Texas Business & Commerce Code
§ 9.409 — RESTRICTIONS ON ASSIGNMENT OF LETTER-OF-CREDIT RIGHTS INEFFECTIVE
BC § 9.409Title 1. UNIFORM COMMERCIAL CODE · Ch. 9. SECURED TRANSACTIONS · Art. D. RIGHTS OF THIRD PARTIES
Statute text
View on source(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 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 chapter 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
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Legislative history
Amended by Acts 1999, 76th Leg., ch. 414, Sec. 1.01, eff. July 1, 2001; Acts 2001, 77th Leg., ch. 705, Sec. 14, eff. June 13, 2001.