13 Pa.C.S. Ch. 94

in effect

13 Pa.C.S. § 9401 Alienability of debtor's rights.

(a) Other law governs alienability; exceptions.--Except as otherwise provided in subsections (b) and (c), whether a debtor's rights in collateral may be voluntarily or involuntarily transferred is governed by law other than this division. (b) Agreement does not prevent transfer.--An agreement between the debtor and secured party which prohibits a transfer of the debtor's rights in collateral or makes the transfer a default does not prevent the transfer from taking effect. (c) Exceptions.--Subsection (a) is also subject to the following: (1) section 9406 (relating to discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles and promissory notes ineffective); (2) section 9407 (relating to restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest); (3) section 9408 (relating to restrictions on assignment of promissory notes, health-care-insurance receivables and certain general intangibles ineffective); and (4) section 9409 (relating to restrictions on assignment of letter-of-credit rights ineffective).

13 Pa.C.S. § 9402 Secured party not obligated on contract of debtor or in tort.

The existence of a security interest, agricultural lien or authority given to a debtor to dispose of or use collateral, without more, does not subject a secured party to liability in contract or tort for the debtor's acts or omissions.

13 Pa.C.S. § 9403 Agreement not to assert defenses against assignee.

(a) Value.--As used in this section, the term "value" has the meaning provided in section 3303(a) (relating to value). (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 which 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 defense or claim in recoupment of the type which may be asserted against a person entitled to enforce a negotiable instrument under section 3305(a) (relating to defenses and claims in recoupment). (c) When subsection (b) not applicable.--Subsection (b) does not apply to defenses of a type which may be asserted against a holder in due course of a negotiable instrument under section 3305(b). (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 division requires that the record include a statement to the effect that the rights of an assignee are subject to claims or defenses which 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 which 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 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. (f) Other law not displaced.--Except as otherwise provided in subsection (d), this section does not displace law other than this division which gives effect to an agreement by an account debtor not to assert a claim or defense against an assignee.

13 Pa.C.S. § 9404 Rights acquired by assignee; claims and defenses against assignee.

(a) Assignee's rights subject to terms, claims and defenses; exceptions.--Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) through (e), the rights of an assignee are subject to: (1) all terms of the agreement between the account debtor and assignor and any defense or claim in recoupment arising from the transaction which gave rise to the contract; and (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) Account debtor's claim reduces amount owed to assignee.--Subject to subsection (c) and except as otherwise provided in subsection (d), the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) only to reduce the amount the account debtor owes. (c) Rule for individual under other law.--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) Omission of required statement in consumer transaction.--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) Inapplicability to health-care-insurance receivable.--This section does not apply to an assignment of a health-care-insurance receivable. (July 1, 2024, P.L.450, No.41, eff. 60 days) 2024 Amendment. Act 41 amended subsec. (a)(2). See section 1 of Act 41 in the appendix to this title for special provisions relating to findings and declarations. Cross References. Section 9404 is referred to in section 9109 of this title.

13 Pa.C.S. § 9405 Modification of assigned contract.

(a) Effect of modification on assignee.--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 subsection is subject to subsections (b) through (d). (b) Applicability of subsection (a).--Subsection (a) applies to the extent that: (1) the right to payment or a part thereof under an assigned contract has not been fully earned by performance; or (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 section 9406(a) (relating to discharge of account debtor; effect of notification). (c) Rule for individual under other law.--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) Inapplicability to health-care-insurance receivable.--This section does not apply to an assignment of a health-care-insurance receivable.

