As Introduced 1
122nd General Assembly 4
Regular Session H. B. No. 338 5
1997-1998 6
REPRESENTATIVES CALLENDER-WOMER BENJAMIN-GARCIA-BATCHELDER- 8
CLANCY-GARDNER-WISE-AMSTUTZ-BUCHY-HARRIS-TIBERI 9
11
A B I L L
To amend sections 1301.05, 1302.56, 1309.01, 13
1309.03, 1309.04, 1309.23, and 1309.24, to enact 14
new sections 1305.01 to 1305.16, and to repeal 15
sections 1305.01, 1305.02, 1305.03, 1305.04, 16
1305.05, 1305.06, 1305.07, 1305.08, 1305.09, 17
1305.10, 1305.11, 1305.12, 1305.13, 1305.14, 18
1305.15, and 1305.16 of the Revised Code to adopt 19
Revised Article V--Letters of Credit of the 20
Uniform Commercial Code. 21
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 23
Section 1. That sections 1301.05, 1302.56, 1309.01, 25
1309.03, 1309.04, 1309.23, and 1309.24 be amended and new 27
sections 1305.01, 1305.02, 1305.03, 1305.04, 1305.05, 1305.06, 28
1305.07, 1305.08, 1305.09, 1305.10, 1305.11, 1305.12, 1305.13, 29
1305.14, 1305.15, and 1305.16 of the Revised Code be enacted to
read as follows: 30
Sec. 1301.05. (A) Except as otherwise provided in this 39
section, when a transaction bears a reasonable relation to this 40
state and also to another state or nation, the parties may agree 41
that the law either of this state or of the other state or nation 42
shall govern their rights and duties. Failing such an agreement 43
Chapters 1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., 45
and 1310. of the Revised Code apply to transactions bearing an 46
appropriate relation to this state.
(B) Where one of the following provisions of Chapters 48
2
1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., and 1310. 50
of the Revised Code specifies the applicable law, that provision 51
governs and a contrary agreement is effective only to the extent 52
permitted by the law, including the conflict of laws rules, so 53
specified:
(1) Rights of creditors against sold goods, as provided in 55
section 1302.43 of the Revised Code; 56
(2) Applicability of sections 1304.01 to 1304.40 of the 58
Revised Code, as provided in section 1304.02 of the Revised Code; 59
(3) Fund transfers under sections 1304.51 to 1304.85 of 61
the Revised Code, as provided in section 1304.85 of the Revised 62
Code; 63
(4) CHOICE OF LAW AS TO LETTERS OF CREDIT UNDER SECTION 65
1305.15 OF THE REVISED CODE;
(5) Applicability of sections 1308.01 to 1308.36 of the 67
Revised Code, as provided in section 1308.05 of the Revised Code; 68
(5)(6) Perfection provisions of section 1309.03 of the 70
Revised Code; 71
(6)(7) Applicability of sections 1310.01 to 1310.78 of the 73
Revised Code, as provided in sections 1310.03 and 1310.04 of the 74
Revised Code. 75
Sec. 1302.56. (A) Where the contract requires payment 84
before inspection, non-conformity NONCONFORMITY of the goods does 85
not excuse the buyer from so making payment unless: 86
(1) the non-conformity THE NONCONFORMITY appears without 88
inspection; or 89
(2) despite DESPITE tender of the required documents the 91
circumstances would justify injunction against honor under the 92
provisions DIVISION (B) of section 1305.13 1305.08 of the Revised 95
Code.
(B) Payment pursuant to division (A) of this section does 97
not constitute an acceptance of goods or impair the buyer's right 98
to inspect or any of his THE BUYER'S remedies. 99
Sec. 1305.01. (A) AS USED IN THIS CHAPTER: 101
3
(1) "ADVISER" MEANS A PERSON WHO, AT THE REQUEST OF THE 104
ISSUER, A CONFIRMER, OR ANOTHER ADVISER, NOTIFIES OR REQUESTS 105
ANOTHER ADVISER TO NOTIFY THE BENEFICIARY THAT A LETTER OF CREDIT 106
HAS BEEN ISSUED, CONFIRMED, OR AMENDED.
