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Souse Bill No. 5802

PUBLIC ACT NO. 96-198

AN ACT REVISING ARTICLE 5 OF THE UNIFORM COMMERCIAL CODE CONCERNING LETTERS OF CREDIT.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 42a-5-101 of the general statutes is repealed and the following is substituted in lieu thereof:

This article [shall be known and] may be cited as "Uniform Commercial Code-Letters of Credit".

Sec. 2. Section 42a-5-102 of the general statutes is repealed and the following is substituted in lieu thereof: [(1) This article applies (a) to a credit issued by a bank if the credit requires a documentary draft or a documentary demand for payment; and (b) to a credit issued by a person other than a bank if the credit requires that the draft or demand for payment be accompanied by a document of title; and (c) to a credit issued by a bank or other person if the credit is not within subparagraph (a) or (b) but conspicuously states that it is a letter of credit or is conspicuously so entitled. (2) Unless the engagement meets the requirements of subsection (1), this article does not apply to engagements to make advances or to honor drafts or demands for payment, to authorities to pay or purchase, to guarantees or to general agreements. (3) This article deals with some but not all of the rules and concepts of letters of credit as such rules or concepts have developed prior to October 1, 1961, or may thereafter develop. The fact that this article states a rule does not by itself require, imply or negate application of the same or a converse rule to a situation not provided for or to a person not specified by this article.]

(a) IN THIS ARTICLE: (1) "ADVISER" MEANS A PERSON WHO, AT THE REQUEST OF THE ISSUER, A CONFIRMER OR ANOTHER ADVISER, NOTIFIES OR REQUESTS ANOTHER ADVISER TO NOTIFY THE BENEFICIARY THAT A LETTER OF CREDIT HAS BEEN ISSUED, CONFIRMED OR AMENDED. (2) "APPLICANT" MEANS A PERSON AT WHOSE REQUEST OR FOR WHOSE ACCOUNT A LETTER OF CREDIT IS ISSUED. THE TERM INCLUDES A PERSON WHO REQUESTS AN ISSUER TO ISSUE A LETTER OF CREDIT ON BEHALF OF ANOTHER IF THE PERSON MAKING THE REQUEST UNDERTAKES AN OBLIGATION TO REIMBURSE THE ISSUER. (3) "BENEFICIARY" MEANS A PERSON WHO UNDER THE TERMS OF A LETTER OF CREDIT IS ENTITLED TO HAVE ITS COMPLYING PRESENTATION HONORED. THE TERM INCLUDES A PERSON TO WHOM DRAWING RIGHTS HAVE BEEN TRANSFERRED UNDER A TRANSFERABLE LETTER OF CREDIT. (4) "CONFIRMER" MEANS A NOMINATED PERSON WHO UNDERTAKES, AT THE REQUEST OR WITH THE CONSENT OF THE ISSUER, TO HONOR A PRESENTATION UNDER A LETTER OF CREDIT ISSUED BY ANOTHER. (5) "DISHONOR" OF A LETTER OF CREDIT MEANS FAILURE TIMELY TO HONOR OR TO TAKE AN INTERIM ACTION, SUCH AS ACCEPTANCE OF A DRAFT, THAT MAY BE REQUIRED BY THE LETTER OF CREDIT. (6) "DOCUMENT" MEANS A DRAFT OR OTHER DEMAND, DOCUMENT OF TITLE, INVESTMENT SECURITY, CERTIFICATE, INVOICE OR OTHER RECORD, STATEMENT OR REPRESENTATION OF FACT, LAW, RIGHT OR OPINION (i) WHICH IS PRESENTED IN A WRITTEN OR OTHER MEDIUM PERMITTED BY THE LETTER OF CREDIT OR, UNLESS PROHIBITED BY THE LETTER OF CREDIT, BY THE STANDARD PRACTICE REFERRED TO IN SUBSECTION (e) OF SECTION 42a-5-108, AS AMENDED BY SECTION 8 OF THIS ACT, AND (ii) WHICH IS CAPABLE OF BEING EXAMINED FOR COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT. A DOCUMENT MAY NOT BE ORAL. (7) "GOOD FAITH" MEANS HONESTY IN FACT IN THE CONDUCT OR TRANSACTION CONCERNED AND THE OBSERVANCE OF REASONABLE COMMERCIAL STANDARDS OF FAIR DEALING. (8) "HONOR" OF A LETTER OF CREDIT MEANS PERFORMANCE OF THE ISSUER'S UNDERTAKING IN THE LETTER OF CREDIT TO PAY OR DELIVER AN ITEM OF VALUE. UNLESS THE LETTER OF CREDIT OTHERWISE PROVIDES, "HONOR" OCCURS (i) UPON PAYMENT, (ii) IF THE LETTER OF CREDIT PROVIDES FOR ACCEPTANCE, UPON ACCEPTANCE OF A DRAFT AND, AT MATURITY, ITS PAYMENT, OR (iii) IF THE LETTER OF CREDIT PROVIDES FOR INCURRING A DEFERRED OBLIGATION, UPON INCURRING THE OBLIGATION AND, AT MATURITY, ITS PERFORMANCE. (9) "ISSUER" MEANS A BANK OR OTHER PERSON THAT ISSUES A LETTER OF CREDIT, BUT DOES NOT INCLUDE AN INDIVIDUAL WHO MAKES AN ENGAGEMENT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. (10) "LETTER OF CREDIT" MEANS A DEFINITE UNDERTAKING THAT SATISFIES THE REQUIREMENTS OF SECTION 42a-5-104, AS AMENDED BY SECTION 4 OF THIS ACT, BY AN ISSUER TO A BENEFICIARY AT THE REQUEST OR FOR THE ACCOUNT OF AN APPLICANT OR, IN THE CASE OF A FINANCIAL INSTITUTION, TO ITSELF OR FOR ITS OWN ACCOUNT, TO HONOR A DOCUMENTARY PRESENTATION BY PAYMENT OR DELIVERY OF AN ITEM OF VALUE. (11) "NOMINATED PERSON" MEANS A PERSON WHOM THE ISSUER (i) DESIGNATES OR AUTHORIZES TO PAY, ACCEPT, NEGOTIATE OR OTHERWISE GIVE VALUE UNDER A LETTER OF CREDIT, AND (ii) UNDERTAKES BY AGREEMENT OR CUSTOM AND PRACTICE TO REIMBURSE. (12) "PRESENTATION" MEANS DELIVERY OF A DOCUMENT TO AN ISSUER OR NOMINATED PERSON FOR HONOR OR GIVING OF VALUE UNDER A LETTER OF CREDIT. (13) "PRESENTER" MEANS A PERSON MAKING A PRESENTATION AS OR ON BEHALF OF A BENEFICIARY OR NOMINATED PERSON. (14) "RECORD" MEANS INFORMATION THAT IS INSCRIBED ON A TANGIBLE MEDIUM, OR THAT IS STORED IN AN ELECTRONIC OR OTHER MEDIUM AND IS RETRIEVABLE IN PERCEIVABLE FORM. (15) "SUCCESSOR OF A BENEFICIARY" MEANS A PERSON WHO SUCCEEDS TO SUBSTANTIALLY ALL OF THE RIGHTS OF A BENEFICIARY BY OPERATION OF LAW, INCLUDING A CORPORATION WITH OR INTO WHICH THE BENEFICIARY HAS BEEN MERGED OR CONSOLIDATED, AN ADMINISTRATOR, EXECUTOR, PERSONAL REPRESENTATIVE, TRUSTEE IN BANKRUPTCY, DEBTOR IN POSSESSION, LIQUIDATOR AND RECEIVER.