13 Pa.C.S. § 9406 Discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles and promissory notes ineffective.

(a) Discharge of account debtor; effect of notification.--Subject to subsections (b) through (i) and (l), an account debtor on an account, chattel paper or a payment intangible may discharge its obligation by paying the assignor until, but not after, the account debtor receives a notification, signed by the assignor or the assignee, that the amount due or to become due has been assigned and that payment is to be made to the assignee. After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor. (b) When notification ineffective.--Subject to subsections (h) and (l), notification is ineffective under subsection (a): (1) If it does not reasonably identify the rights assigned. (2) To the extent that an agreement between an account debtor and a seller of a payment intangible limits the account debtor's duty to pay a person other than the seller and the limitation is effective under law other than this division. (3) At the option of an account debtor, if the notification notifies the account debtor to make less than the full amount of any installment or other periodic payment to the assignee even if: (i) only a portion of the account, chattel paper or payment intangible has been assigned to that assignee; (ii) a portion has been assigned to another assignee; or (iii) the account debtor knows that the assignment to that assignee is limited. (c) Proof of assignment.--Subject to subsections (h) and (l), if requested by the account debtor, an assignee shall seasonably furnish reasonable proof that the assignment has been made. Unless the assignee complies, the account debtor may discharge its obligation by paying the assignor even if the account debtor has received a notification under subsection (a). (d) Term restricting assignment generally ineffective.--In this subsection, "promissory note" includes a negotiable instrument that evidences chattel paper. Except as otherwise provided in subsections (e) and (j) and sections 2A303 (relating to alienability of party's interest under lease contract or of lessor's residual interest in goods; delegation of performance; transfer of rights) and 9407 (relating to restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest) and subject to subsection (h), a term in an agreement between an account debtor and an assignor or in a promissory note is ineffective to the extent that it: (1) prohibits, restricts or requires the consent of the account debtor or person obligated on the promissory note to the assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, the account, chattel paper, payment intangible or promissory note; or (2) provides that the assignment or transfer or the creation, attachment, perfection or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or remedy under the account, chattel paper, payment intangible or promissory note. (e) Inapplicability of subsection (d) to certain sales.--Subsection (d) does not apply to the sale of a payment intangible or promissory note, other than a sale pursuant to a disposition under section 9610 (relating to disposition of collateral after default) or an acceptance of collateral under section 9620 (relating to acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral). (f) Legal restrictions on assignment generally ineffective.--Except as otherwise provided in subsection (j) and sections 2A303 and 9407 and subject to subsections (h) and (i), a rule of law, statute or regulation which prohibits, restricts or requires the consent of a government, governmental body or official or account debtor to the assignment or transfer of, or creation of a security interest in, an account or chattel paper is ineffective to the extent that the rule of law, statute or regulation: (1) prohibits, restricts or requires the consent of the government, governmental body or official or account debtor to the assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, the account or chattel paper; or (2) provides that the assignment or transfer or the creation, attachment, perfection or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or remedy under the account or chattel paper. (g) Subsection (b)(3) not waivable.--Subject to subsections (h) and (l), an account debtor may not waive or vary its option under subsection (b)(3). (h) Rule for individual under other law.--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. (i) Inapplicability to health-care-insurance receivable.--This section does not apply to an assignment of a health-care-insurance receivable. (j) Section prevails over inconsistent law.-- (1) Except as set forth in paragraphs (2), (3), (4) and (5), this section prevails over any inconsistent provision of any existing or future statute or regulation of the Commonwealth unless the provision is contained in a statute of the Commonwealth, refers expressly to this section and states that the provision prevails over this section. (2) Subsection (f) does not apply to an account or chattel paper if the account debtor is the Commonwealth. (3) Subsection (f) does not apply to the following: (i) A claim or right to receive benefits under a workers' compensation act as compensation for personal injury or sickness, including a claim or right to receive benefits under the act of June 2, 1915 (P.L.736, No.338), known as the Workers' Compensation Act. (ii) The act of June 21, 1939 (P.L.566, No.284), known as The Pennsylvania Occupational Disease Act. (iii) Section 306 of the act of August 26, 1971 (P.L.351, No.91), known as the State Lottery Law. (4) Subsections (d) and (f) do not apply to a claim or right to receive benefits from a special needs trust described in section 1917(d)(4) of the Social Security Act (49 Stat. 620, 42 U.S.C. § 1396p(d)(4)). (5) The limitations on restrictions of assignments contained in this section are inapplicable to transfers of structured settlement payment rights pursuant to the act of February 11, 2000 (P.L.1, No.1), known as the Structured Settlement Protection Act. (k) (Reserved). (l) Inapplicability of certain subsections.--Subsections (a), (b), (c) and (g) do not apply to a controllable account or controllable payment intangible. (June 27, 2013, P.L.154, No.30, eff. July 1, 2013; July 1, 2024, P.L.450, No.41, eff. 60 days) 2024 Amendment. Act 41 amended subsecs. (a), (b), (c), (d) and (g) and added subsecs. (k) and (l). See section 1 of Act 41 in the appendix to this title for special provisions relating to findings and declarations. Amendment . Act 30 amended subsec. (e). Cross References. Section 9406 is referred to in sections 2210, 9209, 9401, 9405, 9408 of this title.

13 Pa.C.S. § 9407 Restrictions on creation or enforcement of security interest in leasehold interest or in lessor's residual interest.

