Colorado § 4-9-404 - Rights acquired by assignee; claims and defenses against assignee.

§ 4-9-404. Rights acquired by assignee; claims and defenses against assignee.

(a) Unless an account debtor has made an enforceable agreement not to assert defenses or claims, and subject to subsections (b) to (e) of this section, the rights of an assignee are subject to:

(1) 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

(2) Any other defense or claim of the account debtor against the assignor which accrues before the account debtor receives a notification of the assignment signed by the assignor or the assignee.

(b) Subject to subsection (c) of this section and except as otherwise provided in subsection (d) of this section, the claim of an account debtor against an assignor may be asserted against an assignee under subsection (a) of this section only to reduce the amount the account debtor owes.

(c) This section is subject to law other than this article 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.

(d) In a consumer transaction, if a record evidences the account debtor's obligation, law other than this article 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.

(e) This section does not apply to an assignment of a health-care-insurance receivable.

Source: L. 2001: Entire article R&RE, p. 1372, § 1, effective July 1. L. 2023: (a)(2) amended, (SB 23-090), ch. 136, p. 558, § 71, effective August 7.

Editor's note: This section is similar to former § 4-9-318 (1) as it existed prior to 2001.

ANNOTATION

Annotator's note. Since § 4-9-404 is similar to § 4-9-318 (1) as it existed prior to the 2001 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

This section includes set-offs and counter claims. Farmers Acceptance Corp. v. DeLozier, 179 Colo. 291, 496 P.2d 1016 (1972).

The right to receive money due or to become due under an existing contract may be assigned even though the contract itself may not be assignable. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291, 496 P.2d 1016 (1972).

Assignee is subject to defenses against assignor. An assignee of contract rights stands in the shoes of the assignor, has no greater rights against a debtor than does the assignor, and is subject to all equities and defenses which can be raised by a debtor against the assignor, with the exception of those claims and defenses which are both unrelated to the underlying contract and arise after a debtor is notified of the assignment. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291, 496 P.2d 1016 (1972).

Where an assignee obtains money which the assignor could only retain upon performance of a contract and the assignor fails to perform the contract, an assignee cannot retain mistaken, or even negligent, payments made to it by a debtor, unless there has been a subsequent change of position by assignee. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291, 496 P.2d 1016 (1972).

Where there is no evidence that an assignee relies to his detriment upon such a payment made by a debtor, the judgment of the trial court against him is proper in light of this section. Farmers Acceptance Corp. v. DeLozier, 178 Colo. 291, 496 P.2d 1016 (1972).

Agency relationship between dairyman debtor and agent responsible for marketing milk does not discharge debt to assignee. Mid-States Sales v. Mt. Empire Dairymen's, 741 P.2d 342 (Colo. App. 1987).