Account Debtor Law and Legal Definition

Account debtor means a person responsible on an account, chattel paper, or general intangible. A person obligated to pay a negotiable instrument is exempted from the definition of account debtor by UCC, even if the instrument constitutes chattel paper. Generally, an account debtor is liable to an assignee for payments made to an assignor after the account debtor receives sufficient notice of the assignment. Once an account debtor has notice of an assignment, the account debtor is liable to the assignee if the account debtor pays the assignor money which, under the terms of the assignment, belongs to the assignee. However, even though an account debtor is aware of an assignment, if the account debtor continues to pay the assignor and the assignee does not object, the account debtor is not bound by the assignment. In such a situation, an assignee who wants to take over collection must notify the account debtor to make future payments to him.[ General Motors Acceptance Corp. v. Clifton-Fine Cent. Sch. Dist., 199 A.D.2d 939 (N.Y. App. Div. 1993)].