47-9409. Restrictions on assignment of
letter-of-credit rights ineffective
A. A term in a letter of credit or a rule of law, statute, regulation, custom or
practice applicable to the letter of credit that prohibits, restricts or requires the
consent of an applicant, issuer or nominated person to a beneficiary's assignment of or
creation of a security interest in a letter-of-credit right is ineffective to the extent
that the term or rule of law, statute, regulation, custom or practice:
1. Would impair the creation, attachment or perfection of a security interest in
the letter-of-credit right; or
2. Provides that the assignment or the creation, attachment or perfection of the
security interest may give rise to a default, breach, right of recoupment, claim,
defense, termination, right of termination or remedy under the letter-of-credit right.
B. To the extent that a term in a letter of credit is ineffective under subsection
A but would be effective under law other than this chapter or a custom or practice
applicable to the letter of credit, to the transfer of a right to draw or otherwise
demand performance under the letter of credit or to the assignment of a right to proceeds
of the letter of credit, the creation, attachment or perfection of a security interest in
the letter-of-credit right:
1. Is not enforceable against the applicant, issuer, nominated person or transferee
beneficiary;
2. Imposes no duties or obligations on the applicant, issuer, nominated person or
transferee beneficiary; and
3. Does not require the applicant, issuer, nominated person or transferee
beneficiary to recognize the security interest, pay or render performance to the secured
party or accept payment or other performance from the secured party.
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