section does not apply to an assignment of a health care insurance receivable.

(Repealed (by Sec. 25) and added by Stats. 2000, Ch. 1003, Sec. 26. Effective January 1, 2001. Operative July 1, 2001, by Sec. 56 of Ch. 1003.)

  Previous section
Next section  
 Chapter 4 Contents