(b) DEFINITIONS IN OTHER ARTICLES APPLYING TO THIS ARTICLE AND THE SECTIONS IN WHICH THEY APPEAR ARE: "ACCEPT" OR "ACCEPTANCE". SECTION 42a-3-409. "VALUE". SECTIONS 42a-3-303, 42a-4-211.

(c) ARTICLE 1 CONTAINS CERTAIN ADDITIONAL GENERAL DEFINITIONS AND PRINCIPLES OF CONSTRUCTION AND INTERPRETATION APPLICABLE THROUGHOUT THIS ARTICLE.

Sec. 3. Section 42a-5-103 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) (a) "Credit" or "letters of credit" means an engagement by a bank or other person made at the request of a customer and of a kind within the scope of section 42a-5-102 that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit. A credit may be either revocable or irrevocable. The engagement may be either an agreement to honor or a statement that the bank or other person is authorized to honor. (b) A "documentary draft" or a "documentary demand for payment" is one honor of which is conditioned upon the presentation of a document or documents. "Document" means any paper including document of title, security, invoice, certificate, notice of default and the like. (c) An "issuer" is a bank or other person issuing a credit. (d) A "beneficiary" of a credit is a person who is entitled under its terms to draw or demand payment. (e) An "advising bank" is a bank which gives notification of the issuance of a credit by another bank. (f) A "confirming bank" is a bank which engages either that it will itself honor a credit already issued by another bank or that such a credit will be honored by the issuer or a third bank. (g) A "customer" is a buyer or other person who causes an issuer to issue a credit. The term also includes a bank which procures issuance or confirmation on behalf of that bank's customer. (2) Other definitions applying to this article and the sections in which they appear are: "Notation of credit". Section 42a-5-108. "Presenter". Section 42a-5-112(3). (3) Definitions in other articles applying to this article and the sections in which they appear are: "Accept" or "Acceptance". Section 42a-3-409. "Contract for sale". Section 42a-2-106. "Draft". Section 42a-3-104. "Holder in due course". Section 42a-3-302. "Midnight deadline". Section 42a-4-104. "Security". Section 42a-8-102. (4) In addition, article 1 contains general definitions and principles of construction and interpretation applicable throughout this article.]

(a) THIS ARTICLE APPLIES TO LETTERS OF CREDIT AND TO CERTAIN RIGHTS AND OBLIGATIONS ARISING OUT OF TRANSACTIONS INVOLVING LETTERS OF CREDIT.

(b) THE STATEMENT OF A RULE IN THIS ARTICLE DOES NOT BY ITSELF REQUIRE, IMPLY OR NEGATE APPLICATION OF THE SAME OR A DIFFERENT RULE TO A SITUATION NOT PROVIDED FOR, OR TO A PERSON NOT SPECIFIED, IN THIS ARTICLE.

(c) WITH THE EXCEPTION OF THIS SUBSECTION, SUBSECTIONS (a) AND (d), SUBDIVISIONS (9) AND (10) OF SUBSECTION (a) OF SECTION 42a-5-102, AS AMENDED BY SECTION 2 OF THIS ACT, SUBSECTION (d) OF SECTION 42a-5-106, AS AMENDED BY SECTION 6 OF THIS ACT, AND SUBSECTION (d) OF SECTION 42a-5-114, AS AMENDED BY SECTION 14 OF THIS ACT, AND EXCEPT TO THE EXTENT PROHIBITED IN SUBSECTION (3) OF SECTION 42a-1-102 AND SUBSECTION (d) OF SECTION 42a-5-117, AS AMENDED BY SECTION 17 OF THIS ACT, THE EFFECT OF THIS ARTICLE MAY BE VARIED BY AGREEMENT OR BY A PROVISION STATED OR INCORPORATED BY REFERENCE IN AN UNDERTAKING. A TERM IN AN AGREEMENT OR UNDERTAKING GENERALLY EXCUSING LIABILITY OR GENERALLY LIMITING REMEDIES FOR FAILURE TO PERFORM OBLIGATIONS IS NOT SUFFICIENT TO VARY OBLIGATIONS PRESCRIBED BY THIS ARTICLE.

(d) RIGHTS AND OBLIGATIONS OF AN ISSUER TO A BENEFICIARY OR A NOMINATED PERSON UNDER A LETTER OF CREDIT ARE INDEPENDENT OF THE EXISTENCE, PERFORMANCE OR NONPERFORMANCE OF A CONTRACT OR ARRANGEMENT OUT OF WHICH THE LETTER OF CREDIT ARISES OR WHICH UNDERLIES IT, INCLUDING CONTRACTS OR ARRANGEMENTS BETWEEN THE ISSUER AND THE APPLICANT AND BETWEEN THE APPLICANT AND THE BENEFICIARY.

Sec. 4. Section 42a-5-104 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) Except as otherwise required in subsection (1) (c) of section 42a-5-102 on scope, no particular form of phrasing is required for a credit. A credit must be in writing and signed by the issuer and a confirmation must be in writing and signed by the confirming bank. A modification of the terms of a credit or confirmation must be signed by the issuer or confirming bank. (2) A telegram may be a sufficient signed writing if it identifies its sender by an authorized authentication. The authentication may be in code and the authorized naming of the issuer in an advice of credit is a sufficient signing.] A LETTER OF CREDIT, CONFIRMATION, ADVICE, TRANSFER, AMENDMENT OR CANCELLATION MAY BE ISSUED IN ANY FORM THAT IS A RECORD AND IS AUTHENTICATED (i) BY A SIGNATURE, OR (ii) IN ACCORDANCE WITH THE AGREEMENT OF THE PARTIES OR THE STANDARD PRACTICE REFERRED TO IN SUBSECTION (e) OF SECTION 42a-5-108, AS AMENDED BY SECTION 8 OF THIS ACT.