(2) "APPLICANT" MEANS A PERSON AT WHOSE REQUEST OR FOR 108
WHOSE ACCOUNT A LETTER OF CREDIT IS ISSUED. THE TERM INCLUDES A 109
PERSON WHO REQUESTS AN ISSUER TO ISSUE A LETTER OF CREDIT ON 110
BEHALF OF ANOTHER IF THE PERSON MAKING THE REQUEST UNDERTAKES AN 111
OBLIGATION TO REIMBURSE THE ISSUER. 112
(3) "BENEFICIARY" MEANS A PERSON WHO, UNDER THE TERMS OF A 115
LETTER OF CREDIT, IS ENTITLED TO HAVE ITS COMPLYING PRESENTATION 116
HONORED. THE TERM INCLUDES A PERSON TO WHOM DRAWING RIGHTS HAVE 117
BEEN TRANSFERRED UNDER A TRANSFERABLE LETTER OF CREDIT. 118
(4) "CONFIRMER" MEANS A NOMINATED PERSON WHO UNDERTAKES, 121
AT THE REQUEST OR WITH THE CONSENT OF THE ISSUER, TO HONOR A 122
PRESENTATION UNDER A LETTER OF CREDIT ISSUED BY ANOTHER.
(5) "DISHONOR" OF A LETTER OF CREDIT MEANS FAILURE TIMELY 125
TO HONOR OR TO TAKE AN INTERIM ACTION, SUCH AS ACCEPTANCE OF A 126
DRAFT, THAT MAY BE REQUIRED BY THE LETTER OF CREDIT.
(6) "DOCUMENT" MEANS A DRAFT OR OTHER DEMAND, DOCUMENT OF 129
TITLE, INVESTMENT SECURITY, CERTIFICATE, INVOICE, OR OTHER
RECORD, STATEMENT, OR REPRESENTATION OF FACT, LAW, RIGHT, OR 130
OPINION THAT IS (a) PRESENTED IN A WRITTEN OR OTHER MEDIUM 131
PERMITTED BY THE LETTER OF CREDIT OR, UNLESS PROHIBITED BY THE 132
LETTER OF CREDIT, BY THE STANDARD PRACTICE REFERRED TO IN 133
DIVISION (E) OF SECTION 1305.07 OF THE REVISED CODE AND (b) 134
CAPABLE OF BEING EXAMINED FOR COMPLIANCE WITH THE TERMS AND 136
CONDITIONS OF THE LETTER OF CREDIT. A DOCUMENT MAY NOT BE ORAL. 137
(7) "GOOD FAITH" MEANS HONESTY IN FACT IN THE CONDUCT OR 140
TRANSACTION CONCERNED.
(8) "HONOR" OF A LETTER OF CREDIT MEANS PERFORMANCE OF THE 143
ISSUER'S UNDERTAKING IN THE LETTER OF CREDIT TO PAY OR DELIVER AN 144
ITEM OF VALUE. UNLESS THE LETTER OF CREDIT OTHERWISE PROVIDES, 145
"HONOR" OCCURS:
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(a) UPON PAYMENT; 147
(b) IF THE LETTER OF CREDIT PROVIDES FOR ACCEPTANCE, UPON 150
ACCEPTANCE OF A DRAFT AND, AT MATURITY, ITS PAYMENT; OR 151
(c) IF THE LETTER OF CREDIT PROVIDES FOR INCURRING A 154
DEFERRED OBLIGATION, UPON INCURRING THE OBLIGATION AND, AT
MATURITY, ITS PERFORMANCE. 155
(9) "ISSUER" MEANS A BANK OR OTHER PERSON THAT ISSUES A 158
LETTER OF CREDIT, BUT DOES NOT INCLUDE AN INDIVIDUAL WHO MAKES AN 159
ENGAGEMENT FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES.
