§ 25-5-108. Issuer's rights and obligations. - North Carolina Statutes

§25‑5‑108.  Issuer's rights and obligations.

(a)        Except as otherwiseprovided in G.S. 25‑5‑109, an issuer shall honor a presentationthat, as determined by the standard practice referred to in subsection (e) ofthis section, appears on its face strictly to comply with the terms andconditions of the letter of credit. Except as otherwise provided in G.S. 25‑5‑113and unless otherwise agreed with the applicant, an issuer shall dishonor apresentation that does not appear so to comply.

(b)        An issuer has a reasonabletime after presentation, but not beyond the end of the seventh business day ofthe issuer after the day of its receipt of documents:

(1)        To honor;

(2)        If the letter ofcredit provides for honor to be completed more than seven business days afterpresentation, to accept a draft or incur a deferred obligation; or

(3)        To give notice tothe presenter of discrepancies in the presentation.

(c)        Except as otherwiseprovided in subsection (d) of this section, an issuer is precluded fromasserting as a basis for dishonor any discrepancy if timely notice is not givenor any discrepancy not stated in the notice if timely notice is given.

(d)        Failure to give thenotice specified in subsection (b) of this section or to mention fraud,forgery, or expiration in the notice does not preclude the issuer fromasserting as a basis for dishonor (i) fraud or forgery as described in G.S. 25‑5‑109(a)or (ii) expiration of the letter of credit before presentation.

(e)        An issuer shallobserve standard practice of financial institutions that regularly issueletters of credit. Determination of the issuer's observance of the standardpractice is a matter of interpretation for the court. The court shall offer theparties a reasonable opportunity to present evidence of the standard practice.

(f)         An issuer is notresponsible for:

(1)        The performance ornonperformance of the underlying contract, arrangement, or transaction;

(2)        An act or omissionof others; or

(3)        Observance orknowledge of the usage of a particular trade other than the standard practicereferred to in subsection (e) of this section.

(g)        If an undertakingconstituting a letter of credit under G.S. 25‑5‑102(a)(10) containsnondocumentary conditions, an issuer shall disregard the nondocumentaryconditions and treat them as if they were not stated.

(h)        An issuer that hasdishonored a presentation shall return the documents or hold them at thedisposal of, and send advice to that effect to, the presenter.

(i)         An issuer that hashonored a presentation as permitted or required by this Article:

(1)        Is entitled to bereimbursed by the applicant in immediately available funds not later than thedate of its payment of funds;

(2)        Takes the documentsfree of claims of the beneficiary or presenter;

(3)        Is precluded fromasserting a right of recourse on a draft under G.S. 25‑3‑414 andG.S. 25‑3‑415;

(4)        Except as otherwiseprovided in G.S. 25‑5‑110 and G.S. 25‑5‑117, isprecluded from restitution of money paid or other value given by mistake to theextent the mistake concerns discrepancies in the documents or tender which areapparent on the face of the presentation; and

(5)        Is discharged to theextent of its performance under the letter of credit unless the issuer honoreda presentation in which a required signature of a beneficiary was forged. (1999‑73,s. 1.)