5101-5118

COMMERCIAL CODE
SECTION 5101-5118




5101.  This division may be cited as Uniform Commercial
Code--Letters of Credit.



5102.  (a) In this division:
   (1) "Adviser" means a person who, at the request of the issuer, a
confirmer, or another adviser, notifies or requests another adviser
to notify the beneficiary that a letter of credit has been issued,
confirmed, or amended.
   (2) "Applicant" means a person at whose request or for whose
account a letter of credit is issued. The term includes a person who
requests an issuer to issue a letter of credit on behalf of another
if the person making the request undertakes an obligation to
reimburse the issuer.
   (3) "Beneficiary" means a person who under the terms of a letter
of credit is entitled to have its complying presentation honored. The
term includes a person to whom drawing rights have been transferred
under a transferable letter of credit.
   (4) "Confirmer" means a nominated person who undertakes, at the
request or with the consent of the issuer, to honor a presentation
under a letter of credit issued by another.
   (5) "Dishonor" of a letter of credit means failure timely to honor
or to take an interim action, such as acceptance of a draft, that
may be required by the letter of credit.
   (6) "Document" means a draft or other demand, document of title,
investment security, certificate, invoice, or other record,
statement, or representation of fact, law, right, or opinion (i)
which is presented in a written or other medium permitted by the
letter of credit or, unless prohibited by the letter of credit, by
the standard practice referred to in subdivision (e) of Section 5108
and (ii) which is capable of being examined for compliance with the
terms and conditions of the letter of credit. A document may not be
oral.
   (7) "Good faith" means honesty in fact in the conduct or
transaction concerned.
   (8) "Honor" of a letter of credit means performance of the issuer'
s undertaking in the letter of credit to pay or deliver an item of
value. Unless the letter of credit otherwise provides, "honor" occurs
   (i) upon payment,
   (ii) if the letter of credit provides for acceptance, upon
acceptance of a draft and, at maturity, its payment, or
   (iii) if the letter of credit provides for incurring a deferred
obligation, upon incurring the obligation and, at maturity, its
performance.
   (9) "Issuer" means a bank or other person that issues a letter of
credit, but does not include an individual who makes an engagement
for personal, family, or household purposes.
   (10) "Letter of credit" means a definite undertaking that
satisfies the requirements of Section 5104 by an issuer to a
beneficiary at the request or for the account of an applicant or, in
the case of a financial institution, to itself or for its own
account, to honor a documentary presentation by payment or delivery
of an item of value.
   (11) "Nominated person" means a person whom the issuer (i)
designates or authorizes to pay, accept, negotiate, or otherwise give
value under a letter of credit and (ii) undertakes by agreement or
custom and practice to reimburse.
   (12) "Presentation" means delivery of a document to an issuer or
nominated person for honor or giving of value under a letter of
credit.
   (13) "Presenter" means a person making a presentation as or on
behalf of a beneficiary or nominated person.
   (14) "Record" means information that is inscribed on a tangible
medium, or that is stored in an electronic or other medium and is
retrievable in perceivable form.
   (15) "Successor of a beneficiary" means a person who succeeds to
substantially all of the rights of a beneficiary by operation of law,
including a corporation with or into which the beneficiary has been
merged or consolidated, an administrator, executor, personal
representative, trustee in bankruptcy, debtor in possession,
liquidator, and receiver.
   (b) Definitions in other divisions applying to this division and
the sections in which they appear are:
   "Accept" or "Acceptance"  Section 3409
   "Value"  Sections 3303, 4211
   (c) Division 1 contains certain additional general definitions and
principles of construction and interpretation applicable throughout
this division.



5103.  (a) This division applies to letters of credit and to certain
rights and obligations arising out of transactions involving letters
of credit.
   (b) The statement of a rule in this division does not by itself
require, imply, or negate application of the same or a different rule
to a situation not provided for, or to a person not specified, in
this division.
   (c) With the exception of this subdivision, subdivisions (a) and
(d), paragraphs 9 and 10 of subdivision (a) of Section 5102,
subdivision (d) of Section 5106, and subdivision (d) of Section 5114,
and except to the extent prohibited in Section 1302 and subdivision
(d) of Section 5117, the effect of this division may be varied by
agreement or by a provision stated or incorporated by reference in an
undertaking. A term in an agreement or undertaking generally
excusing liability or generally limiting remedies for failure to
perform obligations is not sufficient to vary obligations prescribed
by this division.
   (d) Rights and obligations of an issuer to a beneficiary or a
nominated person under a letter of credit are independent of the
existence, performance, or nonperformance of a contract or
arrangement out of which the letter of credit arises or which
underlies it, including contracts or arrangements between the issuer
and the applicant and between the applicant and the beneficiary.