(10) "LETTER OF CREDIT" MEANS A DEFINITE UNDERTAKING THAT 162
SATISFIES THE REQUIREMENTS OF SECTION 1305.03 OF THE REVISED CODE
BY AN ISSUER TO A BENEFICIARY AT THE REQUEST OR FOR THE ACCOUNT 163
OF AN APPLICANT OR, IN THE CASE OF A FINANCIAL INSTITUTION, TO 164
ITSELF OR FOR ITS OWN ACCOUNT, TO HONOR A DOCUMENTARY 165
PRESENTATION BY PAYMENT OR DELIVERY OF AN ITEM OF VALUE. 166
(11) "NOMINATED PERSON" MEANS A PERSON WHOM THE ISSUER (a) 169
DESIGNATES OR AUTHORIZES TO PAY, ACCEPT, NEGOTIATE, OR OTHERWISE 170
GIVE VALUE UNDER A LETTER OF CREDIT AND (b) UNDERTAKES BY 171
AGREEMENT OR CUSTOM AND PRACTICE TO REIMBURSE.
(12) "PRESENTATION" MEANS DELIVERY OF A DOCUMENT TO AN 173
ISSUER OR NOMINATED PERSON FOR HONOR OR GIVING OF VALUE UNDER A 174
LETTER OF CREDIT. 175
(13) "PRESENTER" MEANS A PERSON MAKING A PRESENTATION AS, 178
OR ON BEHALF OF, A BENEFICIARY OR NOMINATED PERSON.
(14) "RECORD" MEANS INFORMATION THAT IS INSCRIBED ON A 180
TANGIBLE MEDIUM, OR THAT IS STORED IN AN ELECTRONIC OR OTHER 181
MEDIUM AND IS RETRIEVABLE IN PERCEIVABLE FORM. 182
(15) "SUCCESSOR OF A BENEFICIARY" MEANS A PERSON WHO 184
SUCCEEDS TO SUBSTANTIALLY ALL OF THE RIGHTS OF A BENEFICIARY BY 185
OPERATION OF LAW, INCLUDING A CORPORATION WITH OR INTO WHICH THE 186
BENEFICIARY HAS BEEN MERGED OR CONSOLIDATED, AN ADMINISTRATOR, 187
EXECUTOR, PERSONAL REPRESENTATIVE, TRUSTEE IN BANKRUPTCY, DEBTOR 188
IN POSSESSION, LIQUIDATOR, AND RECEIVER. 189
(B) DEFINITIONS IN OTHER CHAPTERS APPLYING TO THIS CHAPTER 191
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AND THE SECTIONS IN WHICH THEY APPEAR ARE: "ACCEPT" OR 192
"ACCEPTANCE" IN SECTION 1303.46 AND "VALUE" IN SECTIONS 1303.33 193
AND 1304.21 OF THE REVISED CODE.