Sec. 5. Section 42a-5-105 of the general statutes is repealed and the following is substituted in lieu thereof:

[No consideration is necessary to establish a credit or to enlarge or otherwise modify its terms.] CONSIDERATION IS NOT REQUIRED TO ISSUE, AMEND, TRANSFER OR CANCEL A LETTER OF CREDIT, ADVICE OR CONFIRMATION.

Sec. 6. Section 42a-5-106 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) Unless otherwise agreed a credit is established (a) as regards the customer as soon as a letter of credit is sent to him or the letter of credit or an authorized written advice of its issuance is sent to the beneficiary; and (b) as regards the beneficiary when he receives a letter of credit or an authorized written advice of its issuance. (2) Unless otherwise agreed once an irrevocable credit is established as regards the customer it can be modified or revoked only with the consent of the customer and once it is established as regards the beneficiary it can be modified or revoked only with his consent. (3) Unless otherwise agreed after a revocable credit is established it may be modified or revoked by the issuer without notice to or consent from the customer or beneficiary. (4) Notwithstanding any modification or revocation of a revocable credit any person authorized to honor or negotiate under the terms of the original credit is entitled to reimbursement for or honor of any draft or demand for payment duly honored or negotiated before receipt of notice of the modification or revocation and the issuer in turn is entitled to reimbursement from its customer.]

(a) A LETTER OF CREDIT IS ISSUED AND BECOMES ENFORCEABLE ACCORDING TO ITS TERMS AGAINST THE ISSUER WHEN THE ISSUER SENDS OR OTHERWISE TRANSMITS IT TO THE PERSON REQUESTED TO ADVISE OR TO THE BENEFICIARY. A LETTER OF CREDIT IS REVOCABLE ONLY IF IT SO PROVIDES.

(b) AFTER A LETTER OF CREDIT IS ISSUED, RIGHTS AND OBLIGATIONS OF A BENEFICIARY, APPLICANT, CONFIRMER AND ISSUER ARE NOT AFFECTED BY AN AMENDMENT OR CANCELLATION TO WHICH THAT PERSON HAS NOT CONSENTED EXCEPT TO THE EXTENT THE LETTER OF CREDIT PROVIDES THAT IT IS REVOCABLE OR THAT THE ISSUER MAY AMEND OR CANCEL THE LETTER OF CREDIT WITHOUT THAT CONSENT.

(c) IF THERE IS NO STATED EXPIRATION DATE OR OTHER PROVISION THAT DETERMINES ITS DURATION, A LETTER OF CREDIT EXPIRES ONE YEAR AFTER ITS STATED DATE OF ISSUANCE OR, IF NONE IS STATED, AFTER THE DATE ON WHICH IT IS ISSUED.

(d) A LETTER OF CREDIT THAT STATES THAT IT IS PERPETUAL EXPIRES FIVE YEARS AFTER ITS STATED DATE OF ISSUANCE, OR IF NONE IS STATED, AFTER THE DATE ON WHICH IT IS ISSUED.

Sec. 7. Section 42a-5-107 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) Unless otherwise specified an advising bank by advising a credit issued by another bank does not assume any obligation to honor drafts drawn or demands for payment made under the credit but it does assume obligation for the accuracy of its own statement. (2) A confirming bank by confirming a credit becomes directly obligated on the credit to the extent of its confirmation as though it were its issuer and acquires the rights of an issuer. (3) Even though an advising bank incorrectly advises the terms of a credit it has been authorized to advise the credit is established as against the issuer to the extent of its original terms. (4) Unless otherwise specified the customer bears as against the issuer all risks of transmission and reasonable translation or interpretation of any message relating to a credit.]

(a) A CONFIRMER IS DIRECTLY OBLIGATED ON A LETTER OF CREDIT AND HAS THE RIGHTS AND OBLIGATIONS OF AN ISSUER TO THE EXTENT OF ITS CONFIRMATION. THE CONFIRMER ALSO HAS RIGHTS AGAINST AND OBLIGATIONS TO THE ISSUER AS IF THE ISSUER WERE AN APPLICANT AND THE CONFIRMER HAD ISSUED THE LETTER OF CREDIT AT THE REQUEST AND FOR THE ACCOUNT OF THE ISSUER.

(b) A NOMINATED PERSON WHO IS NOT A CONFIRMER IS NOT OBLIGATED TO HONOR OR OTHERWISE GIVE VALUE FOR A PRESENTATION.

(c) A PERSON REQUESTED TO ADVISE MAY DECLINE TO ACT AS AN ADVISER. AN ADVISER THAT IS NOT A CONFIRMER IS NOT OBLIGATED TO HONOR OR GIVE VALUE FOR A PRESENTATION. AN ADVISER UNDERTAKES TO THE ISSUER AND TO THE BENEFICIARY ACCURATELY TO ADVISE THE TERMS OF THE LETTER OF CREDIT, CONFIRMATION, AMENDMENT OR ADVICE RECEIVED BY THAT PERSON AND UNDERTAKES TO THE BENEFICIARY TO CHECK THE APPARENT AUTHENTICITY OF THE REQUEST TO ADVISE. EVEN IF THE ADVICE IS INACCURATE, THE LETTER OF CREDIT, CONFIRMATION OR AMENDMENT IS ENFORCEABLE AS ISSUED.

(d) A PERSON WHO NOTIFIES A TRANSFEREE BENEFICIARY OF THE TERMS OF A LETTER OF CREDIT, CONFIRMATION, AMENDMENT OR ADVICE HAS THE RIGHTS AND OBLIGATIONS OF AN ADVISER UNDER SUBSECTION (c) OF THIS SECTION. THE TERMS IN THE NOTICE TO THE TRANSFEREE BENEFICIARY MAY DIFFER FROM THE TERMS IN ANY NOTICE TO THE TRANSFEROR BENEFICIARY TO THE EXTENT PERMITTED BY THE LETTER OF CREDIT, CONFIRMATION, AMENDMENT OR ADVICE RECEIVED BY THE PERSON WHO SO NOTIFIES.