5104.  A letter of credit, confirmation, advice, transfer,
amendment, or cancellation may be issued in any form that is a record
and is authenticated (i) by a signature or (ii) in accordance with
the agreement of the parties or the standard practice referred to in
subdivision (e) of Section 5108.



5105.  Consideration is not required to issue, amend, transfer, or
cancel a letter of credit, advice, or confirmation.



5106.  (a) A letter of credit is issued and becomes enforceable
according to its terms against the issuer when the issuer sends or
otherwise transmits it to the person requested to advise or to the
beneficiary. A letter of credit is revocable only if it so provides.
   (b) After a letter of credit is issued, rights and obligations of
a beneficiary, applicant, confirmer, and issuer are not affected by
an amendment or cancellation to which that person has not consented
except to the extent the letter of credit provides that it is
revocable or that the issuer may amend or cancel the letter of credit
without that consent.
   (c) If there is no stated expiration date or other provision that
determines its duration, a letter of credit expires one year after
its stated date of issuance or, if none is stated, after the date on
which it is issued.
   (d) A letter of credit that states that it is perpetual expires
five years after its stated date of issuance, or if none is stated,
after the date on which it is issued.



5107.  (a) A confirmer is directly obligated on a letter of credit
and has the rights and obligations of an issuer to the extent of its
confirmation. The confirmer also has rights against and obligations
to the issuer as if the issuer were an applicant and the confirmer
had issued the letter of credit at the request and for the account of
the issuer.
   (b) A nominated person who is not a confirmer is not obligated to
honor or otherwise give value for a presentation.
   (c) A person requested to advise may decline to act as an adviser.
An adviser that is not a confirmer is not obligated to honor or give
value for a presentation. An adviser undertakes to the issuer and to
the beneficiary accurately to advise the terms of the letter of
credit, confirmation, amendment, or advice received by that person
and undertakes to the beneficiary to check the apparent authenticity
of the request to advise. Even if the advice is inaccurate, the
letter of credit, confirmation, or amendment is enforceable as
issued.
   (d) A person who notifies a transferee beneficiary of the terms of
a letter of credit, confirmation, amendment, or advice has the
rights and obligations of an adviser under subdivision (c). The terms
in the notice to the transferee beneficiary may differ from the
terms in any notice to the transferor beneficiary to the extent
permitted by the letter of credit, confirmation, amendment, or advice
received by the person who so notifies.



5108.  (a) Except as otherwise provided in Section 5109, an issuer
shall honor a presentation that, as determined by the standard
practice referred to in subdivision (e), appears on its face strictly
to comply with the terms and conditions of the letter of credit.
Except as otherwise provided in Section 5113 and unless otherwise
agreed with the applicant, an issuer shall dishonor a presentation
that does not appear so to comply.
   (b) An issuer has a reasonable time after presentation, but not
beyond the end of the seventh business day of the issuer after the
day of its receipt of documents:
   (1) to honor,
   (2) if the letter of credit provides for honor to be completed
more than seven business days after presentation, to accept a draft
or incur a deferred obligation, or
   (3) to give notice to the presenter of discrepancies in the
presentation.
   (c) Except as otherwise provided in subdivision (d), an issuer is
precluded from asserting as a basis for dishonor any discrepancy if
timely notice is not given, or any discrepancy not stated in the
notice if timely notice is given.
   (d) Failure to give the notice specified in subdivision (b) or to
mention fraud, forgery, or expiration in the notice does not preclude
the issuer from asserting as a basis for dishonor fraud or forgery
as described in subdivision (a) of Section 5109 or expiration of the
letter of credit before presentation.
   (e) An issuer shall observe standard practice of financial
institutions that regularly issue letters of credit. Determination of
the issuer's observance of the standard practice is a matter of
interpretation for the court. The court shall offer the parties a
reasonable opportunity to present evidence of the standard practice.
   (f) An issuer is not responsible for:
   (1) the performance or nonperformance of the underlying contract,
arrangement, or transaction,
   (2) an act or omission of others, or
   (3) observance or knowledge of the usage of a particular trade
other than the standard practice referred to in subdivision (e).
   (g) If an undertaking constituting a letter of credit under
paragraph (10) of subdivision (a) of Section 5102 contains
nondocumentary conditions, an issuer shall disregard the
nondocumentary conditions and treat them as if they were not stated.
   (h) An issuer that has dishonored a presentation shall return the
documents or hold them at the disposal of, and send advice to that
effect to, the presenter.
   (i) An issuer that has honored a presentation as permitted or
required by this division:
   (1) is entitled to be reimbursed by the applicant in immediately
available funds not later than the date of its payment of funds;
   (2) takes the documents free of claims of the beneficiary or
presenter;
   (3) is precluded from asserting a right of recourse on a draft
under Sections 3414 and 3415;
   (4) except as otherwise provided in Sections 5110 and 5117, is
precluded from restitution of money paid or other value given by
mistake to the extent the mistake concerns discrepancies in the
documents or tender which are apparent on the face of the
presentation; and
   (5) is discharged to the extent of its performance under the
letter of credit unless the issuer honored a presentation in which a
required signature of a beneficiary was forged.