(C) CHAPTER 1301. OF THE REVISED CODE CONTAINS CERTAIN 195
ADDITIONAL GENERAL DEFINITIONS AND PRINCIPLES OF CONSTRUCTION AND 196
INTERPRETATION APPLICABLE THROUGHOUT THIS CHAPTER. 197
Sec. 1305.02. (A) THIS CHAPTER APPLIES TO LETTERS OF 199
CREDIT AND TO CERTAIN RIGHTS AND OBLIGATIONS ARISING OUT OF 200
TRANSACTIONS INVOLVING LETTERS OF CREDIT. 201
(B) THE STATEMENT OF A RULE IN THIS CHAPTER DOES NOT BY 203
ITSELF REQUIRE, IMPLY, OR NEGATE APPLICATION OF THE SAME OR A 204
DIFFERENT RULE TO A SITUATION NOT PROVIDED FOR, OR TO A PERSON 205
NOT SPECIFIED, IN THIS CHAPTER. 206
(C) WITH THE EXCEPTION OF THIS DIVISION, DIVISIONS (A) AND 209
(D) OF THIS SECTION, DIVISIONS (A)(9) AND (10) OF SECTION 210
1305.01, DIVISION (D) OF SECTION 1305.05, AND DIVISION (D) OF 212
SECTION 1305.13, AND EXCEPT TO THE EXTENT PROHIBITED IN DIVISION 213
(C) OF SECTION 1301.02 AND DIVISION (D) OF SECTION 1305.16 OF THE 214
REVISED CODE, THE EFFECT OF THIS CHAPTER MAY BE VARIED BY 215
AGREEMENT OR BY A PROVISION STATED OR INCORPORATED BY REFERENCE 216
IN AN UNDERTAKING. A TERM IN AN AGREEMENT OR UNDERTAKING 217
GENERALLY EXCUSING LIABILITY OR GENERALLY LIMITING REMEDIES FOR 218
FAILURE TO PERFORM OBLIGATIONS IS NOT SUFFICIENT TO VARY 219
OBLIGATIONS PRESCRIBED BY THIS CHAPTER. 220
(D) RIGHTS AND OBLIGATIONS OF AN ISSUER TO A BENEFICIARY 222
OR A NOMINATED PERSON UNDER A LETTER OF CREDIT ARE INDEPENDENT OF 224
THE EXISTENCE, PERFORMANCE, OR NONPERFORMANCE OF A CONTRACT OR 225
ARRANGEMENT OUT OF WHICH THE LETTER OF CREDIT ARISES OR WHICH
UNDERLIES IT, INCLUDING CONTRACTS OR ARRANGEMENTS BETWEEN THE 226
ISSUER AND THE APPLICANT AND BETWEEN THE APPLICANT AND THE 227
BENEFICIARY. 228
Sec. 1305.03. A LETTER OF CREDIT, CONFIRMATION, ADVICE, 230
TRANSFER, AMENDMENT, OR CANCELLATION MAY BE ISSUED IN ANY FORM 231
THAT IS A RECORD AND IS AUTHENTICATED BY A SIGNATURE OR IN 232
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ACCORDANCE WITH THE AGREEMENT OF THE PARTIES OR THE STANDARD 233
PRACTICE REFERRED TO IN DIVISION (E) OF SECTION 1305.07 OF THE 234
REVISED CODE.
Sec. 1305.04. CONSIDERATION IS NOT REQUIRED TO ISSUE, 236
AMEND, TRANSFER, OR CANCEL A LETTER OF CREDIT, ADVICE, OR 237
CONFIRMATION.
Sec. 1305.05. (A) A LETTER OF CREDIT IS ISSUED AND 239
BECOMES ENFORCEABLE ACCORDING TO ITS TERMS AGAINST THE ISSUER 241
WHEN THE ISSUER SENDS OR OTHERWISE TRANSMITS IT TO THE PERSON 242
REQUESTED TO ADVISE OR TO THE BENEFICIARY. A LETTER OF CREDIT IS 243
