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The Vermont Statutes Online



Title

09A

:
Uniform Commercial Code






Chapter

009

:
Secured Transactions











 

§

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:

(1) would impair

the creation, attachment, or perfection of a security interest in the

letter-of-credit right; or

(2) 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:

(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. (Added

1999, No. 106 (Adj. Sess.), § 2, eff. July 1, 2001.)