CHAPTER 238

COMMERCE AND TRADE

AN ACT TO AMEND TITLE 6, DELAWARE CODE RELATING TO COMMERCE AND TRADE.

Be it enacted by the General Assembly of the State of Delaware:

Section 1. Title 6, Delaware Code is amended by adding in Part II thereof a new chapter to be designated Chapter 18, as follows:

CHAPTER 18. ASSIGNMENT OF ACCOUNTS RECEIVABLE

§ 1801. Definitions

For the purposes of this Chapter:

(a) "Account" means an account receivable. It includes sums owing, although not yet payable, under an existing contract, whether performed or unperformed, and whether for goods or services. It also includes the proceeds and avails of any such account and all rights, powers, remedies, liens, collateral, securities and incidents appertaining to such account and all of the assignor's rights, title and interest in or to, or liens on, the merchandise or other property, if any, the sale or other transfer of which to the account debtor gave rise to such account, in case such merchandise or property be not delivered to or accepted by, or be rejected or returned by or repossessed from the account debtor. It excludes obligations represented or secured by a judgment, mortgage (chattel or real estate), lease of real estate, or contract for the sale of real estate.

(b) "Assignment" includes any transfer, sale, pledge or mortgage of an account, or of a part thereof, or of any right, title or interest therein;

(c) "Assignor" includes a transferor, seller, pledgor and mortgagor;

(d) "Assignee" includes a transferee, purchaser, pledgee, mortgagee and any person with rights acquired from or through such assignee;

(e) "Account Debtor" means a person obligated to pay an account;

(f) "Subsequent Assignee" means a later assignee of an account immediately or immediately claiming under an assignor who has previously assigned such account;

(g) "Value" means any consideration sufficient to support a simple contract, including an antecedent debt or liability, whether an account is taken in satisfaction thereof or as security therefor;

(h) "Person" means an individual, partnership, association, foreign or domestic corporation, and any other business or legal entity.

The singular of any of the above terms shall include the plural.

§ 1802. Assignment valid when made

An assignment of an account shall transfer from the time of its making all rights which the assignor has power to transfer and shall be valid and fully perfected at the time it is made (a) if it is in writing (b) if the assignee has given value therefor (c) if the assignee takes the assignment in good faith (d) whether or not notice of assignment is given to the account debtor or the account debtor assents to such assignment. After the making of such assignment no existing or future creditor of the assignor and no subsequent assignee shall acquire, by legal process or otherwise, any right, title, lien or interest in or to such account, or any proceeds thereof, or any judgment, instrument, token or writing given as evidence thereof or in substitution therefor, equal or superior to or in diminution of the rights of the assignee under such assignment.

§ 1803. Rights of account debtor

Whenever, prior to notice to him of an assignment of an account, the account debtor has, while acting in good faith:

(a) Made payment of the account, in whole or in part; or

(b) Given in payment of or as evidence, in whole or in part, of the account, a negotiable instrument, or other writing, which shall not have been delivered (whether or not endorsed or assigned) to and retained by the first assignee or anyone claiming under or through the first assignee; or

(c) Effected a new contract with a subsequent assignee by means of a novation in respect to the account; or

(d) Become liable upon a final judgment on the account; such payment or the assumption or suffering of such substitute liability or the giving of such negotiable instrument or other writing shall, to the extent thereof, be a valid discharge of the account debtor's liability upon such account. Nothing in this chapter shall deprive the account debtor of any valid defense to which he would otherwise be entitled or any valid right existing under the contract from which the assigned account arose, or of any right of set-off or counterclaim against the assignor existing at the time the account debtor receives notice of the assignment.

§ 1804. Accountability of subsequent assignors, assignees and of creditors

If an account is assigned as provided in § 1802, the assignor and any subsequent assignee of the account and any creditor of such assignor, other than a creditor realizing on a lien obtained prior to such assignment, shall be liable and accountable to the assignee under such assignment for all sums thereafter received in payment, in whole or in part, of such account; and any such assignor, subsequent assignee or creditor who after the date of such assignment obtains an instrument, token or writing in payment or as evidence, in whole or in part, of such account, or effects a novation with respect thereto, or obtains an order, judgment or decree for the payment of such account, shall be deemed to have received, effected or obtained the same for the use and benefit of the assignee under such assignment and shall be liable and accountable to him therefor and for the proceeds thereof; provided any action to enforce any rights under this section against any party other than the assignor shall be commenced only within one year from the date such funds are received, such novation is effected, or such instrument, token, writing, order, judgment or decree is obtained, as the case may be.

§ 1805. Return of property, adjustments

If, in the case of any assigned account, merchandise sold, or any part thereof, is returned to or recovered by the assignor from the account debtor and is thereafter dealt with by the assignor as his own property, or if the assignor grants credits, allowances or adjustments to the account debtor, the right to or lien of the assignee upon any balance remaining owing on such account and his right to or lien upon any other account assigned to him by the assignor shall not be invalidated, whether or not the assignee shall have consented to or acquiesced in, such act of the assignor.

§ 1806. Validity not impaired by certain acts

An assignment of an account receivable is not, and shall not be deemed to be invalid because:

(a) By its terms such assignment permits the assignor to collect or compromise the assigned account; or

(b) By its terms such assignment permits the assignor to use the proceeds of the assigned account, when collected, in the conduct of his business; or

(c) No notice thereof is given to the account debtor or to any other person; or

(d) Neither such assignment nor any copy or notice thereof is recorded or filed in any public office; or

(e) The assignor has failed to account for proceeds or replace collateral.

§ 1807. Exceptions to application of this chapter

(a) This chapter shall not apply to: (1) the rights of the United States in any case of an assignment of a claim against the United States but shall apply to the rights of all other persons interested in such assignment; or (2) any general assignment for the benefit of creditors; or (3) an assignment or other transfer of a claim for wages, salary or other compensation of an employee; or (4) a transfer of accounts as part of a sale of the business out of which they arose, or a transfer of a contract right to an assignee who is also to do the performance under the contract; or (5) an assignment or other transfer of an interest or claim in or under any policy of insurance; or (6) to monies arising from public or private construction contracts for which the assignor has furnished a surety bond guaranteeing the performance of the contract or the payment of labor and materials claims arising therefrom.

(b) This act shall not be construed to alter or affect any existing law with respect to the negotiation of or the rights of the holders of negotiable instruments. Nor shall it be construed to alter or affect the relative rights or priorities of creditors of account debtors as provided under statutes governing conditional sales, trust receipts, factor's liens or other statutes making provision for the recording or filing of memoranda or assignments or notices of such assignments.

Section 2. Severability of provisions of this chapter

If any provision of this Chapter or the application thereof to any person or circumstance is held invalid, such invalidity shall not affect other provisions or applications of this Chapter which can be given effect without the invalid provisions or application, and to this end the provisions of this Chapter are declared to be severable.

Approved July 3, 1957.