(a) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit. The term does not include a beneficiary's drawing rights or documents presented by the beneficiary.
A beneficiary may assign its right to part or all of the proceeds of a letter of credit.The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit.
An issuer or nominated person need not recognize an assignment of proceeds of aletter of credit until it consents to the assignment.
An issuer or nominated person has no obligation to give or withhold its consent to anassignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor.
Rights of a transferee beneficiary or nominated person are independent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds.
Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary, or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is governed by article 9 of this title or other law. Against persons other than the issuer, transferee beneficiary, or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by article 9 of this title or other law.
Source: L. 96: Entire article R&RE, p. 199, § 1, effective July 1.
Editor's note: This section is similar to former § 4-5-116 as it existed prior to 1996.
Statute of limitations. An action to enforce a right or obligation arising under this article must be commenced within one year after the expiration date of the relevant letter of credit or one year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occurs, regardless of the aggrieved party's lack of knowledge of the breach.
Source: L. 96: Entire article R&RE, p. 200, § 1, effective July 1.
Choice of law and forum. (a) The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or otherwise authenticated by the affected parties in the manner provided in section 4-5-104 or by a provision in the person's letter of credit, confirmation, or other undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction.
Unless subsection (a) of this section applies, the liability of an issuer, nominatedperson, or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person's undertaking. If more than one address is indicated, the person is considered to be located at the address from which the person's undertaking was issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities and a bank is considered to be located at the place where its relevant branch is considered to be located under this subsection (b).
Except as otherwise provided in this subsection (c), the liability of an issuer, nominated person, or adviser is governed by any rules of custom or practice, such as the "Uniform Customs and Practice for Documentary Credits", to which the letter of credit, confirmation, or other undertaking is expressly made subject. If (i) this article would govern the liability of an issuer, nominated person, or adviser under subsection (a) or (b) of this section, (ii) the relevant undertaking incorporates rules of custom or practice, and (iii) there is conflict between this article and those rules as applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in section 4-5-103 (c).
If there is conflict between this article and article 3, 4, 4.5, or 9 of this title, thisarticle governs.
The forum for settling disputes arising out of an undertaking within this article maybe chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (a) of this section.
Source: L. 96: Entire article R&RE, p. 200, § 1, effective July 1.