AB111,108,18 14409.340 Effectiveness of right of recoupment or setoff against deposit
15account. (1)
Exercise of recoupment or setoff. Except as otherwise provided in
16sub. (3), a bank with which a deposit account is maintained may exercise any right
17of recoupment or setoff against a secured party that holds a security interest in the
18deposit account.
AB111,108,22 19(2) Recoupment or setoff not affected by security interest. Except as
20otherwise provided in sub. (3), the application of this chapter to a security interest
21in a deposit account does not affect a right of recoupment or setoff of the secured party
22as to a deposit account maintained with the secured party.
AB111,109,2 23(3) When setoff ineffective. The exercise by a bank of a setoff against a
24deposit account is ineffective against a secured party that holds a security interest

1in the deposit account which is perfected by control under s. 409.104 (1) (c), if the
2setoff is based on a claim against the debtor.
AB111,109,6 3409.341 Bank's rights and duties with respect to deposit account.
4Except as otherwise provided in s. 409.340 (3), and unless the bank otherwise agrees
5in an authenticated record, a bank's rights and duties with respect to a deposit
6account maintained with the bank are not terminated, suspended, or modified by:
AB111,109,8 7(1) The creation, attachment, or perfection of a security interest in the deposit
8account;
AB111,109,9 9(2) The bank's knowledge of the security interest; or
AB111,109,10 10(3) The bank's receipt of instructions from the secured party.
AB111,109,16 11409.342 Bank's right to refuse to enter into or disclose existence of
12control agreement.
This chapter does not require a bank to enter into an
13agreement of the kind described in s. 409.104 (1) (b), even if its customer so requests
14or directs. A bank that has entered into such an agreement is not required to confirm
15the existence of the agreement to another person unless requested to do so by its
16customer.
AB111,109,1817 subchapter IV
18RIGHTS OF 3RD PARTIES
AB111,109,22 19409.401 Alienability of debtor's rights. (1) Other law governs
20alienability; exceptions.
Except as otherwise provided in sub. (2) and ss. 409.406,
21409.407, 409.408, and 409.409, whether a debtor's rights in collateral may be
22voluntarily or involuntarily transferred is governed by law other than this chapter.
AB111,109,25 23(2) Agreement does not prevent transfer. An agreement between the debtor
24and secured party which prohibits a transfer of the debtor's rights in collateral or
25makes the transfer a default does not prevent the transfer from taking effect.
AB111,110,4
1409.402 Secured party not obligated on contract of debtor or in tort.
2The existence of a security interest, agricultural lien, or authority given to a debtor
3to dispose of or use collateral, without more, does not subject a secured party to
4liability in contract or tort for the debtor's acts or omissions.
AB111,110,6 5409.403 Agreement not to assert defenses against assignee. (1) Value.
6In this section, "value" has the meaning provided in s. 403.303 (1).
AB111,110,10 7(2) Agreement not to assert claim or defense. Except as otherwise provided
8in this section, an agreement between an account debtor and an assignor not to assert
9against an assignee any claim or defense that the account debtor may have against
10the assignor is enforceable by an assignee that takes an assignment:
AB111,110,1111 (a) For value;
AB111,110,1212 (b) In good faith;
AB111,110,1413 (c) Without notice of a claim of a property or possessory right to the property
14assigned; and
AB111,110,1715 (d) Without notice of a defense or claim in recoupment of the type that may be
16asserted against a person entitled to enforce a negotiable instrument under s.
17403.305 (1).
AB111,110,20 18(3) When sub. (2) not applicable. Subsection (2) does not apply to defenses of
19a type that may be asserted against a holder in due course of a negotiable instrument
20under s. 403.305 (2).
AB111,110,25 21(4) Omission of required statement in consumer transaction. In a consumer
22transaction, if a record evidences the account debtor's obligation, law other than this
23chapter requires that the record include a statement to the effect that the rights of
24an assignee are subject to claims or defenses that the account debtor could assert
25against the original obligee, and the record does not include such a statement:
AB111,111,2
1(a) The record has the same effect as if the record had included such a
2statement; and
AB111,111,43 (b) The account debtor may assert against an assignee those claims and
4defenses that would have been available if the record had included such a statement.
AB111,111,8 5(5) Rule for individual under other law. This section is subject to law other
6than this chapter which establishes a different rule for an account debtor who is an
7individual and who incurred the obligation primarily for personal, family, or
8household purposes.
AB111,111,11 9(6) Other law not displaced. Except as otherwise provided in sub. (4), this
10section does not displace law other than this chapter which gives effect to an
11agreement by an account debtor not to assert a claim or defense against an assignee.
AB111,111,15 12409.404 Rights acquired by assignee; claims and defenses against
13assignee. (1)
Assignee's rights subject to terms, claims, and defenses; exceptions.
