§ 25-9-409. Restrictions on assignment of letter-of-credit rights ineffective. - North Carolina Statutes

§25‑9‑409.  Restrictions on assignment of letter‑of‑creditrights ineffective.

(a)        Term or lawrestricting assignment generally ineffective. – A term in a letter of credit ora rule of law, statute, regulation, custom, or practice applicable to theletter of credit which prohibits, restricts, or requires the consent of anapplicant, issuer, or nominated person to a beneficiary's assignment of orcreation of a security interest in a letter‑of‑credit right isineffective to the extent that the term or rule of law, statute, regulation,custom, or practice:

(1)        Would impair thecreation, attachment, or perfection of a security interest in the letter‑of‑creditright; or

(2)        Provides that theassignment or the creation, attachment, or perfection of the security interestmay give rise to a default, breach, right of recoupment, claim, defense,termination, right of termination, or remedy under the letter‑of‑creditright.

(b)        Limitation onineffectiveness under subsection (a). – To the extent that a term in a letter ofcredit is ineffective under subsection (a) of this section but would beeffective under law other than this Article or a custom or practice applicableto the letter of credit, to the transfer of a right to draw or otherwise demandperformance under the letter of credit, or to the assignment of a right toproceeds of the letter of credit, the creation, attachment, or perfection of asecurity interest in the letter‑of‑credit right:

(1)        Is not enforceableagainst the applicant, issuer, nominated person, or transferee beneficiary;

(2)        Imposes no duties orobligations on the applicant, issuer, nominated person, or transfereebeneficiary; and

(3)        Does not require theapplicant, issuer, nominated person, or transferee beneficiary to recognize thesecurity interest, pay or render performance to the secured party, or acceptpayment or other performance from the secured party. (2000‑169,s. 1.)