Sec. 8. Section 42a-5-108 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) A credit which specifies that any person purchasing or paying drafts drawn or demands for payment made under it must note the amount of the draft or demand on the letter or advice of credit is a "notation credit". (2) Under a notation credit (a) a person paying the beneficiary or purchasing a draft or demand for payment from him acquires a right to honor only if the appropriate notation is made and by transferring or forwarding for honor the documents under the credit such a person warrants to the issuer that the notation has been made; and (b) unless the credit or a signed statement that an appropriate notation has been made accompanies the draft or demand for payment the issuer may delay honor until evidence of notation has been procured which is satisfactory to it but its obligation and that of its customer continue for a reasonable time not exceeding thirty days to obtain such evidence. (3) If the credit is not a notation credit (a) the issuer may honor complying drafts or demands for payment presented to it in the order in which they are presented and is discharged pro tanto by honor of any such draft or demand; (b) as between competing good faith purchasers of complying drafts or demands the person first purchasing has priority over a subsequent purchaser even though the later purchased draft or demand has been first honored.]

(a) EXCEPT AS OTHERWISE PROVIDED IN SECTION 42a-5-109, AS AMENDED BY SECTION 9 OF THIS ACT, AN ISSUER SHALL HONOR A PRESENTATION THAT, AS DETERMINED BY THE STANDARD PRACTICE REFERRED TO IN SUBSECTION (e) OF THIS SECTION, APPEARS ON ITS FACE STRICTLY TO COMPLY WITH THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT. EXCEPT AS OTHERWISE PROVIDED IN SECTION 42a-5-113, AS AMENDED BY SECTION 13 OF THIS ACT, 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 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) OF THIS SECTION, 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) OF THIS SECTION 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 SUBSECTION (a) OF SECTION 42a-5-109, AS AMENDED BY SECTION 9 OF THIS ACT, 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) OF THIS SECTION.

(g) IF AN UNDERTAKING CONSTITUTING A LETTER OF CREDIT UNDER SUBDIVISION (10) OF SUBSECTION (a) OF SECTION 42a-5-102, AS AMENDED BY SECTION 2 OF THIS ACT, 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 THIS ARTICLE: (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 SECTIONS 42a-3-414 AND 42a-3-415; (4) EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 42a-5-110, AS AMENDED BY SECTION 10 OF THIS ACT, AND 42a-5-117, AS AMENDED BY SECTION 17 OF THIS ACT, 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.

Sec. 9. Section 42a-5-109 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) An issuer's obligation to its customer includes good faith and observance of any general banking usage but unless otherwise agreed does not include liability or responsibility (a) for performance of the underlying contract for sale or other transaction between the customer and the beneficiary; or (b) for any act or omission of any person other than itself or its own branch or for loss or destruction of a draft, demand or document in transit or in the possession of others; or (c) based on knowledge or lack of knowledge of any usage of any particular trade. (2) An issuer must examine documents with care so as to ascertain that on their face they appear to comply with the terms of the credit but unless otherwise agreed assumes no liability or responsibility for the genuineness, falsification or effect of any document which appears on such examination to be regular on its face. (3) A nonbank issuer is not bound by any banking usage of which it has no knowledge.]

(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: (1) THE ISSUER SHALL HONOR THE PRESENTATION, IF HONOR IS DEMANDED BY (i) A NOMINATED PERSON WHO HAS GIVEN VALUE IN GOOD FAITH AND WITHOUT NOTICE OF FORGERY OR MATERIAL FRAUD, (ii) A CONFIRMER WHO HAS HONORED ITS CONFIRMATION IN GOOD FAITH, (iii) 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 (iv) 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 (2) 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: (1) THE RELIEF IS NOT PROHIBITED UNDER THE LAW APPLICABLE TO AN ACCEPTED DRAFT OR DEFERRED OBLIGATION INCURRED BY THE ISSUER; (2) 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; (3) ALL OF THE CONDITIONS TO ENTITLE A PERSON TO THE RELIEF UNDER THE LAW OF THIS STATE HAVE BEEN MET; AND (4) 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 SUBDIVISION (1) OF SUBSECTION (a) OF THIS SECTION.

Sec. 10. Section 42a-5-110 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) Unless otherwise specified a credit may be used in portions in the discretion of the beneficiary. (2) Unless otherwise specified a person by presenting a documentary draft or demand for payment under a credit relinquishes upon its honor all claims to the documents and a person by transferring such draft or demand or causing such presentment authorizes such relinquishment. An explicit reservation of claim makes the draft or demand noncomplying.]

(a) IF ITS PRESENTATION IS HONORED, THE BENEFICIARY WARRANTS: (1) TO THE ISSUER, ANY OTHER PERSON TO WHOM PRESENTATION IS MADE, AND THE APPLICANT THAT THERE IS NO FRAUD OR FORGERY OF THE KIND DESCRIBED IN SUBSECTION (a) OF SECTION 42a-5-109, AS AMENDED BY SECTION 9 OF THIS ACT; AND (2) TO THE APPLICANT THAT THE DRAWING DOES NOT VIOLATE ANY AGREEMENT BETWEEN THE APPLICANT AND THE BENEFICIARY OR ANY OTHER AGREEMENT INTENDED BY THEM TO BE AUGMENTED BY THE LETTER OF CREDIT.

(b) THE WARRANTIES IN SUBSECTION (a) OF THIS SECTION ARE IN ADDITION TO WARRANTIES ARISING UNDER ARTICLES 3, 4, 7 AND 8 BECAUSE OF THE PRESENTATION OR TRANSFER OF DOCUMENTS COVERED BY ANY OF THOSE ARTICLES.

Sec. 11. Section 42a-5-111 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) Unless otherwise agreed the beneficiary by transferring or presenting a documentary draft or demand for payment warrants to all interested parties that the necessary conditions of the credit have been complied with. This is in addition to any warranties arising under articles 3, 4, 7 and 8. (2) Unless otherwise agreed a negotiating, advising, confirming, collecting or issuing bank presenting or transferring a draft or demand for payment under a credit warrants only the matters warranted by a collecting bank under article 4 and any such bank transferring a document warrants only the matters warranted by an intermediary under articles 7 and 8.]

(a) IF AN ISSUER WRONGFULLY DISHONORS OR REPUDIATES ITS OBLIGATION TO PAY MONEY UNDER A LETTER OF CREDIT BEFORE PRESENTATION, THE BENEFICIARY, SUCCESSOR OR NOMINATED PERSON PRESENTING ON ITS OWN BEHALF MAY RECOVER FROM THE ISSUER THE AMOUNT THAT IS THE SUBJECT OF THE DISHONOR OR REPUDIATION. IF THE ISSUER'S OBLIGATION UNDER THE LETTER OF CREDIT IS NOT FOR THE PAYMENT OF MONEY, THE CLAIMANT MAY OBTAIN SPECIFIC PERFORMANCE OR, AT THE CLAIMANT'S ELECTION, RECOVER AN AMOUNT EQUAL TO THE VALUE OF PERFORMANCE FROM THE ISSUER. IN EITHER CASE, THE CLAIMANT MAY ALSO RECOVER INCIDENTAL DAMAGES AND, IF APPROPRIATE UNDER THE CIRCUMSTANCES, CONSEQUENTIAL DAMAGES. THE CLAIMANT IS NOT OBLIGATED TO TAKE ACTION TO AVOID DAMAGES THAT MIGHT BE DUE FROM THE ISSUER UNDER THIS SUBSECTION. IF, ALTHOUGH NOT OBLIGATED TO DO SO, THE CLAIMANT AVOIDS DAMAGES, THE CLAIMANT'S RECOVERY FROM THE ISSUER MUST BE REDUCED BY THE AMOUNT OF DAMAGES AVOIDED. THE ISSUER HAS THE BURDEN OF PROVING THE AMOUNT OF DAMAGES AVOIDED. IN THE CASE OF REPUDIATION THE CLAIMANT NEED NOT PRESENT ANY DOCUMENT.

