§ 5-109 — Fraud and forgery

Section 5--109. Fraud and forgery.\n (a) If a presentation is made that appears on its face strictly to\ncomply with the terms and conditions of the letter of credit, but a\nrequired document is forged or materially fraudulent, or honor of the\npresentation would facilitate a material fraud by the beneficiary on the\nissuer or applicant:\n (1) The issuer shall honor the presentation, if honor is demanded\n by:\n (i) a nominated person who has given value in good faith and\n without notice of forgery or material fraud,\n (ii) a confirmer who has honored its confirmation in good\n faith,\n (iii) a holder in due course of a draft drawn under the letter\n of credit which was taken after acceptance by the issuer\n or nominated person, or\n (iv) an assignee of the issuer's or nominated person's\n deferred obligation that was taken for value and without\n notice of forgery or material fraud after the obligation\n was incurred by the issuer or nominated person; and\n (2) The issuer, acting in good faith, may honor or dishonor the\n presentation in any other case.\n (b) If an applicant claims that a required document is forged or\nmaterially fraudulent or that honor of the presentation would facilitate\na material fraud by the beneficiary on the issuer or applicant, a court\nof competent jurisdiction may temporarily or permanently enjoin the\nissuer from honoring a presentation or grant similar relief against the\nissuer or other persons only if the court finds that:\n (1) The relief is not prohibited under the law applicable to an\n accepted draft or deferred obligation incurred by the issuer;\n (2) A beneficiary, issuer, or nominated person who may be\n adversely affected is adequately protected against loss that\n it may suffer because the relief is granted;\n (3) All of the conditions to entitle a person to the relief under\n the law of this state have been met; and\n (4) On the basis of the information submitted to the court, the\n applicant is more likely than not to succeed under its claim\n of forgery or material fraud and the person demanding honor\n does not qualify for protection under paragraph (1) of\n subsection (a) of this section.\n