Assignment of Proceeds

  1. Law
  2. Georgia Code
  3. Commercial Code
  4. Letters of Credit
  5. Assignment of Proceeds

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  1. As used in this Code section, the term "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.
  2. 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.
  3. An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment.
  4. An issuer or nominated person has no obligation to give or withhold its consent to an assignment 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.
  5. 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.
  6. Neither the rights recognized by this Code 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.

(Code 1981, §11-5-114, enacted by Ga. L. 2002, p. 995, § 1.)

RESEARCH REFERENCES

U.L.A.

- Uniform Commercial Code (U.L.A.) § 5-114.

JUDICIAL DECISIONS

Breach of letter of credit.

- Buyer was not an indispensable party to a seller's suit alleging that a bank breached a letter of credit by failing to honor its obligation under O.C.G.A. § 11-5-114 to pay a demand because: (1) the buyer's joinder was not necessary in order to afford complete relief between the seller and the bank; (2) the bank could file suit against the buyer for indemnification or implead the buyer in the current suit; and (3) the bank would not be subject to multiple inconsistent judgment obligations if the buyer were not joined. GE Credit Corp. of Tenn. v. First Nat'l Banc, Inc., F. Supp. 2d (S.D. Ga. Sept. 2, 2005).


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