47-5108

47-5108. Issuer's rights and
obligations

A. Except as otherwise provided in section 47-5109, an issuer shall honor a
presentation that, as determined by the standard practice referred to in subsection E of
this section, appears on its face strictly to comply with the terms and conditions of the
letter of credit. Except as otherwise provided in section 47-5113 and unless otherwise
agreed with the applicant, an issuer shall dishonor a presentation that does not appear
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 subsection D of this section, 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 subsection B of this section 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 section 47-5109,
subsection A 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 subsection E of this section.

G. If an undertaking constituting a letter of credit 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
chapter:

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
47-3414 and 47-3415;

4. Except as otherwise provided in sections 47-5110 and 47-5117, 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 that 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.