California Commercial Code

§ 5109

COM § 5109 Effective Jan 1, 1997Div. 5

Statute text

(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.

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Legislative history

Repealed and added by Stats. 1996, Ch. 176, Sec. 7. Effective January 1, 1997.