2006 Minnesota Statutes

336.9-409 RESTRICTIONS ON ASSIGNMENT OF LETTER OF CREDIT RIGHTS
INEFFECTIVE.
(a) Term or law restricting assignment generally ineffective. 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) Limitation on ineffectiveness under subsection (a). 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.
History: 2000 c 399 art 1 s 71