(b) IF AN ISSUER WRONGFULLY DISHONORS A DRAFT OR DEMAND PRESENTED UNDER A LETTER OF CREDIT OR HONORS A DRAFT OR DEMAND IN BREACH OF ITS OBLIGATION TO THE APPLICANT, THE APPLICANT MAY RECOVER DAMAGES RESULTING FROM THE BREACH, INCLUDING INCIDENTAL DAMAGES AND, IF APPROPRIATE UNDER THE CIRCUMSTANCES, CONSEQUENTIAL DAMAGES, LESS ANY AMOUNT SAVED AS A RESULT OF THE BREACH.

(c) IF AN ADVISER OR NOMINATED PERSON OTHER THAN A CONFIRMER BREACHES AN OBLIGATION UNDER THIS ARTICLE OR AN ISSUER BREACHES AN OBLIGATION NOT COVERED IN SUBSECTION (a) OR (b) OF THIS SECTION, A PERSON TO WHOM THE OBLIGATION IS OWED MAY RECOVER DAMAGES RESULTING FROM THE BREACH, INCLUDING INCIDENTAL BUT NOT CONSEQUENTIAL DAMAGES, LESS ANY AMOUNT SAVED AS A RESULT OF THE BREACH. TO THE EXTENT OF THE CONFIRMATION, A CONFIRMER HAS THE LIABILITY OF AN ISSUER SPECIFIED IN THIS SUBSECTION AND SUBSECTIONS (a) AND (b) OF THIS SECTION.

(d) AN ISSUER, NOMINATED PERSON OR ADVISER WHO IS FOUND LIABLE UNDER SUBSECTION (a), (b) OR (c) OF THIS SECTION SHALL PAY INTEREST ON THE AMOUNT OWED THEREUNDER FROM THE DATE OF WRONGFUL DISHONOR OR OTHER APPROPRIATE DATE.

(e) REASONABLE ATTORNEY'S FEES AND OTHER EXPENSES OF LITIGATION MAY BE AWARDED TO THE PREVAILING PARTY IN AN ACTION IN WHICH A REMEDY IS SOUGHT UNDER THIS ARTICLE.

(f) DAMAGES THAT WOULD OTHERWISE BE PAYABLE BY A PARTY FOR BREACH OF AN OBLIGATION UNDER THIS ARTICLE MAY BE LIQUIDATED BY AGREEMENT OR UNDERTAKING, BUT ONLY IN AN AMOUNT OR BY A FORMULA THAT IS REASONABLE IN LIGHT OF THE HARM ANTICIPATED.

Sec. 12. Section 42a-5-112 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) A bank to which a documentary draft or demand for payment is presented under a credit may without dishonor of the draft, demand or credit (a) defer honor until the close of the third banking day following receipt of the documents; and (b) further defer honor if the presenter has expressly or impliedly consented thereto. Failure to honor within the time here specified constitutes dishonor of the draft or demand and of the credit except as otherwise provided in subsection (4) of section 42a-5-114 on conditional payment. (2) Upon dishonor the bank may unless otherwise instructed fulfill its duty to return the draft or demand and the documents by holding them at the disposal of the presenter and sending him an advice to that effect. (3) "Presenter" means any person presenting a draft or demand for payment for honor under a credit even though that person is a confirming bank or other correspondent which is acting under an issuer's authorization.]

(a)EXCEPT AS OTHERWISE PROVIDED IN SECTION 42a-5-113, AS AMENDED BY SECTION 13 OF THIS ACT, UNLESS A LETTER OF CREDIT PROVIDES THAT IT IS TRANSFERABLE, THE RIGHT OF A BENEFICIARY TO DRAW OR OTHERWISE DEMAND PERFORMANCE UNDER A LETTER OF CREDIT MAY NOT BE TRANSFERRED.

(b) EVEN IF A LETTER OF CREDIT PROVIDES THAT IT IS TRANSFERABLE, THE ISSUER MAY REFUSE TO RECOGNIZE OR CARRY OUT A TRANSFER IF: (1) THE TRANSFER WOULD VIOLATE APPLICABLE LAW; OR (2) THE TRANSFEROR OR TRANSFEREE HAS FAILED TO COMPLY WITH ANY REQUIREMENT STATED IN THE LETTER OF CREDIT OR ANY OTHER REQUIREMENT RELATING TO TRANSFER IMPOSED BY THE ISSUER WHICH IS WITHIN THE STANDARD PRACTICE REFERRED TO IN SUBSECTION (e) OF SECTION 42a-5-108, AS AMENDED BY SECTION 8 OF THIS ACT, OR IS OTHERWISE REASONABLE UNDER THE CIRCUMSTANCES.

Sec. 13. Section 42a-5-113 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) A bank seeking to obtain, whether for itself or another, honor, negotiation or reimbursement under a credit may give an indemnity to induce such honor, negotiation or reimbursement. (2) An indemnity agreement inducing honor, negotiation or reimbursement (a) unless otherwise explicitly agreed applies to defects in the documents but not in the goods; and (b) unless a longer time is explicitly agreed expires at the end of ten business days following receipt of the documents by the ultimate customer unless notice of objection is sent before such expiration date. The ultimate customer may send notice of objection to the person from whom he received the documents and any bank receiving such notice is under a duty to send notice to its transferor before its midnight deadline.]

(a) A SUCCESSOR OF A BENEFICIARY MAY CONSENT TO AMENDMENTS, SIGN AND PRESENT DOCUMENTS, AND RECEIVE PAYMENT OR OTHER ITEMS OF VALUE IN THE NAME OF THE BENEFICIARY WITHOUT DISCLOSING ITS STATUS AS A SUCCESSOR.

