COMMON MISTAKES WITH NOTICES OF ASSIGNMENT – A CASE STUDY Bruce E. Loren, Esq. and Allen J. Heffner, Esq. | Dec 08 2018

The Notice of Assignment is probably the single most important document for a Factor. Understanding what needs to be included in the Notice of Assignment, how to send it, and who to send it to can mean the difference between getting paid or not.

This article focuses on a real-life example of a Factor who unfortunately made some self-inflicted mistakes with respect to its Notice of Assignment and lessons that can be learned from that experience.


  • Client was a contractor performing maintenance and janitorial services for a large pharmaceutical corporation with multiple offices throughout the country (the Account Debtor).
  • Unsure of which location to send the Notice of Assignment, the Factor asked the Client where and to whom the Notice of Assignment should be sent.
  • Based upon the Client’s response, the Factor e-mailed a copy of the Notice of Assignment to an individual with the account debtor’s domain name and also sent a copy of the Notice of Assignment, via U.S. mail, to the Account Debtor’s CFO.
  • Additionally, the Factor included a signature line on the Notice of Assignment for the Account Debtor to execute, confirming receipt of the Notice of Assignment, and to be returned to Factor.
  • Moreover, the Factor had the Client send an e-mail to its contact with the Account Debtor instructing the Account Debtor to make payments directly to the Factor.
  • Believing it had validly delivered the Notice of Assignment, and having heard no objection from the Account Debtor, the Factor began advancing funds to the Client on purchased invoices.
  • For some time, the Account Debtor made payments to the Factor. However, at some point, the Client instructed the Account Debtor to cease making payments to the Factor and going forward, to submit all payments directly to the Client. Subsequently, the Factor sued the Account Debtor arguing the payments made directly to the Client did not discharge the Account Debtor’s obligations.


Issue Number 1:

The court held that Factor could not prove the Account Debtor’s receipt of the Notice of Assignment. The Notice of Assignment was mailed without any proof of delivery, and the e-mailed copy of the Notice of Assignment was sent to a former employee of Account Debtor that did not work for the Account Debtor at the time the e-mail was sent by Factor. Therefore, the court found that because Factor could not prove Account Debtor’s receipt of the Notice of Assignment, Account Debtor’s payment directly to Client did discharge its obligations as it had no obligations to pay Factor.

Issue Number 2:

The Factor also argued that Client’s e-mail to the Account Debtor informing the Account Debtor of the factoring arrangement and the Client’s instructions to the Account Debtor to make payments directly to the Factor constituted a Notice of Assignment, which the Account Debtor complied with. The court also rejected this argument. The judge found that the Client’s e-mail did not satisfy the requirements of UCC § 9-406 that a Notice of Assignment must: (a) notify the Account Debtor that the amount due or to become due has been assigned; (b) notify the Account Debtor that payment is to be made to the Factor; (c) reasonably identify the rights assigned; and (d) be signed by the Factor or its Client. Therefore, this was an invalid Notice of Assignment.

What to take away from this case:

Factors should never rely upon the Client for information as to whom and where the Notice of Assignment should be sent. The Factor must perform its own research as to where it should be sent and should never send it to only an individual. The Factor should deliver the Notice of Assignment to the Account Debtor’s accounts payable department. Moreover, it is the Factor’s burden to prove the Account Debtor’s receipt of the Notice of Assignment. Therefore, Notices of Assignment should always be sent via certified mail/return receipt requested or other method that provides for proof of delivery.

Factors must have procedures in place to ensure that its Notices of Assignment contain the proper information and are delivered in the proper manner and to the proper location. Without delivering a proper Notice of Assignment, there is no legal requirement that the Account Debtor pay the Factor. Conversely, a proper Notice of Assignment creates the only path for the Account Debtor to relieve itself of the debt – pay the Factor.

Bruce Loren and Allen Heffner of the Loren & Kean Law Firm are based in Palm Beach Gardens and Fort Lauderdale. For over 25 years, Mr. Loren has focused his practice on construction law and factoring law. Mr. Loren has achieved the title of “Certified in Construction Law” by the Florida Bar. The Firm represents factoring companies in a wide range of industries, including construction, regarding all aspects of litigation and dispute resolution. Mr. Loren and Mr. Heffner can be reached at bloren@lorenkeanlaw.com or aheffner@lorenkeanlaw.com or 561-615-5701.