UCC §§9-406 and 9-408 have provided much grist for the mill in this column, including about judicial decisions that misconstrue them as well as their sometimes less-than-symbiotic relationship with other statutory provisions. These provisions are important to understand because, in certain circumstances, they will override contractual and statutory restrictions on the ability to place liens on or to transfer assets. One obvious policy reason for such override is to facilitate extensions of credit. Unfortunately, the provisions themselves are fairly complex and so often present challenges for judges and practitioners alike to navigate.

The scope of Article 9 itself adds to that complexity. Many lawyers don’t realize that Article 9 applies not just to security interests in assets but also to outright assignments of certain assets, such as promissory notes, accounts, chattel paper and payment intangibles, and that’s certainly true of 9-406 and 9-408 (something the Permanent Editorial Board of the UCC is trying to make clear in a draft PEB Commentary issued on Dec. 10, 2019).

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