70A-9a-409 - Restrictions on assignment of letter-of-credit rights ineffective.
70A-9a-409. Restrictions on assignment of letter-of-credit rights ineffective.
(1) A term in a letter of credit or a rule of law, statute, regulation, custom, or practiceapplicable 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 aletter-of-credit right is ineffective to the extent that the term or rule of law, statute, regulation,custom, or practice:
(a) would impair the creation, attachment, or perfection of a security interest in theletter-of-credit right; or
(b) provides that the assignment or the creation, attachment, or perfection of the securityinterest may give rise to a default, breach, right of recoupment, claim, defense, termination, rightof termination, or remedy under the letter-of-credit right.
(2) To the extent that a term in a letter of credit is ineffective under Subsection (1) butwould be effective under law other than this chapter or a custom or practice applicable to theletter of credit, to the transfer of a right to draw or otherwise demand performance under the letterof 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:
(a) is not enforceable against the applicant, issuer, nominated person, or transfereebeneficiary;
(b) imposes no duties or obligations on the applicant, issuer, nominated person, ortransferee beneficiary; and
(c) does not require the applicant, issuer, nominated person, or transferee beneficiary torecognize the security interest, pay or render performance to the secured party, or accept paymentor other performance from the secured party.
Enacted by Chapter 252, 2000 General Session