§ 34.1-9-409 — 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 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:
(i) Would impair the creation, attachment or
perfection of a security interest in the letter-of-credit right;
or
(ii) 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 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:
(i) Is not enforceable against the applicant, issuer,
nominated person or transferee beneficiary;
(ii) Imposes no duties or obligations on the
applicant, issuer, nominated person or transferee beneficiary;
and
(iii) 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.
PART 5
FILING
SUBPART 1
FILING OFFICE; CONTENTS AND
EFFECTIVENESS OF FINANCING STATEMENT