14Unless an account debtor has made an enforceable agreement not to assert defenses
15or claims, and subject to subs. (2) to (5), the rights of an assignee are subject to:
AB111,111,1816 (a) All terms of the agreement between the account debtor and assignor and
17any defense or claim in recoupment arising from the transaction that gave rise to the
18contract; and
AB111,111,2119 (b) Any other defense or claim of the account debtor against the assignor which
20accrues before the account debtor receives a notification of the assignment
21authenticated by the assignor or the assignee.
AB111,111,25 22(2) Account debtor's claim reduces amount owed to assignee. Subject to sub.
23(3) and except as otherwise provided in sub. (4), the claim of an account debtor
24against an assignor may be asserted against an assignee under sub. (1) only to reduce
25the amount the account debtor owes.
AB111,112,4
1(3) Rule for individual under other law. This section is subject to law other
2than this chapter which establishes a different rule for an account debtor who is an
3individual and who incurred the obligation primarily for personal, family, or
4household purposes.
AB111,112,12 5(4) Omission of required statement in consumer transaction. In a consumer
6transaction, if a record evidences the account debtor's obligation, law other than this
7chapter requires that the record include a statement to the effect that the account
8debtor's recovery against an assignee with respect to claims and defenses against the
9assignor may not exceed amounts paid by the account debtor under the record, and
10the record does not include such a statement, the extent to which a claim of an
11account debtor against the assignor may be asserted against an assignee is
12determined as if the record had included such a statement.
AB111,112,14 13(5) Inapplicability to health care insurance receivable. This section does not
14apply to an assignment of a health care insurance receivable.
AB111,112,20 15409.405 Modification of assigned contract. (1) Effect of modification on
16assignee.
A modification of or substitution for an assigned contract is effective
17against an assignee if made in good faith. The assignee acquires corresponding
18rights under the modified or substituted contract. The assignment may provide that
19the modification or substitution is a breach of contract by the assignor. This
20subsection is subject to subs. (2) to (4).
AB111,112,21 21(2) Applicability of sub. (1). Subsection (1) applies to the extent that:
AB111,112,2322 (a) The right to payment or a part thereof under an assigned contract has not
23been fully earned by performance; or
AB111,113,3
1(b) The right to payment or a part thereof has been fully earned by performance
2and the account debtor has not received notification of the assignment under s.
3409.406 (1).
AB111,113,7 4(3) Rule for individual under other law. This section is subject to law other
5than this chapter which establishes a different rule for an account debtor who is an
6individual and who incurred the obligation primarily for personal, family, or
7household purposes.
AB111,113,9 8(4) Inapplicability to health care insurance receivable. This section does not
9apply to an assignment of a health care insurance receivable.
AB111,113,20 10409.406 Discharge of account debtor; notification of assignment;
11identification and proof of assignment; restrictions on assignment of
12accounts, chattel paper, payment intangibles, and promissory notes
13ineffective. (1)
Discharge of account debtor; effect of notification. Subject to
14subs. (2) to (9), an account debtor on an account, chattel paper, or a payment
15intangible may discharge its obligation by paying the assignor until, but not after,
16the account debtor receives a notification, authenticated by the assignor or the
17assignee, that the amount due or to become due has been assigned and that payment
18is to be made to the assignee. After receipt of the notification, the account debtor may
19discharge its obligation by paying the assignee and may not discharge the obligation
20by paying the assignor.
AB111,113,22 21(2) When notification ineffective. Subject to sub. (8), notification is
22ineffective under sub. (1):
AB111,113,2323 (a) If it does not reasonably identify the rights assigned;
AB111,114,3
1(b) To the extent that an agreement between an account debtor and a seller of
2a payment intangible limits the account debtor's duty to pay a person other than the
3seller and the limitation is effective under law other than this chapter; or
AB111,114,64 (c) At the option of an account debtor, if the notification notifies the account
5debtor to make less than the full amount of any installment or other periodic
6payment to the assignee, even if:
AB111,114,87 1. Only a portion of the account, chattel paper, or payment intangible has been
8assigned to that assignee;
AB111,114,99 2. A portion has been assigned to another assignee; or
AB111,114,1010 3. The account debtor knows that the assignment to that assignee is limited.
AB111,114,15 11(3) Proof of assignment. Subject to sub. (8), if requested by the account debtor,
12an assignee shall seasonably furnish reasonable proof that the assignment has been
13made. Unless the assignee complies, the account debtor may discharge its obligation
14by paying the assignor, even if the account debtor has received a notification under
15sub. (1).
