§ 34.1-5-109 — Fraud and forgery

(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:
(i) The issuer shall honor the presentation, if honor
is demanded by (1) a nominated person who has given value in
good faith and without notice of forgery or material fraud, (2)
a confirmer who has honored its confirmation in good faith, (3)
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 (4) 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
(ii) 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:
(i) The relief is not prohibited under the law
applicable to an accepted draft or deferred obligation incurred
by the issuer;
(ii) 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;
(iii) All of the conditions to entitle a person to
the relief under the law of this state have been met; and
(iv) 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 paragraph (a)(i) of
this section.