Michigan Laws 440.9409 – Restrictions on assignment of letter-of-credit rights ineffective
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(1) 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 does 1 or more of the following:
(a) Would impair the creation, attachment, or perfection of a security interest in the letter-of-credit right.
Terms Used In Michigan Laws 440.9409
- Attachment: A procedure by which a person's property is seized to pay judgments levied by the court.
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Letter-of-credit right: means a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance. See Michigan Laws 440.9102
- Person: means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity. See Michigan Laws 440.1201
- Proceeds: means , except as used in section 9609(2), 1 or more of the following property:
(i) Whatever is acquired upon the sale, lease, license, exchange, or other disposition of collateral. See Michigan Laws 440.9102Remedy: means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal. See Michigan Laws 440.1201 Right: includes remedy. See Michigan Laws 440.1201 Secured party: means 1 or more of the following:
(i) A person in whose favor a security interest is created or provided for under a security agreement, whether or not any obligation to be secured is outstanding. See Michigan Laws 440.9102Security interest: means an interest in personal property or fixtures which secures payment or performance of an obligation. See Michigan Laws 440.1201 Statute: A law passed by a legislature. Term: means a portion of an agreement that relates to a particular matter. See Michigan Laws 440.1201
(b) 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.
(2) To the extent that a term in a letter of credit is ineffective under subsection (1) 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, the term is not enforceable against the applicant, issuer, nominated person, or transferee beneficiary, imposes no duties or obligations on the applicant, issuer, nominated person, or transferee beneficiary, and 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.