§ 9-409. 9-409

284 words·~1 min read·/us/ucc/a9/s9-409

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

(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 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)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 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.