§ 26-1-5.1-108 — Issuer's duty and privilege to honor; standard practice; issuer's rights upon honor of presentation

Indiana § 26-1-5.1-108

• Jurisdiction: Indiana
• Title 26: COMMERCIAL LAW
• Art. 1: UNIFORM COMMERCIAL CODE
• Ch. 5.1: Letters of Credit

Text

(a) Except as otherwise provided in IC 26-1-5.1-109, an issuer shall honor a presentation that, as determined
by the standard practice referred to in subsection (e), appears on its
face strictly to comply with the terms and conditions of the letter of
credit. Except as otherwise provided in IC 26-1-5.1-113 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 (7) 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), 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) 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 IC 26-1-5.1-109(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).
(g) If an undertaking constituting a letter of credit under IC 26-1-5.1-102(a)(10) 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 IC 26-1-5.1:
(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
IC 26-1-3.1-414 and IC 26-1-3.1-415;
(4) except as otherwise provided in IC 26-1-5.1-110 and IC 26-1-5.1-117, 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.

Legislative History

As added by P.L.183-1996, SEC.4.