(810 ILCS 5/Art. 9 Pt. 4 heading)
PART 4.
RIGHTS OF THIRD PARTIES
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(810 ILCS 5/9-401) (from Ch. 26, par. 9-401)
Sec. 9-401.
Alienability of debtor's rights.
(a) Other law governs alienability; exceptions. Except as
otherwise provided in subsection (b) and Sections 9-406, 9-407, 9-408, and
9-409,
whether a debtor's rights in collateral may be voluntarily or involuntarily
transferred is governed by law other than this Article.
(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.
(Source: P.A. 90-300, eff. 1-1-98; 91-893, eff. 7-1-01.)
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(810 ILCS 5/9-401A)
Sec. 9-401A.
(Blank).
(Source: P.A. 90-300, eff. 1-1-98; 91-893, eff. 7-1-01.)
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(810 ILCS 5/9-402) (from Ch. 26, par. 9-402)
Sec. 9-402.
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.
(Source: P.A. 91-357, eff. 7-29-99; 91-893, eff. 7-1-01.)
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(810 ILCS 5/9-403) (from Ch. 26, par. 9-403)
Sec. 9-403.
Agreement not to assert defenses against assignee.
(a) "Value." In this Section, "value" has the meaning provided in
Section 3-303(a).
(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 that 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
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(4) without notice of a defense or claim in
| | recoupment of the type that may be asserted against a person entitled to enforce a negotiable instrument under Section 3-305(a).
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(c) When subsection (b) not applicable. Subsection (b) does not
apply to defenses of a type that may be asserted against a holder in due course of a
negotiable instrument under Section 3-305(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 Article requires that the record include a statement to the effect that
the rights of an assignee are subject to claims or defenses that 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
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(2) the account debtor may assert against an assignee
| | those claims and defenses that would have been available if the record included such a statement.
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(e) Rule for individual under other law. This Section is subject
to law other than this Article 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 Article which
gives effect to an agreement by an account debtor not to assert a claim or
defense
against an assignee.
(Source: P.A. 90-300, eff. 1-1-98; 91-357, eff. 7-29-99; 91-893, eff.
7-1-01.)
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(810 ILCS 5/9-404) (from Ch. 26, par. 9-404)
Sec. 9-404.
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 that gave rise to the contract; and
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(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 authenticated by the assignor or the assignee.
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(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 Article 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 Article 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.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/9-404.5)
Sec. 9-404.5.
Termination statement; duties of filing officer.
(1) If a financing statement covering consumer goods is filed on or
after July 1, 1973, then within one
month or within 10 days following written demand by the debtor after there
is no outstanding secured obligation and no commitment to make advances,
incur obligations or otherwise give value, the secured party must file with
each filing officer with whom the financing statement was filed, a
termination statement to the effect that he no longer claims a security
interest under the financing statement, which shall be identified by file
number. In other cases whenever there is no outstanding secured obligation
and no commitment to make advances, incur obligations or otherwise give
value, the secured party must on written demand by the debtor send the
debtor, for each filing officer with whom the financing statement was
filed, a termination statement to the effect that he no longer claims a
security interest under the financing statement, which shall be identified
by file number. A termination statement signed by a person other than the
secured party of record must be accompanied by a separate written statement
of assignment signed by the secured party of record. If
the affected secured party fails to file such a termination statement as
required by this subsection, or to send such a termination statement within
10 days after proper demand therefor, he shall be liable to the debtor for
$100 and in addition for any loss caused to the debtor by such failure.
(2) On presentation to the filing officer of such a termination
statement he must note it in the index. If he has received the termination
statement in duplicate, he shall return one copy of the termination
statement to the secured party stamped to show the time of receipt thereof.
If the filing officer has a microfilm or other photographic record of the
financing statement, and of any related continuation statement, statement
of assignment and statement of release, he may remove the originals from
the files at any time after receipt of the termination statement, or if he
has no such record, he may remove them from the files at any time after one
year after receipt of the termination statement.
(3) If the termination statement is in the standard form prescribed by the
Secretary
of State, the uniform fee for filing and indexing the termination statement in
the office of
a county recorder shall be $5 and otherwise shall be $10, plus in each case an
additional
fee of $5 for each name more than one at each address listed against which the
termination statement is required to be indexed.
(Source: P.A. 91-893, eff. 7-6-00.)
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(810 ILCS 5/9-405) (from Ch. 26, par. 9-405)
Sec. 9-405.
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
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(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 9-406(a).
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(c) Rule for individual under other law. This Section is subject
to law other than this Article 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.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/9-406) (from Ch. 26, par. 9-406)
Sec. 9-406. 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), 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, authenticated 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 subsection (h),
notification is ineffective under subsection (a):
(1) if it does not reasonably identify the rights
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(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 Article; or
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(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:
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(A) only a portion of the account, chattel paper,
| | or payment intangible has been assigned to that assignee;
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(B) a portion has been assigned to another
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(C) the account debtor knows that the assignment
| | to that assignee is limited.
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(c) Proof of assignment. Subject to subsection (h), 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. Except as
otherwise provided in subsection (e) and Sections 2A-303 and 9-407, 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
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(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.
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(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 9-610 or an acceptance of collateral under Section 9-620.
(f) Legal restrictions on assignment generally ineffective.
Except as otherwise provided in Sections 2A-303 and 9-407 and subject to
subsections (h) and (i), a rule of law, statute, or regulation that 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
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(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.
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(g) Subsection (b)(3) not waivable. Subject to subsection (h), 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 Article 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.
(Source: P.A. 97-1034, eff. 7-1-13.)
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(810 ILCS 5/9-407) (from Ch. 26, par. 9-407)
Sec. 9-407.
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 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
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(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.
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(b) Effectiveness of certain terms. Except as otherwise provided
in Section 2A-303(7), 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
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(2) a delegation of a material performance of either
| | party to the lease contract in violation of the term.
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(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
that 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 2A-303(4) unless, and then only to
the
extent that, enforcement actually results in a delegation of material
performance of
the lessor.
(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/9-408) (from Ch. 26, par. 9-408)
Sec. 9-408. 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 subsection (b), 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
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(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.
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(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 9-610 or an acceptance of collateral under Section 9-620.
(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
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(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.
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(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 Article 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;
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(2) does not impose a duty or obligation on the
| | person obligated on the promissory note or the account debtor;
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(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;
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(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;
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(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
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(6) does not entitle the secured party to enforce the
| | security interest in the promissory note, health-care-insurance receivable, or general intangible.
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(Source: P.A. 97-1034, eff. 7-1-13.)
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(810 ILCS 5/9-409)
Sec. 9-409.
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
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(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.
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(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 Article 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;
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(2) imposes no duties or obligations on the
| | applicant, issuer, nominated person, or transferee beneficiary; and
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(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.
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(Source: P.A. 91-893, eff. 7-1-01.)
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(810 ILCS 5/9-410)
Sec. 9-410.
(Blank).
(Source: P.A. 91-893, eff. 7-1-01.)
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