5109.  (a) If a presentation is made that appears on its face
strictly to comply with the terms and conditions of the letter of
credit, but a required document is forged or materially fraudulent,
or honor of the presentation would facilitate a material fraud by the
beneficiary on the issuer or applicant:
   (1) the issuer shall honor the presentation, if honor is demanded
by (i) a nominated person who has given value in good faith and
without notice of forgery or material fraud, (ii) a confirmer who has
honored its confirmation in good faith, (iii) a holder in due course
of a draft drawn under the letter of credit which was taken after
acceptance by the issuer or nominated person, or (iv) an assignee of
the issuer's or nominated person's deferred obligation that was taken
for value and without notice of forgery or material fraud after the
obligation was incurred by the issuer or nominated person; and
   (2) the issuer, acting in good faith, may honor or dishonor the
presentation in any other case.
   (b) If an applicant claims that a required document is forged or
materially fraudulent or that honor of the presentation would
facilitate a material fraud by the beneficiary on the issuer or
applicant, a court of competent jurisdiction may temporarily or
permanently enjoin the issuer from honoring a presentation or grant
similar relief against the issuer or other persons only if the court
finds that:
   (1) the relief is not prohibited under the law applicable to an
accepted draft or deferred obligation incurred by the issuer;
   (2) a beneficiary, issuer, or nominated person who may be
adversely affected is adequately protected against loss that it may
suffer because the relief is granted;
   (3) all of the conditions to entitle a person to the relief under
the law of this state have been met; and
   (4) on the basis of the information submitted to the court, the
applicant is more likely than not to succeed under its claim of
forgery or material fraud and the person demanding honor does not
qualify for protection under paragraph (1) of subdivision (a).




5110.  (a) If its presentation is honored, the beneficiary warrants:
   (1) to the issuer, any other person to whom presentation is made,
and the applicant that there is no fraud or forgery of the kind
described in subdivision (a) of Section 5109; and
   (2) to the applicant that the drawing does not violate any
agreement between the applicant and beneficiary or any other
agreement intended by them to be augmented by the letter of credit.
   (b) The warranties in subdivision (a) are in addition to
warranties arising under Division 3 (commencing with Section 3101),
Division 4 (commencing with Section 4101), Division 7 (commencing
with Section 7101), and Division 8 (commencing with Section 8101)
because of the presentation or transfer of documents covered by any
of those divisions.


5111.  (a) If an issuer wrongfully dishonors or repudiates its
obligation to pay money under a letter of credit before presentation,
the beneficiary, successor, or nominated person presenting on its
own behalf may recover from the issuer the amount that is the subject
of the dishonor or repudiation. If the issuer's obligation under the
letter of credit is not for the payment of money, the claimant may
obtain specific performance or, at the claimant's election, recover
an amount equal to the value of performance from the issuer. In
either case, the claimant may also recover incidental but not
consequential damages. The claimant is not obligated to take action
to avoid damages that might be due from the issuer under this
subdivision. If, although not obligated to do so, the claimant avoids
damages, the claimant's recovery from the issuer must be reduced by
the amount of damages avoided. The issuer has the burden of proving
the amount of damages avoided. In the case of repudiation the
claimant need not present any document.
   (b) If an issuer wrongfully dishonors a draft or demand presented
under a letter of credit or honors a draft or demand in breach of its
obligation to the applicant, the applicant may recover damages
resulting from the breach, including incidental but not consequential
damages, less any amount saved as a result of the breach.
   (c) If an adviser or nominated person other than a confirmer
breaches an obligation under this article or an issuer breaches an
obligation not covered in subdivision (a) or (b), a person to whom
the obligation is owed may recover damages resulting from the breach,
including incidental but not consequential damages, less any amount
saved as a result of the breach. To the extent of the confirmation, a
confirmer has the liability of an issuer specified in this
subdivision and subdivisions (a) and (b).
   (d) An issuer, nominated person, or adviser who is found liable
under subdivision (a), (b), or (c) shall pay interest on the amount
owed thereunder from the date of wrongful dishonor or other
appropriate date.
   (e) Reasonable attorney's fees and other expenses of litigation
must be awarded to the prevailing party in an action in which a
remedy is sought under this article.
   (f) Damages that would otherwise be payable by a party for breach
of an obligation under this article may be liquidated by agreement or
undertaking, but only in an amount or by a formula that is
reasonable in light of the harm anticipated.