AB111,114,19 16(4) Term restricting assignment generally ineffective. Except as otherwise
17provided in sub. (5) and ss. 409.407 and 411.303, and subject to sub. (8), a term in an
18agreement between an account debtor and an assignor or in a promissory note is
19ineffective to the extent that it:
AB111,114,2320 (a) Prohibits, restricts, or requires the consent of the account debtor or person
21obligated on the promissory note to the assignment or transfer of, or the creation,
22attachment, perfection, or enforcement of a security interest in, the account, chattel
23paper, payment intangible, or promissory note; or
AB111,115,224 (b) Provides that the assignment or transfer or the creation, attachment,
25perfection, or enforcement of the security interest may give rise to a default, breach,

1right of recoupment, claim, defense, termination, right of termination, or remedy
2under the account, chattel paper, payment intangible, or promissory note.
AB111,115,4 3(5) Inapplicability of sub. (4) to certain sales. Subsection (4) does not apply
4to the sale of a payment intangible or promissory note.
AB111,115,10 5(6) Legal restrictions on assignment generally ineffective. Except as
6otherwise provided in ss. 108.13, 409.407, 411.303, and 565.30 and subject to subs.
7(8) and (9), a rule of law, statute, or rule that prohibits, restricts, or requires the
8consent of a government, governmental body or official, or account debtor to the
9assignment or transfer of, or creation of a security interest in, an account or chattel
10paper is ineffective to the extent that the rule of law, statute, or rule:
AB111,115,1411 (a) Prohibits, restricts, or requires the consent of the government,
12governmental body or official, or account debtor to the assignment or transfer of, or
13the creation, attachment, perfection, or enforcement of a security interest in, the
14account or chattel paper; or
AB111,115,1815 (b) Provides that the assignment or transfer or the creation, attachment,
16perfection, or enforcement of the security interest may give rise to a default, breach,
17right of recoupment, claim, defense, termination, right of termination, or remedy
18under the account or chattel paper.
AB111,115,20 19(7) Subsection (2) (c) not waivable. Subject to sub. (8), an account debtor may
20not waive or vary its option under sub. (2) (c).
AB111,115,24 21(8) Rule for individual under other law. This section is subject to law other
22than this chapter which establishes a different rule for an account debtor who is an
23individual and who incurred the obligation primarily for personal, family, or
24household purposes.
AB111,116,2
1(9) Inapplicability to health-care-insurance receivable. This section does
2not apply to an assignment of a health-care-insurance receivable.
AB111,116,6 3409.407 Restrictions on creation or enforcement of security interest in
4leasehold interest or in leasor's residual interest. (1)
Term restricting
5assignment generally ineffective.
Except as otherwise provided in sub. (2), a term
6in a lease agreement is ineffective to the extent that it:
AB111,116,107 (a) Prohibits, restricts, or requires the consent of a party to the lease to the
8assignment or transfer of, or the creation, attachment, perfection, or enforcement of
9a security interest in, an interest of a party under the lease contract or in the lessor's
10residual interest in the goods; or
AB111,116,1411 (b) Provides that the assignment or transfer or the creation, attachment,
12perfection, or enforcement of the security interest may give rise to a default, breach,
13right of recoupment, claim, defense, termination, right of termination, or remedy
14under the lease.
AB111,116,16 15(2) Effectiveness of certain terms. Except as otherwise provided in s. 411.303
16(7), a term described in sub. (1) (b) is effective to the extent that there is:
AB111,116,1817 (a) A transfer by the lessee of the lessee's right of possession or use of the goods
18in violation of the term; or
AB111,116,2019 (b) A delegation of a material performance of either party to the lease contract
20in violation of the term.
AB111,117,3 21(3) Security interest not material impairment. The creation, attachment,
22perfection, or enforcement of a security interest in the lessor's interest under the
23lease contract or the lessor's residual interest in the goods is not a transfer that
24materially impairs the lessee's prospect of obtaining return performance or
25materially changes the duty of or materially increases the burden or risk imposed

1on the lessee within the purview of s. 411.303 (4) unless, and then only to the extent
2that, enforcement actually results in a delegation of material performance of the
3lessor.
AB111,117,14 4409.408 Restrictions on assignment of promissory notes,
5health-care-insurance receivables, and certain general intangibles
6ineffective. (1)
Term restricting assignment generally ineffective. Except as
7otherwise provided in sub. (2), a term in a promissory note or in an agreement
8between an account debtor and a debtor which relates to a health-care-insurance
9receivable or a general intangible, including a contract, permit, license, or franchise,
10and which term prohibits, restricts, or requires the consent of the person obligated
11on the promissory note or the account debtor to, the assignment or transfer of, or
12creation, attachment, or perfection of a security interest in, the promissory note,
13health-care-insurance receivable, or general intangible, is ineffective to the extent
14that the term:
AB111,117,1615 (a) Would impair the creation, attachment, or perfection of a security interest;
16or
AB111,117,2017 (b) Provides that the assignment or transfer or the creation, attachment, or
18perfection of the security interest may give rise to a default, breach, right of
19recoupment, claim, defense, termination, right of termination, or remedy under the
20promissory note, health-care-insurance receivable, or general intangible.