(b) A SUCCESSOR OF A BENEFICIARY MAY CONSENT TO AMENDMENTS, SIGN AND PRESENT DOCUMENTS, AND RECEIVE PAYMENT OR OTHER ITEMS OF VALUE IN ITS OWN NAME AS THE DISCLOSED SUCCESSOR OF THE BENEFICIARY. EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION (e) OF THIS SECTION, AN ISSUER SHALL RECOGNIZE A DISCLOSED SUCCESSOR OF A BENEFICIARY AS BENEFICIARY IN FULL SUBSTITUTION FOR ITS PREDECESSOR UPON COMPLIANCE WITH THE REQUIREMENTS FOR RECOGNITION BY THE ISSUER OF A TRANSFER OF DRAWING RIGHTS BY OPERATION OF LAW UNDER THE STANDARD PRACTICE REFERRED TO IN SUBSECTION (e) OF SECTION 42a-5-108, AS AMENDED BY SECTION 8 OF THIS ACT, OR, IN THE ABSENCE OF SUCH A PRACTICE, COMPLIANCE WITH OTHER REASONABLE PROCEDURES SUFFICIENT TO PROTECT THE ISSUER.

(c) AN ISSUER IS NOT OBLIGED TO DETERMINE WHETHER A PURPORTED SUCCESSOR IS A SUCCESSOR OF A BENEFICIARY OR WHETHER THE SIGNATURE OF A PURPORTED SUCCESSOR IS GENUINE OR AUTHORIZED.

(d) HONOR OF A PURPORTED SUCCESSOR'S APPARENTLY COMPLYING PRESENTATION UNDER SUBSECTION (a) OR (b) OF THIS SECTION HAS THE CONSEQUENCES SPECIFIED IN SUBSECTION (i) OF SECTION 42a-5-108, AS AMENDED BY SECTION 8 OF THIS ACT, EVEN IF THE PURPORTED SUCCESSOR IS NOT THE SUCCESSOR OF A BENEFICIARY. DOCUMENTS SIGNED IN THE NAME OF THE BENEFICIARY OR OF A DISCLOSED SUCCESSOR BY A PERSON WHO IS NEITHER THE BENEFICIARY NOR THE SUCCESSOR OF THE BENEFICIARY ARE FORGED DOCUMENTS FOR THE PURPOSES OF SECTION 42a-5-109, AS AMENDED BY SECTION 9 OF THIS ACT.

(e) AN ISSUER WHOSE RIGHTS OF REIMBURSEMENT ARE NOT COVERED BY SUBSECTION (d) OF THIS SECTION OR SUBSTANTIALLY SIMILAR LAW AND ANY CONFIRMER OR NOMINATED PERSON MAY DECLINE TO RECOGNIZE A PRESENTATION UNDER SUBSECTION (b) OF THIS SECTION.

(f) A BENEFICIARY WHOSE NAME IS CHANGED AFTER THE ISSUANCE OF A LETTER OF CREDIT HAS THE SAME RIGHTS AND OBLIGATIONS AS A SUCCESSOR OF A BENEFICIARY UNDER THIS SECTION.

Sec. 14. Section 42a-5-114 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) An issuer must honor a draft or demand for payment which complies with the terms of the relevant credit regardless of whether the goods or documents conform to the underlying contract for sale or other contract between the customer and the beneficiary. The issuer is not excused from honor of such a draft or demand by reason of an additional general term that all documents must be satisfactory to the issuer, but an issuer may require that specified documents must be satisfactory to it. (2) Unless otherwise agreed when documents appear on their face to comply with the terms of a credit but a required document does not in fact conform to the warranties made on negotiation or transfer of a document of title as provided in section 42a-7-507 or of a certificated security as provided in section 42a-8-306 or is forged or fraudulent or there is fraud in the transaction: (a) The issuer must honor the draft or demand for payment if honor is demanded by a negotiating bank or other holder of the draft or demand which has taken the draft or demand under the credit and under circumstances which would make it a holder in due course as defined in section 42a-3-302 and in an appropriate case would make it a person to whom a document of title has been duly negotiated as provided in section 42a-7-502 or a bona fide purchaser of a certificated security as defined in section 42a-8-302; and (b) in all other cases as against its customer, an issuer acting in good faith may honor the draft or demand for payment despite notification from the customer of fraud, forgery or other defect not apparent on the face of the documents but a court of appropriate jurisdiction may enjoin such honor. (3) Unless otherwise agreed an issuer which has duly honored a draft or demand for payment is entitled to immediate reimbursement of any payment made under the credit and to be put in effectively available funds not later than the day before maturity of any acceptance made under the credit. (4) When a credit provides for payment by the issuer on receipt of notice that the required documents are in the possession of a correspondent or other agent of the issuer (a) any payment made on receipt of such notice is conditional; and (b) the issuer may reject documents which do not comply with the credit if it does so within three banking days following its receipt of the documents; and (c) in the event of such rejection, the issuer is entitled by charge-back or otherwise to return of the payment made. (5) In the case covered by subsection (4) failure to reject documents within the time specified in subparagraph (b) constitutes acceptance of the documents and makes the payment final in favor of the beneficiary.]

(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.

(b) 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.

(c) AN ISSUER OR NOMINATED PERSON NEED NOT RECOGNIZE AN ASSIGNMENT OF PROCEEDS OF A LETTER OF CREDIT UNTIL IT CONSENTS TO THE ASSIGNMENT.

(d) 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.

(e) 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.

(f) 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 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 OR OTHER LAW.

Sec. 15. Section 42a-5-115 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) When an issuer wrongfully dishonors a draft or demand for payment presented under a credit the person entitled to honor has with respect to any documents the rights of a person in the position of a seller as defined in section 42a-2-707 and may recover from the issuer the face amount of the draft or demand together with incidental damages under section 42a-2-710 on seller's incidental damages and interest but less any amount realized by resale or other use or disposition of the subject matter of the transaction. In the event no resale or other utilization is made the documents, goods or other subject matter involved in the transaction must be turned over to the issuer on payment of judgment. (2) When an issuer wrongfully cancels or otherwise repudiates a credit before presentment of a draft or demand for payment drawn under it the beneficiary has the rights of a seller after anticipatory repudiation by the buyer under section 42a-2-610 if he learns of the repudiation in time reasonably to avoid procurement of the required documents. Otherwise the beneficiary has an immediate right of action for wrongful dishonor.]

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.