5112.  (a) Except as otherwise provided in Section 5113, unless a
letter of credit provides that it is transferable, the right of a
beneficiary to draw or otherwise demand performance under a letter of
credit may not be transferred.
   (b) Even if a letter of credit provides that it is transferable,
the issuer may refuse to recognize or carry out a transfer if:
   (1) the transfer would violate applicable law; or
   (2) the transferor or transferee has failed to comply with any
requirement stated in the letter of credit or any other requirement
relating to transfer imposed by the issuer which is within the
standard practice referred to in subdivision (e) of Section 5108 or
is otherwise reasonable under the circumstances.



5113.  (a) A successor of a beneficiary may consent to amendments,
sign and present documents, and receive payment or other items of
value in the name of the beneficiary without disclosing its status as
a successor.
   (b) A successor of a beneficiary may consent to amendments, sign
and present documents, and receive payment or other items of value in
its own name as the disclosed successor of the beneficiary. Except
as otherwise provided in subdivision (e), an issuer shall recognize a
disclosed successor of a beneficiary as beneficiary in full
substitution for its predecessor upon compliance with the
requirements for recognition by the issuer of a transfer of drawing
rights by operation of law under the standard practice referred to in
subdivision (e) of Section 5108 or, in the absence of such a
practice, compliance with other reasonable procedures sufficient to
protect the issuer.
   (c) An issuer is not obliged to determine whether a purported
successor is a successor of a beneficiary or whether the signature of
a purported successor is genuine or authorized.
   (d) Honor of a purported successor's apparently complying
presentation under subdivision (a) or (b) has the consequences
specified in subdivision (i) of Section 5108 even if the purported
successor is not the successor of a beneficiary. Documents signed in
the name of the beneficiary or of a disclosed successor by a person
who is neither the beneficiary nor the successor of the beneficiary
are forged documents for the purposes of Section 5109.
   (e) An issuer whose rights of reimbursement are not covered by
subdivision (d) or substantially similar law and any confirmer or
nominated person may decline to recognize a presentation under
subdivision (b).
   (f) A beneficiary whose name is changed after the issuance of a
letter of credit has the same rights and obligations as a successor
of a beneficiary under this section.


5114.  (a) In this section, "proceeds of a letter of credit" means
the cash, check, accepted draft, or other item of value paid or
delivered upon honor or giving of value by the issuer or any
nominated person under the letter of credit. The term does not
include a beneficiary's drawing rights or documents presented by the
beneficiary.
   (b) A beneficiary may assign its right to part or all of the
proceeds of a letter of credit. The beneficiary may do so before
presentation as a present assignment of its right to receive proceeds
contingent upon its compliance with the terms and conditions of the
letter of credit.
   (c) An issuer or nominated person need not recognize an assignment
of proceeds of a letter of credit until it consents to the
assignment.
   (d) An issuer or nominated person has no obligation to give or
withhold its consent to an assignment of proceeds of a letter of
credit, but consent may not be unreasonably withheld if the assignee
possesses and exhibits the letter of credit and presentation of the
letter of credit is a condition to honor.
   (e) Rights of a transferee beneficiary or nominated person are
independent of the beneficiary's assignment of the proceeds of a
letter of credit and are superior to the assignee's right to the
proceeds.
   (f) Neither the rights recognized by this section between an
assignee and an issuer, transferee beneficiary, or nominated person
nor the issuer's or nominated person's payment of proceeds to an
assignee or third person affect the rights between the assignee and
any person other than the issuer, transferee beneficiary, or
nominated person. The mode of creating and perfecting a security
interest in or granting an assignment of a beneficiary's rights to
proceeds is governed by Division 9 (commencing with Section 9101) or
other law. Against persons other than the issuer, transferee
beneficiary, or nominated person, the rights and obligations arising
upon the creation of a security interest or other assignment of a
beneficiary's right to proceeds and its perfection are governed by
Division 9 (commencing with Section 9101) or other law.



