Ark. Code Ann. § 4-9-404 (2020)
Rights acquired by assignee — Claims and defenses against assignee
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Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b)-(e), the rights of an assignee are subject to:
- 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
- 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.
- 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.
- This section is subject to law other than this chapter 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.
- In a consumer transaction, if a record evidences the account debtor's obligation, law other than this chapter 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.
- This section does not apply to an assignment of a health-care-insurance receivable.
History. Acts 2001, No. 1439, § 1.
Case Notes
Assignment.
“Assignment” language held to provide means of perfecting security interest in accounts receivable. Northwest Nat'l Bank v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 25 Ark. App. 279, 757 S.W.2d 182 (1988) (decision under prior law).
Assignee of trucking companies stood in the companies' position and was subject to any defenses a transportation company had against the companies, including fraud, and the trial court erred in finding otherwise; in addition, because the assignee was no longer a prevailing party, the appellate court also reversed the award of attorney fees under § 16-22-308. Am. Transp. Corp. v. Exch. Capital Corp., 84 Ark. App. 28, 129 S.W.3d 312 (2003).
Knowledge of Secured Party.
Where bank-assignee was aware of subcontractor-assignor's financial difficulties, and financial loss resulted from failure to pay materialmen who had assisted in construction of apartment complex, owners-general contractors who had made progress payments jointly to subcontractor-assignor and bank-assignee which had loaned money to subcontractor, without making an effort to verify that all previous bills for labor and materials had been paid, were entitled to recover amount of loss from the bank. Benton State Bank v. Warren, 263 Ark. 1, 562 S.W.2d 74 (1978) (decision under prior law).
Setoff.
A bank did not assume responsibility for the performance of a construction contract between a contractor and a carpet manufacturing plant by setting off a deposit by the contractor against the contractor's mortgage indebtedness, for the setoff by the bank was not under its security interest but was an exercise of its common law right which was supplemented by an agreement set out in the note evidencing the contractor's indebtedness to the bank. Cherokee Carpet Mills, Inc. v. Worthen Bank & Trust Co., 262 Ark. 776, 561 S.W.2d 310 (1978) (decision under prior law).
Superiority of Rights.
One cannot obtain a superior property right than its assignor. First Nat'l Bank v. Massachusetts Gen. Life Ins. Co., 296 Ark. 28, 752 S.W.2d 1 (1988) (decision under prior law).
Cited: Wawak v. Stewart, 247 Ark. 1093, 449 S.W.2d 922 (1970) (decision under prior law).