§ 4-5-109 — Fraud and forgery

Colorado § 4-5-109

• Jurisdiction: Colorado
• Title 04: Uniform
• Art.: Letters of Credit

Text

(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 subsection (a)(1) of
this section.

Legislative History

Source: L. 96: Entire article R&RE, p. 196, � 1, effective July 1.