5115.  An action to enforce a right or obligation arising under this
article must be commenced within one year after the expiration date
of the relevant letter of credit or one year after the cause of
action accrues, whichever occurs later. A cause of action accrues
when the breach occurs, regardless of the aggrieved party's lack of
knowledge of the breach.



5116.  (a) The liability of an issuer, nominated person, or adviser
for action or omission is governed by the law of the jurisdiction
chosen by an agreement in the form of a record signed or otherwise
authenticated by the affected parties in the manner provided in
Section 5104 or by a provision in the person's letter of credit,
confirmation, or other undertaking. The jurisdiction whose law is
chosen need not bear any relation to the transaction.
   (b) Unless subdivision (a) applies, the liability of an issuer,
nominated person, or adviser for action or omission is governed by
the law of the jurisdiction in which the person is located. The
person is considered to be located at the address indicated in the
person's undertaking. If more than one address is indicated, the
person is considered to be located at the address from which the
person's undertaking was issued. For the purpose of jurisdiction,
choice of law, and recognition of interbranch letters of credit, but
not enforcement of a judgment, all branches of a bank are considered
separate juridical entities and a bank is considered to be located at
the place where its relevant branch is considered to be located
under this subdivision.
   (c) Except as otherwise provided in this subdivision, the
liability of an issuer, nominated person, or adviser is governed by
any rules of custom or practice, such as the Uniform Customs and
Practice for Documentary Credits, to which the letter of credit,
confirmation, or other undertaking is expressly made subject. If (i)
this article would govern the liability of an issuer, nominated
person, or adviser under subdivision (a) or (b), (ii) the relevant
undertaking incorporates rules of custom or practice, and (iii) there
is conflict between this article and those rules applied to that
undertaking, those rules govern except to the extent of any conflict
with the nonvariable provisions specified in subdivision (c) of
Section 5103.
   (d) If there is conflict between this division and Division 3
(commencing with Section 3101), Division 4 (commencing with Section
4101), or Division 9 (commencing with Section 9101), this division
governs.
   (e) The forum for settling disputes arising out of an undertaking
within this article may be chosen in the manner and with the binding
effect that governing law may be chosen in accordance with
subdivision (a).


5117.  (a) An issuer that honors a beneficiary's presentation is
subrogated to the rights of the beneficiary to the same extent as if
the issuer were a secondary obligor of the underlying obligation owed
to the beneficiary and of the applicant to the same extent as if the
issuer were the secondary obligor of the underlying obligation owed
to the applicant.
   (b) An applicant that reimburses an issuer is subrogated to the
rights of the issuer against any beneficiary, presenter, or nominated
person to the same extent as if the applicant were the secondary
obligor of the obligations owed to the issuer and has the rights of
subrogation of the issuer to the rights of the beneficiary stated in
subdivision (a).
   (c) A nominated person who pays or gives value against a draft or
demand presented under a letter of credit is subrogated to the rights
of:
   (1) the issuer against the applicant to the same extent as if the
nominated person were a secondary obligor of the obligation owed to
the issuer by the applicant;
   (2) the beneficiary to the same extent as if the nominated person
were a secondary obligor of the underlying obligation owed to the
beneficiary; and
   (3) the applicant to the same extent as if the nominated person
were a secondary obligor of the underlying obligation owed to the
applicant.
   (d) Notwithstanding any agreement or term to the contrary, the
rights of subrogation stated in subdivisions (a) and (b) do not arise
until the issuer honors the letter of credit or otherwise pays and
the rights in subdivision (c) do not arise until the nominated person
pays or otherwise gives value. Until then, the issuer, nominated
person, and the applicant do not derive under this section present or
prospective rights forming the basis of a claim, defense, or excuse.



5118.  (a) An issuer or nominated person has a security interest in
a document presented under a letter of credit to the extent that the
issuer or nominated person honors or gives value for the
presentation.
   (b) So long as and to the extent that an issuer or nominated
person has not been reimbursed or has not otherwise recovered the
value given with respect to a security interest in a document under
subdivision (a), the security interest continues and is subject to
Division 9 (commencing with Section 9101), subject to all of the
following:
   (1) A security agreement is not necessary to make the security
interest enforceable under paragraph (3) of subdivision (b) of
section 9203.
   (2) If the document is presented in a medium other than a written
or other tangible medium, the security interest is perfected.
   (3) If the document is presented in a written or other tangible
medium and is not a certificated security, chattel paper, a document
of title, an instrument, or a letter of credit, the security interest
is perfected and has priority over a conflicting security interest
in the document so long as the debtor does not have possession of the
document.