(a) Term restricting assignment generally ineffective.--Except as otherwise provided in subsection (b), a term in a lease agreement is ineffective to the extent that it: (1) prohibits, restricts or requires the consent of a party to the lease to the assignment or transfer of, or the creation, attachment, perfection or enforcement of a security interest in, an interest of a party under the lease contract or in the lessor's residual interest in the goods; or (2) provides that the assignment or transfer or the creation, attachment, perfection or enforcement of the security interest may give rise to a default, breach, right of recoupment, claim, defense, termination, right of termination or remedy under the lease. (b) Effectiveness of certain terms.--Except as otherwise provided in section 2A303(g) (relating to requirements for prohibition of transfer in consumer lease), a term described in subsection (a)(2) is effective to the extent that there is: (1) a transfer by the lessee of the lessee's right of possession or use of the goods in violation of the term; or (2) a delegation of a material performance of either party to the lease contract in violation of the term. (c) Security interest not material impairment.--The creation, attachment, perfection or enforcement of a security interest in the lessor's interest under the lease contract or the lessor's residual interest in the goods is not a transfer which materially impairs the lessee's prospect of obtaining return performance or materially changes the duty of or materially increases the burden or risk imposed on the lessee within the purview of section 2A303(d) (relating to certain rights and remedies) unless, and then only to the extent that, enforcement actually results in a delegation of material performance of the lessor. Cross References. Section 9407 is referred to in sections 2A303, 9401, 9406 of this title.

13 Pa.C.S. § 9408 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 subsections (b) and (e), 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, other than a sale pursuant to a disposition under section 9610 (relating to disposition of collateral after default) or an acceptance of collateral under section 9620 (relating to acceptance of collateral in full or partial satisfaction of obligation; compulsory disposition of collateral). (c) Legal restrictions on assignment generally ineffective.--Except as otherwise provided in subsection (e), a rule of law, statute or regulation which 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).--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) would be effective under law other than this division but is ineffective under subsection (a) or (c), 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) Section prevails over inconsistent law.-- (1) Except as set forth in paragraphs (2), (3) and (4), this section prevails over any inconsistent provision of any existing or future statute or regulation of the Commonwealth unless the provision is contained in a statute of the Commonwealth, refers expressly to this section and states that the provision prevails over this section. (2) Subsection (c) does not apply to the provisions, claims and rights listed in section 9406(j)(3) (relating to discharge of account debtor; notification of assignment; identification and proof of assignment; restrictions on assignment of accounts, chattel paper, payment intangibles and promissory notes ineffective). (3) Subsections (a) and (c) do not apply to the claims and rights described in section 9406(j)(4). (4) The limitations on restrictions of assignments contained in this section are inapplicable to transfers of structured settlement payment rights pursuant to the act of February 11, 2000 (P.L.1, No.1), known as the Structured Settlement Protection Act. (f) (Reserved). (g) "Promissory note".--In this section, "promissory note" includes a negotiable instrument that evidences chattel paper. (June 27, 2013, P.L.154, No.30, eff. July 1, 2013; July 1, 2024, P.L.450, No.41, eff. 60 days) 2024 Amendment. Act 41 added subsecs. (f) and (g). See section 1 of Act 41 in the appendix to this title for special provisions relating to findings and declarations. Amendment . Act 30 amended subsec. (b).

13 Pa.C.S. § 9409 Restrictions on assignment of letter-of-credit rights ineffective.

(a) Term or law restricting assignment generally ineffective.--A term in a letter of credit or a rule of law, statute, regulation, custom or practice applicable to the letter of credit which prohibits, restricts or requires the consent of an applicant, issuer or nominated person to a beneficiary's assignment of or creation of a security interest in a letter-of-credit right is ineffective to the extent that the term or rule of law, statute, regulation, custom or practice: (1) would impair the creation, attachment or perfection of a security interest in the letter-of-credit right; or (2) provides that the assignment 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 letter-of-credit right. (b) Limitation on ineffectiveness under subsection (a).--To the extent that a term in a letter of credit is ineffective under subsection (a) but would be effective under law other than this division or a custom or practice applicable to the letter of credit, to the transfer of a right to draw or otherwise demand performance under the letter of credit or to the assignment of a right to proceeds of the letter of credit, the creation, attachment or perfection of a security interest in the letter-of-credit right: (1) is not enforceable against the applicant, issuer, nominated person or transferee beneficiary; (2) imposes no duties or obligations on the applicant, issuer, nominated person or transferee beneficiary; and (3) does not require the applicant, issuer, nominated person or transferee beneficiary to recognize the security interest, pay or render performance to the secured party or accept payment or other performance from the secured party. Cross References. Section 9409 is referred to in section 9401 of this title.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://www.palegis.us/statutes/consolidated/view-statute?txtType=HTM&ttl=13Fetched: 10/16/2026