§ 554.5108 — Issuer’s rights and obligations

Iowa § 554.5108

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 554: UNIFORM COMMERCIAL CODE

Text

1. Except as otherwise provided in section 554.5109, an issuer shall honor a presentation
that, as determined by the standard practice referred to in subsection 5, appears on its face
strictly to comply with the terms and conditions of the letter of credit. Except as otherwise
provided in section 554.5113 and unless otherwise agreed with the applicant, an issuer shall
dishonor a presentation that does not appear so to comply.

2. 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:
a. to honor,
b. 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
c. to give notice to the presenter of discrepancies in the presentation.
3. Except as otherwise provided in subsection 4, 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.
4. Failure to give the notice specified in subsection 2 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 554.5109, subsection 1, or expiration of the letter of
credit before presentation.
5. 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.
6. An issuer is not responsible for:
a. the performance or nonperformance of the underlying contract, arrangement, or
transaction,
b. an act or omission of others, or
c. observance or knowledge of the usage of a particular trade other than the standard
practice referred to in subsection 5.
7. If an undertaking constituting a letter of credit under section 554.5102, subsection
1, paragraph “j”, contains nondocumentary conditions, an issuer shall disregard the
nondocumentary conditions and treat them as if they were not stated.
8. 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.
9. An issuer that has honored a presentation as permitted or required by this Article:
a. is entitled to be reimbursed by the applicant in immediately available funds not later
than the date of its payment of funds;
b. takes the documents free of claims of the beneficiary or presenter;
c. is precluded from asserting a right of recourse on a draft under sections 554.3414 and
554.3415;
d. except as otherwise provided in sections 554.5110 and 554.5117, 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
e. 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.

Legislative History

[C66, 71, 73, 75, 77, 79, 81, §554.5108]