REVOCABLE ONLY IF IT SO PROVIDES. 244
(B) AFTER A LETTER OF CREDIT IS ISSUED, RIGHTS AND 246
OBLIGATIONS OF A BENEFICIARY, APPLICANT, CONFIRMER, AND ISSUER 247
ARE NOT AFFECTED BY AN AMENDMENT OR CANCELLATION TO WHICH THAT 248
PERSON HAS NOT CONSENTED EXCEPT TO THE EXTENT THE LETTER OF 249
CREDIT PROVIDES THAT IT IS REVOCABLE OR THAT THE ISSUER MAY AMEND 250
OR CANCEL THE LETTER OF CREDIT WITHOUT THAT CONSENT. 251
(C) IF THERE IS NO STATED EXPIRATION DATE OR OTHER 253
PROVISION THAT DETERMINES ITS DURATION, A LETTER OF CREDIT 254
EXPIRES ONE YEAR AFTER ITS STATED DATE OF ISSUANCE OR, IF NONE IS 255
STATED, AFTER THE DATE ON WHICH IT IS ISSUED. 256
(D) A LETTER OF CREDIT THAT STATES THAT IT IS PERPETUAL 258
EXPIRES FIVE YEARS AFTER ITS STATED DATE OF ISSUANCE OR, IF NONE 259
IS STATED, AFTER THE DATE ON WHICH IT IS ISSUED. 260
Sec. 1305.06. (A) A CONFIRMER IS DIRECTLY OBLIGATED ON A 262
LETTER OF CREDIT AND HAS THE RIGHTS AND OBLIGATIONS OF AN ISSUER 264
TO THE EXTENT OF ITS CONFIRMATION. THE CONFIRMER ALSO HAS RIGHTS 265
AGAINST AND OBLIGATIONS TO THE ISSUER AS IF THE ISSUER WERE AN 266
APPLICANT AND THE CONFIRMER HAD ISSUED THE LETTER OF CREDIT AT 267
THE REQUEST AND FOR THE ACCOUNT OF THE ISSUER. 268
(B) A NOMINATED PERSON WHO IS NOT A CONFIRMER IS NOT 270
OBLIGATED TO HONOR OR OTHERWISE GIVE VALUE FOR A PRESENTATION. 271
(C) A PERSON REQUESTED TO ADVISE MAY DECLINE TO ACT AS AN 273
ADVISER. AN ADVISER THAT IS NOT A CONFIRMER IS NOT OBLIGATED TO 274
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HONOR OR GIVE VALUE FOR A PRESENTATION. AN ADVISER UNDERTAKES TO 275
THE ISSUER AND TO THE BENEFICIARY ACCURATELY TO ADVISE THE TERMS 276
OF THE LETTER OF CREDIT, CONFIRMATION, AMENDMENT, OR ADVICE 277
RECEIVED BY THAT PERSON AND UNDERTAKES TO THE BENEFICIARY TO 278
CHECK THE APPARENT AUTHENTICITY OF THE REQUEST TO ADVISE. EVEN 279
IF THE ADVICE IS INACCURATE, THE LETTER OF CREDIT, CONFIRMATION, 280
OR AMENDMENT IS ENFORCEABLE AS ISSUED. 281
(D) A PERSON WHO NOTIFIES A TRANSFEREE BENEFICIARY OF THE 283
TERMS OF A LETTER OF CREDIT, CONFIRMATION, AMENDMENT, OR ADVICE 284
HAS THE RIGHTS AND OBLIGATIONS OF AN ADVISER UNDER DIVISION (C) 285
OF THIS SECTION. THE TERMS IN THE NOTICE TO THE TRANSFEREE 286
BENEFICIARY MAY DIFFER FROM THE TERMS IN ANY NOTICE TO THE 287
TRANSFEROR BENEFICIARY TO THE EXTENT PERMITTED BY THE LETTER OF 288
CREDIT, CONFIRMATION, AMENDMENT, OR ADVICE RECEIVED BY THE PERSON 290
WHO SO NOTIFIES.
