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The Anti-Assignment Override Provisions
Like the knight in a game of chess, UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?
In general, Section 9406(d) overrides (renders “ineffective”) a term in an agreement between an account debtor and an assignor or in a promissory note to the extent such term prohibits or restricts the creation, attachment, perfection or enforcement of a security interest in an account, chattel paper, payment intangible, or promissory note (or to the extent the security interest may give rise to a breach or termination of the underlying agreement or note). Section 9408(a) overrides a term in a promissory note or in an agreement between an account debtor and a debtor to the extent such term would impair the creation, attachment or perfection of a security interest in a promissory note, health care insurance receivable, or general intangible (or to the extent the security interest may give rise to a breach or termination of the underlying note, receivable or general intangible).
A 9406(d) example is a provision in a license agreement that prohibits the licensor from granting a security interest to a third party in the royalties payable by the licensee under the license. The “account debtor” in this example is the licensee, and the right to payment of the royalties is an “account.” Section 9406(d) renders this provision unenforceable. A 9408(a) example is a provision in a license agreement that prohibits the licensee from granting a security interest to a third party in its rights under the license. The “account debtor” in this example is the licensor, and the rights of the licensee under the license are a “general intangible.” Section 9408(a) renders this provision unenforceable.
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The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Anti-Assignment Override Provisions
UCC Sections 9406(d) and 9408(a) are one of the most powerful, yet least understood, sections of the Uniform Commercial Code. On their face, they appear to override anti-assignment provisions in agreements that would limit the grant of a security interest. But do these sections really work?