47. Assignment of intangibles etc, and rights of third party account debtors

Official English translation. Where it differs from the Sinhala or Tamil text, the Act itself says which text prevails.

(1)

Unless an account debtor has made an enforceable agreement not to assert defences or any claims arising out of a contract between such account debtor and the assignor, an account debtor may set up by way of a defence against the assignee-

(a)

all defences available to the account debtor against the assignor arising out of the terms of the contract or a related contract, including equitable set-off and misrepresentation; and

(b)

the right to set-off any debt owing to the account debtor by the assignor, that was payable to the account debtor before the debtor received notice of the assignment.

(2)

A person obligated on an account or chattel paper may pay the assignor until the person receives notice reasonably identifying the relevant rights that the account or chattel paper has been assigned and, if requested by the account debtor, the assignee shall furnish proof within a reasonable time that the assignment has been made and if the assignee does not do so, the person may pay the assignor.

(3)

To the extent that the right to payment or part payment under a contract which has been assigned has not been earned by performance and despite notice of the assignment, any modification of, or substitution for the contract made in good faith and in accordance with reasonable commercial standards and without material adverse effect upon the assignee’s rights under the contract or the assignor’s ability to perform the contract, shall be effective against the assignee, unless the person obligated on the account or chattel paper has otherwise agreed. However, the assignee shall acquire corresponding rights under the modified or substituted contract.

(4)

A term in the contract between the account debtor and assignor that prohibits or restricts the assignment of, or the giving of a security right in the whole of the account or chattel paper for money due or to become due, or that requires the account debtor’s consent to such assignment or such giving of a security right, shall be-

(a)

binding on the assignor, only to the extent of making the assignor liable to the account debtor for breach of their contract;

and

(b)

unenforceable against third parties.

(5)

For the purpose of this section, “account debtor”

means a person who is obligated on an account or on chattel paper.

Part VI

Registration

Read on from Part VI

Part VII

General Provisions

Read on from Part VII

Part VIII

Repeals and Savings

Read on from Part VIII

Part IX

Interpretation

Read on from Part IX