Also known as: account debtors
Written by attorneys · grounded in primary & secondary sources — see below
An obligor on a right to payment that constitutes an account, chattel paper, or general intangible. The definition excludes persons obligated to pay a negotiable instrument even if the instrument evidences chattel paper.
CityCare Hospital sells unpaid patient invoices to Apex Billing LLC. Jordan owes an unpaid invoice that remains an ordinary account. Apex seeks to enforce its rights in the assigned collateral. Jordan is the party obligated on the account and therefore qualifies as the account debtor.
Summit Steel LLC performs work under a subcontract with Metro Builders Corp. Summit assigns its rights to progress payments to Harbor Finance Corp. Metro remains obligated to make those payments under the original subcontract. Metro therefore functions as the account debtor with respect to the assigned receivables.
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A person obligated on an account, chattel paper, or general intangible qualifies as an account debtor. The definition expressly excludes persons obligated to pay a negotiable instrument even if the instrument evidences chattel paper.
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No. A person remains an account debtor on the underlying account or general intangible even after a negotiable note is issued for disputed amounts. The exclusion applies only to the obligation on the negotiable instrument itself.
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Assignment changes only the party entitled to receive payment. The original obligor on the account remains the account debtor and continues to owe the monetary obligation to the assignee.
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An account debtor owes the underlying payment obligation while the debtor in the secured transaction is the party that granted the security interest in the receivable. The distinction determines which Article 9 rules on notification, discharge, and defenses apply.
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