AB111,117,23 21(2) Applicability of sub. (1) to sales of certain rights to payment. Subsection
22(1) applies to a security interest in a payment intangible or promissory note only if
23the security interest arises out of a sale of the payment intangible or promissory note.
AB111,118,5 24(3) Legal restrictions on assignment generally ineffective. A rule of law,
25statute, or rule that prohibits, restricts, or requires the consent of a government,

1governmental body or official, person obligated on a promissory note or account
2debtor to the assignment or transfer of, or creation of a security interest in, a
3promissory note, health-care-insurance receivable, or general intangible, including
4a contract, permit, license, or franchise between an account debtor and a debtor, is
5ineffective to the extent that the rule of law, statute, or rule:
AB111,118,76 (a) Would impair the creation, attachment, or perfection of a security interest;
7or
AB111,118,118 (b) Provides that the assignment or transfer or the creation, attachment, or
9perfection of the security interest may give rise to a default, breach, right of
10recoupment, claim, defense, termination, right of termination, or remedy under the
11promissory note, health-care-insurance receivable, or general intangible.
AB111,118,18 12(4) Limitation on ineffectiveness under subs. (1) and (3). To the extent that a
13term in a promissory note or in an agreement between an account debtor and a debtor
14which relates to a health-care-insurance receivable, or general intangible or a rule
15of law, statute, or rule described in sub. (3) would be effective under law other than
16this chapter but is ineffective under sub. (1) or (3), the creation, attachment, or
17perfection of a security interest in the promissory note, health-care-insurance
18receivable, or general intangible:
AB111,118,2019 (a) Is not enforceable against the person obligated on the promissory note or
20the account debtor;
AB111,118,2221 (b) Does not impose a duty or obligation on the person obligated on the
22promissory note or the account debtor;
AB111,118,2523 (c) Does not require the person obligated on the promissory note or the account
24debtor to recognize the security interest, pay or render performance to the secured
25party, or accept payment or performance from the secured party;
AB111,119,5
1(d) Does not entitle the secured party to use or assign the debtor's rights under
2the promissory note, health-care-insurance receivable, or general intangible,
3including any related information or materials furnished to the debtor in the
4transaction giving rise to the promissory note, health-care-insurance receivable, or
5general intangible;
AB111,119,86 (e) Does not entitle the secured party to use, assign, possess, or have access to
7any trade secrets or confidential information of the person obligated on the
8promissory note or the account debtor; and
AB111,119,109 (f) Does not entitle the secured party to enforce the security interest in the
10promissory note, health-care-insurance receivable, or general intangible.
AB111,119,17 11409.409 Restrictions on assignment of letter-of-credit rights
12ineffective. (1)
Term or law restricting assignment generally ineffective. A
13term in a letter of credit or a rule of law, statute, rule, custom, or practice applicable
14to the letter of credit which prohibits, restricts, or requires the consent of an
15applicant, issuer, or nominated person to a beneficiary's assignment of or creation of
16a security interest in a letter-of-credit right is ineffective to the extent that the term
17or rule of law, statute, rule, custom, or practice:
AB111,119,1918 (a) Would impair the creation, attachment, or perfection of a security interest
19in the letter-of-credit right; or
AB111,119,2320 (b) Provides that the assignment or the creation, attachment, or perfection of
21the security interest may give rise to a default, breach, right of recoupment, claim,
22defense, termination, right of termination, or remedy under the letter-of-credit
23right.
AB111,120,4 24(2) Limitation on ineffectiveness under sub. (1). To the extent that a term in
25a letter of credit is ineffective under sub. (1) but would be effective under law other

1than this chapter or a custom or practice applicable to the letter of credit, to the
2transfer of a right to draw or otherwise demand performance under the letter of
3credit, or to the assignment of a right to proceeds of the letter of credit, the creation,
4attachment, or perfection of a security interest in the letter-of-credit right:
AB111,120,65 (a) Is not enforceable against the applicant, issuer, nominated person, or
6transferee beneficiary;
AB111,120,87 (b) Imposes no duties or obligations on the applicant, issuer, nominated person,
8or transferee beneficiary; and
AB111,120,119 (c) Does not require the applicant, issuer, nominated person, or transferee
10beneficiary to recognize the security interest, pay or render performance to the
11secured party, or accept payment or other performance from the secured party.
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