Sec. 1305.07. (A) EXCEPT AS OTHERWISE PROVIDED IN SECTION 292
1305.08 OF THE REVISED CODE, AN ISSUER SHALL HONOR A PRESENTATION 294
THAT, AS DETERMINED BY THE STANDARD PRACTICE REFERRED TO IN 295
DIVISION (E) OF THIS SECTION, APPEARS ON ITS FACE STRICTLY TO 296
COMPLY WITH THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT. 297
EXCEPT AS OTHERWISE PROVIDED IN SECTION 1305.12 OF THE REVISED 298
CODE AND, UNLESS OTHERWISE AGREED WITH THE APPLICANT, AN ISSUER 299
SHALL DISHONOR A PRESENTATION THAT DOES NOT APPEAR SO TO COMPLY. 300
(B) AN ISSUER HAS A REASONABLE TIME AFTER PRESENTATION, 302
BUT NOT BEYOND THE END OF THE SEVENTH BUSINESS DAY OF THE ISSUER 303
AFTER THE DAY OF ITS RECEIPT OF DOCUMENTS: 304
(1) TO HONOR; 306
(2) IF THE LETTER OF CREDIT PROVIDES FOR HONOR TO BE 308
COMPLETED MORE THAN SEVEN BUSINESS DAYS AFTER PRESENTATION, TO 309
ACCEPT A DRAFT OR INCUR A DEFERRED OBLIGATION; OR 310
(3) TO GIVE NOTICE TO THE PRESENTER OF DISCREPANCIES IN 312
THE PRESENTATION. 313
(C) EXCEPT AS OTHERWISE PROVIDED IN DIVISION (D) OF THIS 316
SECTION, AN ISSUER IS PRECLUDED FROM ASSERTING AS A BASIS FOR 317
8
DISHONOR ANY DISCREPANCY IF TIMELY NOTICE IS NOT GIVEN OR ANY 318
DISCREPANCY NOT STATED IN THE NOTICE IF TIMELY NOTICE IS GIVEN. 319
(D) FAILURE TO GIVE THE NOTICE SPECIFIED IN DIVISION (B) 322
OF THIS SECTION OR TO MENTION FRAUD, FORGERY, OR EXPIRATION IN
THE NOTICE DOES NOT PRECLUDE THE ISSUER FROM ASSERTING AS A BASIS 324
FOR DISHONOR FRAUD OR FORGERY AS DESCRIBED IN DIVISION (A) OF 325
SECTION 1305.08 OF THE REVISED CODE OR EXPIRATION OF THE LETTER
OF CREDIT BEFORE PRESENTATION. 326
(E) AN ISSUER SHALL OBSERVE STANDARD PRACTICE OF FINANCIAL 328
INSTITUTIONS THAT REGULARLY ISSUE LETTERS OF CREDIT. 329
DETERMINATION OF THE ISSUER'S OBSERVANCE OF THE STANDARD PRACTICE 331
IS A MATTER OF INTERPRETATION FOR THE COURT. THE COURT SHALL 332
OFFER THE PARTIES A REASONABLE OPPORTUNITY TO PRESENT EVIDENCE OF 333
THE STANDARD PRACTICE.
(F) AN ISSUER IS NOT RESPONSIBLE FOR: 335
(1) THE PERFORMANCE OR NONPERFORMANCE OF THE UNDERLYING 337
CONTRACT, ARRANGEMENT, OR TRANSACTION; 338
(2) AN ACT OR OMISSION OF OTHERS; OR 340
(3) OBSERVANCE OR KNOWLEDGE OF THE USAGE OF A PARTICULAR 343
TRADE OTHER THAN THE STANDARD PRACTICE REFERRED TO IN DIVISION 344
(E) OF THIS SECTION.
(G) IF AN UNDERTAKING CONSTITUTING A LETTER OF CREDIT 346
UNDER DIVISION (A)(10) OF SECTION 1305.01 OF THE REVISED CODE 347
CONTAINS NONDOCUMENTARY CONDITIONS, AN ISSUER SHALL DISREGARD THE 349
NONDOCUMENTARY CONDITIONS AND TREAT THEM AS IF THEY WERE NOT
STATED. 350
(H) AN ISSUER THAT HAS DISHONORED A PRESENTATION SHALL 352
RETURN THE DOCUMENTS OR HOLD THEM AT THE DISPOSAL OF, AND SEND 353
ADVICE TO THAT EFFECT TO, THE PRESENTER. 354
(I) AN ISSUER THAT HAS HONORED A PRESENTATION AS PERMITTED 356
