(a) Term or law restricting assignment generally ineffective. -- A term in a letter
of credit or a rule of law, statute, regulation, custom, or practice applicable to
the letter of credit which 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) Limitation on ineffectiveness under subsection (a). -- To the extent that a term in a letter of credit is ineffective under subsection
(a) of this section but would be effective under law other than this Article 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
(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.
FindLaw Codes may not reflect the most recent version of the law in your jurisdiction. Please verify the status of the code you are researching with the state legislature or via Westlaw before relying on it for your legal needs.
Was this helpful?
Response sent, thank you
Welcome to FindLaw's Cases & Codes
A free source of state and federal court opinions, state laws, and the United States Code. For more information about the legal concepts addressed by these cases and statutes, visit FindLaw's Learn About the Law.