                                 CODE OF VIRGINIA

RESTRICTIONS ON ASSIGNMENT OF LETTER-OF-CREDIT RIGHTS INEFFECTIVE (§ 8.9A-409)

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&#8217;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 title 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. 1007.