Next Generation Bar Exam Quiz
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CONTRACTS
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Builder and Design Co. signed a contract under which Design Co. would provide architectural services in two phases. Builder owes Design Co. $40,000 for completed phase 1. Design Co. assigned its right to that $40,000 to Bank as collateral for a loan, and Bank notified Builder. Later, after receiving that notice, Design Co. performed phase 2 negligently, causing Builder $40,000 in damages to correct the work. Builder refused to pay Bank. Bank sued Builder.
Commercial Code § 9-404(a) provides: 'The rights of an assignee are subject to (1) all terms of the agreement between the account debtor and the assignor and any defense or claim in recoupment arising from the transaction that gave rise to the assigned contract; and (2) any other defense or claim of the account debtor against the assignor that accrues before the account debtor receives notification of the assignment.'
In Bank's suit against Builder, who prevails?
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