Sec. 16. Section 42a-5-116 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) The right to draw under a credit can be transferred or assigned only when the credit is expressly designated as transferable or assignable. (2) Even though the credit specifically states that it is nontransferable or nonassignable the beneficiary may before performance of the conditions of the credit assign his right to proceeds. Such an assignment is an assignment of an account under article 9 on secured transactions and is governed by that article except that (a) the assignment is ineffective until the letter of credit or advice of credit is delivered to the assignee which delivery constitutes perfection of the security interest under article 9; and (b) the issuer may honor drafts or demands for payment drawn under the credit until it receives a notification of the assignment signed by the beneficiary which reasonably identifies the credit involved in the assignment and contains a request to pay the assignee; and (c) after what reasonably appears to be such a notification has been received the issuer may without dishonor refuse to accept or pay even to a person otherwise entitled to honor until the letter of credit or advice of credit is exhibited to the issuer. (3) Except where the beneficiary has effectively assigned his right to draw or his right to proceeds, nothing in this section limits his right to transfer or negotiate drafts or demands drawn under the credit.]

(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 42a-5-104, AS AMENDED BY SECTION 4 OF THIS ACT, 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.

(b) UNLESS SUBSECTION (a) OF THIS SECTION APPLIES, THE LIABILITY OF AN ISSUER, NOMINATED PERSON 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.

(c) EXCEPT AS OTHERWISE PROVIDED IN THIS SUBSECTION, 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 42a-5-103, AS AMENDED BY SECTION 3 OF THIS ACT.

(d) IF THERE IS CONFLICT BETWEEN THIS ARTICLE AND ARTICLE 3, 4, 4A OR 9, THIS ARTICLE GOVERNS.

(e) THE FORUM FOR SETTLING DISPUTES ARISING OUT OF AN UNDERTAKING WITHIN THIS ARTICLE MAY BE CHOSEN IN THE MANNER AND WITH THE BINDING EFFECT THAT GOVERNING LAW MAY BE CHOSEN IN ACCORDANCE WITH SUBSECTION (a) OF THIS SECTION.

Sec. 17. Section 42a-5-117 of the general statutes is repealed and the following is substituted in lieu thereof:

[(1) Where an issuer or an advising or confirming bank or a bank which has for a customer procured issuance of a credit by another bank becomes insolvent before final payment under the credit and the credit is one to which this article is made applicable by paragraph (a) or (b) of section 42a-5-102(1) on scope, the receipt or allocation of funds or collateral to secure or meet obligations under the credit shall have the following results: (a) To the extent of any funds or collateral turned over after or before the insolvency as indemnity against or specifically for the purpose of payment of drafts or demands for payment drawn under the designated credit, the drafts or demands are entitled to payment in preference over depositors or other general creditors of the issuer or bank; and (b) on expiration of the credit or surrender of the beneficiary's right under it unused any person who has given such funds or collateral is similarly entitled to return thereof; and (c) a charge to a general or current account with a bank if specifically consented to for the purpose of indemnity against or payment of drafts or demands for payment drawn under the designated credit falls under the same rules as if the funds had been drawn out in cash and then turned over with specific instructions. (2) After honor or reimbursement under this section the customer or other person for whose account the insolvent bank has acted is entitled to receive the documents involved.]

(a) AN ISSUER THAT HONORS A BENEFICIARY'S PRESENTATION IS SUBROGATED TO THE RIGHTS OF THE BENEFICIARY TO THE SAME EXTENT AS IF THE ISSUER WERE A SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE BENEFICIARY AND OF THE APPLICANT TO THE SAME EXTENT AS IF THE ISSUER WERE THE SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE APPLICANT.

(b) AN APPLICATION THAT REIMBURSES AN ISSUER IS SUBROGATED TO THE RIGHTS OF THE ISSUER AGAINST ANY BENEFICIARY, PRESENTER OR NOMINATED PERSON TO THE SAME EXTENT AS IF THE APPLICANT WERE THE SECONDARY OBLIGOR OF THE OBLIGATIONS OWED TO THE ISSUER AND HAS THE RIGHTS OF SUBROGATION OF THE ISSUER TO THE RIGHTS OF THE BENEFICIARY STATED IN SUBSECTION (a) OF THIS SECTION.

(c) A NOMINATED PERSON WHO PAYS OR GIVES VALUE AGAINST A DRAFT OR DEMAND PRESENTED UNDER A LETTER OF CREDIT IS SUBROGATED TO THE RIGHTS OF: (1) THE ISSUER AGAINST THE APPLICANT TO THE SAME EXTENT AS IF THE NOMINATED PERSON WERE A SECONDARY OBLIGOR OF THE OBLIGATION OWED TO THE ISSUER BY THE APPLICANT; (2) THE BENEFICIARY TO THE SAME EXTENT AS IF THE NOMINATED PERSON WERE A SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE BENEFICIARY; AND (3) THE APPLICANT TO THE SAME EXTENT AS IF THE NOMINATED PERSON WERE A SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE APPLICANT.

(d) NOTWITHSTANDING ANY AGREEMENT OR TERM TO THE CONTRARY, THE RIGHTS OF SUBROGATION STATED IN SUBSECTIONS (a) AND (b) OF THIS SECTION DO NOT ARISE UNTIL THE ISSUER HONORS THE LETTER OF CREDIT OR OTHERWISE PAYS AND THE RIGHTS IN SUBSECTION (c) OF THIS SECTION DO NOT ARISE UNTIL THE NOMINATED PERSON PAYS OR OTHERWISE GIVES VALUE. UNTIL THEN, THE ISSUER, NOMINATED PERSON AND THE APPLICANT DO NOT DERIVE UNDER THIS SECTION PRESENT OR PROSPECTIVE RIGHTS FORMING THE BASIS OF A CLAIM, DEFENSE OR EXCUSE.

Sec. 18. Section 42a-1-105 of the general statutes is repealed and the following is substituted in lieu thereof: (1) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement this title applies to transactions bearing an appropriate relation to this state. (2) Where one of the following provisions of this title specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law, including the conflict of laws rules, so specified: Rights of creditors against sold goods. Section 42a-2-402. Applicability of the article on bank deposits and collections. Section 42a-4-102. Governing law in the article on funds transfers. Section 42a-4A-507. LETTERS OF CREDIT. SECTION 42a-5-116, AS AMENDED BY SECTION 16 OF THIS ACT. Applicability of the article on investment securities. Section 42a-8-106. Perfection provisions of the article on secured transactions. Section 42a-9-103a AS AMENDED BY SECTION 20 OF THIS ACT.

Sec. 19. Section 42a-2-512 of the general statutes is repealed and the following is substituted in lieu thereof: (1) Where the contract requires payment before inspection nonconformity of the goods does not excuse the buyer from so making payment unless (a) the nonconformity appears without inspection; or (b) despite tender of the required documents the circumstances would justify injunction against honor under the provisions of section [42a-5-114] SUBSECTION (b) OF SECTION 42a-5-109, AS AMENDED BY SECTION 9 OF THIS ACT. (2) Payment pursuant to subsection (1) does not constitute an acceptance of goods or impair the buyer's right to inspect or any of his remedies.

