Acts and Regulations

P-7.1 - Personal Property Security Act

Section 41
Disposition versions

Full text
Assignments of intangibles and chattel paper: rights of third party account debtors
41(1)In this section
“account debtor” means a person who is obligated under an intangible or chattel paper;(débiteur d’un compte)
“assignee” includes a secured party and a receiver.(cessionnaire)
41(2)Unless the account debtor on an intangible or chattel paper has made an enforceable agreement not to assert defences or claims arising out of a contract, the rights of an assignee of the intangible or chattel paper are subject to
(a) the terms of the contract between the account debtor and the assignor and any defence or claim arising from the contract or a closely connected contract, and
(b) any other defence or claim of the account debtor against the assignor that accrues before the account debtor acquires knowledge of the assignment.
41(3)A modification of or substitution for a contract made in good faith and in accordance with reasonable commercial standards and without material adverse effect on the assignee’s rights under the contract or the assignor’s ability to perform the contract is effective against the assignee unless the account debtor has otherwise agreed.
41(4)Subsection (3) applies
(a) to the extent that an assigned right to payment arising out of the contract has not been earned by performance, and
(b) notwithstanding that notice of the assignment has been given to the account debtor.
41(5)If the contract has been substituted or modified in the manner referred to in subsection (3), the assignee obtains rights corresponding to those of the assignor under the modified or substituted contract.
41(6)Nothing in subsections (3) to (5) affects the validity of a term in an assignment agreement that provides that a modification or substitution referred to in those subsections is a breach of contract by the assignor.
41(7)If collateral which is either an intangible or chattel paper is assigned, the account debtor may make payments to the assignor
(a) before the account debtor receives notice of the assignment in accordance with subsection (8), or
(b) after the account debtor receives notice of the assignment if the account debtor requests the assignee to furnish proof of the assignment and the assignee fails to furnish proof within fifteen days after the request.
41(8)A notice of an assignment under subsection (7) shall
(a) state that the amount payable or to become payable under the contract has been assigned and that payment is to be made to the assignee, and
(b) identify the contract under which the amount payable is to become payable.
41(9)Payment by an account debtor to an assignee after the account debtor receives notice of the assignment in accordance with subsection (8) discharges the obligation of the account debtor to the extent of the payment.
41(10)A term in a contract between a debtor on an account or chattel paper and an assignor that prohibits or restricts assignment of the whole of the account or chattel paper for money due or to become due is binding on the assignor only to the extent that the assignor may be liable in damages for breach of the term, but is unenforceable against third parties.
Assignments of intangibles and chattel paper: rights of third party account debtors
41(1)In this section
“account debtor” means a person who is obligated under an intangible or chattel paper;
“assignee” includes a secured party and a receiver.
41(2)Unless the account debtor on an intangible or chattel paper has made an enforceable agreement not to assert defences or claims arising out of a contract, the rights of an assignee of the intangible or chattel paper are subject to
(a) the terms of the contract between the account debtor and the assignor and any defence or claim arising from the contract or a closely connected contract, and
(b) any other defence or claim of the account debtor against the assignor that accrues before the account debtor acquires knowledge of the assignment.
41(3)A modification of or substitution for a contract made in good faith and in accordance with reasonable commercial standards and without material adverse effect on the assignee’s rights under the contract or the assignor’s ability to perform the contract is effective against the assignee unless the account debtor has otherwise agreed.
41(4)Subsection (3) applies
(a) to the extent that an assigned right to payment arising out of the contract has not been earned by performance, and
(b) notwithstanding that notice of the assignment has been given to the account debtor.
41(5)If the contract has been substituted or modified in the manner referred to in subsection (3), the assignee obtains rights corresponding to those of the assignor under the modified or substituted contract.
41(6)Nothing in subsections (3) to (5) affects the validity of a term in an assignment agreement that provides that a modification or substitution referred to in those subsections is a breach of contract by the assignor.
41(7)If collateral which is either an intangible or chattel paper is assigned, the account debtor may make payments to the assignor
(a) before the account debtor receives notice of the assignment in accordance with subsection (8), or
(b) after the account debtor receives notice of the assignment if the account debtor requests the assignee to furnish proof of the assignment and the assignee fails to furnish proof within fifteen days after the request.
41(8)A notice of an assignment under subsection (7) shall
(a) state that the amount payable or to become payable under the contract has been assigned and that payment is to be made to the assignee, and
(b) identify the contract under which the amount payable is to become payable.
41(9)Payment by an account debtor to an assignee after the account debtor receives notice of the assignment in accordance with subsection (8) discharges the obligation of the account debtor to the extent of the payment.
41(10)A term in a contract between a debtor on an account or chattel paper and an assignor that prohibits or restricts assignment of the whole of the account or chattel paper for money due or to become due is binding on the assignor only to the extent that the assignor may be liable in damages for breach of the term, but is unenforceable against third parties.