8.9A-409 - A-409. Restrictions on assignment of letter-of-credit rights ineffective. - Virginia Statutes

§ 8.9A-409. Restrictions on assignment of letter-of-credit rights ineffective.

(a) Term or law restricting assignment generally ineffective. A term in aletter of credit or a rule of law, statute, regulation, custom, or practiceapplicable to the letter of credit which prohibits, restricts, or requiresthe consent of an applicant, issuer, or nominated person to a beneficiary'sassignment of or creation of a security interest in a letter-of-credit rightis 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 securityinterest in the letter-of-credit right; or

(2) provides that the assignment or the creation, attachment, or perfectionof the security interest may give rise to a default, breach, right ofrecoupment, claim, defense, termination, right of termination, or remedyunder the letter-of-credit right.

(b) Limitation on ineffectiveness under subsection (a). To the extent that aterm in a letter of credit is ineffective under subsection (a) but would beeffective under law other than this title or a custom or practice applicableto the letter of credit, to the transfer of a right to draw or otherwisedemand performance under the letter of credit, or to the assignment of aright to proceeds of the letter of credit, the creation, attachment, orperfection of a security interest in the letter-of-credit right:

(1) is not enforceable against the applicant, issuer, nominated person, ortransferee beneficiary;

(2) imposes no duties or obligations on the applicant, issuer, nominatedperson, or transferee beneficiary; and

(3) does not require the applicant, issuer, nominated person, or transfereebeneficiary to recognize the security interest, pay or render performance tothe secured party, or accept payment or other performance from the securedparty.

(2000, c. 1007.)