Lender's Security Interest In Credit Card Receivables Was Subject To Terms Of The Underlying Contract And The Account Debtor's Claims And Defenses

LexisNexis (September 30, 2016, 4:54 PM EDT) -- Accounts receivable have been called "precarious collateral" because the assignee is subject to all terms of the underlying contract, and the account debtor has a right to refuse payment to the assignor if it has claims or defenses that it may assert. This baseline rule is codified in UCC 9-404. The rule reflects the fact that, in the absence of a waiver, the secured party as assignee of a receivable simply steps into the shoes of the assignor. Receivables are not negotiable instruments, where a holder...
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