(810 ILCS 5/5-102) (from Ch. 26, par. 5-102)
Sec. 5-102.
Definitions.
(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.
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(2) "Applicant" means a person at whose request or
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| 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.
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(3) "Beneficiary" means a person who under the terms
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| 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.
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(4) "Confirmer" means a nominated person who
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| undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another.
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(5) "Dishonor" of a letter of credit means failure
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| timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit.
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(6) "Document" means a draft or other demand,
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| 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 Section 5-108(e) 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.
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(7) "Good faith" means honesty in fact in the conduct
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| or transaction concerned.
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(8) "Honor" of a letter of credit means performance
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| 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
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(i) upon payment,
(ii) if the letter of credit provides for
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| acceptance, upon acceptance of a draft and, at maturity, its payment, or
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(iii) if the letter of credit provides for
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| incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.
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(9) "Issuer" means a bank or other person that issues
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| a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes.
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(10) "Letter of credit" means a definite undertaking
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| that satisfies the requirements of Section 5-104 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.
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(11) "Nominated person" means a person whom the
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| 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.
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(12) "Presentation" means delivery of a document to
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| an issuer or nominated person for honor or giving of value under a letter of credit.
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(13) "Presenter" means a person making a presentation
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| as or on behalf of a beneficiary or nominated person.
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(14) "Record" means information that is inscribed on
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| a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form.
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(15) "Successor of a beneficiary" means a person who
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| 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.
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(b) Definitions in other Articles applying to this Article and the
Sections in which they appear are:
"Accept" or "Acceptance" Section 3-409
"Value" Sections 3-303, 4-211
(c) Article 1 contains certain additional general definitions and
principles of construction and interpretation applicable throughout this
Article.
(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-108) (from Ch. 26, par. 5-108)
Sec. 5-108.
Issuer's rights and obligations.
(a) Except as otherwise provided in Section 5-109, an issuer shall
honor a presentation that, as determined by the standard practice referred to
in subsection (e), appears on its face strictly to comply with the terms and
conditions of the letter of credit. Except as otherwise provided in Section
5-113 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
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(3) to give notice to the presenter of discrepancies
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(c) Except as otherwise provided in subsection (d), 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) 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
Section 5-109(a) 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
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| underlying contract, arrangement, or transaction,
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(2) an act or omission of others, or
(3) observance or knowledge of the usage of a
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| particular trade other than the standard practice referred to in subsection (e).
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(g) If an undertaking constituting a letter of credit under Section
5-102(a)(10) 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
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| immediately available funds not later than the date of its payment of funds;
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(2) takes the documents free of claims of the
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| beneficiary or presenter;
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(3) is precluded from asserting a right of recourse
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| on a draft under Sections 3-414 and 3-415;
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(4) except as otherwise provided in Sections 5-110
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| and 5-117, 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
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(5) is discharged to the extent of its performance
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| under the letter of credit unless the issuer honored a presentation in which a required signature of a beneficiary was forged.
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(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-109) (from Ch. 26, par. 5-109)
Sec. 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:
(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
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(2) the issuer, acting in good faith, may honor or
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| dishonor the presentation in any other case.
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(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
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| applicable to an accepted draft or deferred obligation incurred by the issuer;
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(2) a beneficiary, issuer, or nominated person who
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| may be adversely affected is adequately protected against loss that it may suffer because the relief is granted;
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(3) all of the conditions to entitle a person to the
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| relief under the law of this State have been met; and
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(4) on the basis of the information submitted to the
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| 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 subsection (a)(1).
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(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-116) (from Ch. 26, par. 5-116)
Sec. 5-116.
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 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.
(b) Unless subsection (a) 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), (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 5-103(c).
(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).
(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-117) (from Ch. 26, par. 5-117)
Sec. 5-117.
Subrogation of issuer, applicant, and nominated person.
(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 applicant 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).
(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;
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(2) the beneficiary to the same extent as if the
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| nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and
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(3) the applicant to the same extent as if the
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| nominated person were a secondary obligor of the underlying obligation owed to the applicant.
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(d) Notwithstanding any agreement or term to the contrary, the
rights of subrogation stated in subsections (a) and (b) do not arise until the
issuer honors the letter of credit or otherwise pays and the rights in
subsection (c) 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.
(Source: P.A. 89-534, eff. 1-1-97.)
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