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(810 ILCS 5/Art.
5 heading)
ARTICLE
5
LETTERS
OF CREDIT
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(810 ILCS 5/5-101) (from Ch. 26, par. 5-101)
Sec. 5-101. Short title.
This Article may be cited as Uniform Commercial Code--Letters
of Credit.
(Source: P.A. 89-534, eff. 1-1-97.)
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(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
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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
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conduct 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
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issues 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
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presentation 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 5/5-103) (from Ch. 26, par. 5-103)
Sec. 5-103. Scope.
(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), Sections 5-102(a)(9)
and (10), 5-106(d), and 5-114(d), and except to the
extent prohibited in Sections 1-102(3) and 5-117(d),
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.
(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-104) (from Ch. 26, par. 5-104)
Sec. 5-104. Formal requirements.
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 Section 5-108(e).
(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-105) (from Ch. 26, par. 5-105)
Sec. 5-105. Consideration.
Consideration is not required to issue, amend, transfer, or
cancel a letter of credit, advice, or confirmation.
(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-106) (from Ch. 26, par. 5-106)
Sec. 5-106. Issuance, amendment,
cancellation, and duration.
(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 5 years after its stated date of
issuance, or if none is stated, after the date on which it is
issued.
(Source: P.A. 89-534, eff. 1-1-97.)
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(810 ILCS 5/5-107) (from Ch. 26, par. 5-107)
Sec. 5-107. Confirmer, nominated
person, and adviser.
(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). 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.
(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
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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
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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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