1. The Laws of New York
  2. Consolidated Laws
  3. Uniform Commercial Code
  4. Article 5: Letters of Credit


Section 5-108 Issuer's rights and obligations

Uniform Commercial Code (UCC)

Section 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) 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 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 issue 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 5--109 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.

  (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 paragraph (10) of subsection (a) of section 5--102 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 3--414 and 3--415;

   (4) except as otherwise provided in sections 5--110 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

   (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.