Sec. 20. Subsection (1) of section 42a-9-103a of the general statutes is repealed and the following is substituted in lieu thereof: (1) (a) [Subsection (1)] THIS SUBSECTION applies to documents, [and] instruments, RIGHTS TO PROCEEDS OF WRITTEN LETTERS OF CREDIT and [to] goods other than those covered by a certificate of title described in subsection (2), mobile goods described in subsection (3), and minerals described in subsection (5); (b) except as otherwise provided in this subsection, perfection and the effect of perfection or nonperfection of a security interest in collateral are governed by the law of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected; (c) if the parties to a transaction creating a purchase money security interest in goods in one jurisdiction understand at the time that the security interest attaches that the goods will be kept in another jurisdiction, then the law of the other jurisdiction governs the perfection and the effect of perfection or nonperfection of the security interest from the time it attaches until thirty days after the debtor receives possession of the goods and thereafter if the goods are taken to the other jurisdiction before the end of the thirty-day period; (d) when collateral is brought into and kept in this state while subject to a security interest perfected under the law of the jurisdiction from which the collateral was removed, the security interest remains perfected, but if action is required by part 3 of this article to perfect the security interest, (i) if such action is not taken before the expiration of the period of perfection in the other jurisdiction or the end of four months after the collateral is brought into this state, whichever period first expires, the security interest becomes unperfected at the end of that period and is thereafter deemed to have been unperfected as against a person who became a purchaser after removal; (ii) if such action is taken before the expiration of the period specified in subparagraph (i), the security interest continues perfected thereafter; (iii) for the purpose of priority over a buyer of consumer goods as provided in subsection (2) of section 42a-9-307, the period of the effectiveness of a filing in the jurisdiction from which the collateral is removed is governed by the rules with respect to perfection in subparagraphs (i) and (ii) of this subsection.

Sec. 21. Section 42a-9-104 of the general statutes is repealed and the following is substituted in lieu thereof:

This article does not apply (a) to a security interest subject to any statute of the United States to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of property; or (b) to a landlord's lien; or (c) to a lien given by statute or other rule of law for services or materials except as provided in section 42a-9-310 on priority of such liens; or (d) to a transfer of a claim for wages, salary or other compensation of an employee; or (e) to a transfer by a government or governmental subdivision or agency; or (f) to a sale of accounts or chattel paper as part of a sale of the business out of which they arose, or an assignment of accounts or chattel paper which is for the purpose of collection only, or a transfer of a right to payment under a contract to an assignee who is also to do the performance under the contract or a transfer of a single account to an assignee in whole or partial satisfaction of a preexisting indebtedness; or (g) to a transfer of an interest or claim in or under any policy of insurance, except as provided with respect to proceeds and priorities in proceeds; or (h) to a right represented by a judgment, other than a judgment taken on a right to payment which was collateral; or (i) to any right of set-off; or (j) except to the extent that provision is made for fixtures in section 42a-9-313, to the creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder; or (k) to a transfer in whole or in part of any claim arising out of tort; or (l) to a transfer of an interest in any deposit account, except as provided with respect to proceeds and priorities in proceeds; OR (m) TO A TRANSFER OF AN INTEREST IN A LETTER OF CREDIT OTHER THAN THE RIGHTS TO PROCEEDS OF A WRITTEN LETTER OF CREDIT.

Sec. 22. Subsection (3) of section 42a-9-105 of the general statutes is repealed and the following is substituted in lieu thereof: (3) The following definitions in other articles apply to this article: "Check". Section 42a-3-104. "Contract for sale". Section 42a-2-106. "Holder in due course". Section 42a-3-302. "LETTER OF CREDIT". SECTION [4m42a-5-102 [0m, AS AMENDED BY SECTION 2 OF THIS ACT. "Note". Section 42a-3-104. "PROCEEDS OF A LETTER OF CREDIT". SECTION 42a-5-114(a), AS AMENDED BY SECTION 14 OF THIS ACT. "Sale". Section 42a-2-106.

Sec. 23. Section 42a-9-106 of the general statutes is repealed and the following is substituted in lieu thereof:

"Account" means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance. "General intangibles" means any personal property, including things in action, other than goods, accounts, chattel paper, documents, instruments, RIGHTS TO PROCEEDS OF WRITTEN LETTERS OF CREDIT and money. All rights to payment earned or unearned under a charter or other contract involving the use or hire of a vessel and all rights incident to the charter or contract are accounts.

Sec. 24. Subsection (1) of section 42a-9-304 of the general statutes is repealed and the following is substituted in lieu thereof: (1) A security interest in chattel paper or negotiable documents may be perfected by filing. A SECURITY INTEREST IN THE RIGHTS TO PROCEEDS OF A WRITTEN LETTER OF CREDIT CAN BE PERFECTED ONLY BY THE SECURED PARTY'S TAKING POSSESSION OF THE LETTER OF CREDIT. A security interest in money or instruments, other than certificated securities or instruments which constitute part of chattel paper, can be perfected only by the secured party's taking possession, except as provided in subsections (4) and (5) of this section and subsections (2) and (3) of section 42a-9-306, on proceeds.

Sec. 25. Section 42a-9-305 of the general statutes is repealed and the following is substituted in lieu thereof:

A security interest in letters of credit and advices of credit, goods, instruments, other than certificated securities, money, negotiable documents or chattel paper may be perfected by the secured party's taking possession of the collateral. A SECURITY INTEREST IN THE RIGHT TO PROCEEDS OF A WRITTEN LETTER OF CREDIT MAY BE PERFECTED BY THE SECURED PARTY'S TAKING POSSESSION OF THE LETTER OF CREDIT. If such collateral other than goods covered by a negotiable document is held by a bailee, the secured party is deemed to have possession from the time the bailee receives notification of the secured party's interest. A security interest is perfected by possession from the time possession is taken without relation back and continues only so long as possession is retained, unless otherwise specified in this article. The security interest may be otherwise perfected as provided in this article before or after the period of possession by the secured party.

Sec. 26. (NEW) This act applies to a letter of credit that is issued on or after the effective date of this act. This act does not apply to a transaction, event, obligation or duty arising out of or associated with a letter of credit that was issued before the effective date of this act.

Sec. 27. (NEW) A transaction arising out of or associated with a letter of credit that was issued before the effective date of this act and the rights, obligations and interests flowing from that transaction are governed by any statute or other law amended or repealed by this act as if repeal or amendment had not occurred and may be terminated, completed, consummated or enforced under that statute or other law.

Approved June 3, 1996. Effective October 1, 1996.

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