§ 41-09-71 — (9-409) 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 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:
a. Would impair the creation, attachment, or perfection of a security interest in the
letter-of-credit right; or
b. Provides that the assignment, 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.
2. To the extent that a term in a letter of credit is ineffective under subsection 1 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:
a. Is not enforceable against the applicant, issuer, nominated person, or transferee
beneficiary;
b. Imposes no duties or obligations on the applicant, issuer, nominated person, or
transferee beneficiary; and
c. 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.