(A) A term in a letter of credit or a rule of law, statute, regulation, custom, or practice applicable to the letter of credit that 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 not effective to the extent that the term or rule or 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 not effective under division (A) of this section but would be effective under law other than this chapter or under 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.
Effective Date: 07-01-2001
Section: Previous 1309.402 1309.403 1309.404 1309.405 1309.406 1309.407 1309.408 1309.409 1309.501 1309.502 1309.503 1309.504 1309.505 1309.506 1309.507 NextLast modified: October 10, 2016