OR REQUIRED BY THIS CHAPTER: 357
(1) IS ENTITLED TO BE REIMBURSED BY THE APPLICANT IN 359
IMMEDIATELY AVAILABLE FUNDS NOT LATER THAN THE DATE OF ITS 360
PAYMENT OF FUNDS; 361
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(2) TAKES THE DOCUMENTS FREE OF CLAIMS OF THE BENEFICIARY 364
OR PRESENTER;
(3) IS PRECLUDED FROM ASSERTING A RIGHT OF RECOURSE ON A 367
DRAFT UNDER SECTIONS 1303.54 AND 1303.55 OF THE REVISED CODE;
(4) EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 1305.09 AND 370
1305.16 OF THE REVISED CODE, IS PRECLUDED FROM RESTITUTION OF
MONEY PAID OR OTHER VALUE GIVEN BY MISTAKE TO THE EXTENT THE 371
MISTAKE CONCERNS DISCREPANCIES IN THE DOCUMENTS OR TENDER THAT 372
ARE APPARENT ON THE FACE OF THE PRESENTATION; AND 373
(5) IS DISCHARGED TO THE EXTENT OF ITS PERFORMANCE UNDER 376
THE LETTER OF CREDIT UNLESS THE ISSUER HONORED A PRESENTATION IN 377
WHICH A REQUIRED SIGNATURE OF A BENEFICIARY WAS FORGED. 378
Sec. 1305.08. (A) IF A PRESENTATION IS MADE THAT APPEARS 380
ON ITS FACE STRICTLY TO COMPLY WITH THE TERMS AND CONDITIONS OF 382
THE LETTER OF CREDIT, BUT A REQUIRED DOCUMENT IS FORGED OR 383
MATERIALLY FRAUDULENT, OR HONOR OF THE PRESENTATION WOULD 384
FACILITATE A MATERIAL FRAUD BY THE BENEFICIARY ON THE ISSUER OR 385
APPLICANT:
(1) THE ISSUER SHALL HONOR THE PRESENTATION, IF HONOR IS 387
DEMANDED BY (a) A NOMINATED PERSON WHO HAS GIVEN VALUE IN GOOD 388
FAITH AND WITHOUT NOTICE OF FORGERY OR MATERIAL FRAUD, (b) A 389
CONFIRMER WHO HAS HONORED ITS CONFIRMATION IN GOOD FAITH, (c) A 391
HOLDER IN DUE COURSE OF A DRAFT DRAWN UNDER THE LETTER OF CREDIT 392
WHICH WAS TAKEN AFTER ACCEPTANCE BY THE ISSUER OR NOMINATED 393
PERSON, OR (d) AN ASSIGNEE OF THE ISSUER'S OR NOMINATED PERSON'S 394
DEFERRED OBLIGATION THAT WAS TAKEN FOR VALUE AND WITHOUT NOTICE 395
OF FORGERY OR MATERIAL FRAUD AFTER THE OBLIGATION WAS INCURRED BY 396
THE ISSUER OR NOMINATED PERSON; AND
(2) THE ISSUER, ACTING IN GOOD FAITH, MAY HONOR OR 398
DISHONOR THE PRESENTATION IN ANY OTHER CASE. 399
(B) IF AN APPLICANT CLAIMS THAT A REQUIRED DOCUMENT IS 401
FORGED OR MATERIALLY FRAUDULENT OR THAT HONOR OF THE PRESENTATION 402
WOULD FACILITATE A MATERIAL FRAUD BY THE BENEFICIARY ON THE 403
ISSUER OR APPLICANT, A COURT OF COMPETENT JURISDICTION MAY 404
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TEMPORARILY OR PERMANENTLY ENJOIN THE ISSUER FROM HONORING A 405
PRESENTATION OR GRANT SIMILAR RELIEF AGAINST THE ISSUER OR OTHER 406
PERSONS ONLY IF THE COURT FINDS THAT: 407
(1) THE RELIEF IS NOT PROHIBITED UNDER THE LAW APPLICABLE 410
TO AN ACCEPTED DRAFT OR DEFERRED OBLIGATION INCURRED BY THE 411
ISSUER;
(2) A BENEFICIARY, ISSUER, OR NOMINATED PERSON WHO MAY BE 414
ADVERSELY AFFECTED IS ADEQUATELY PROTECTED AGAINST LOSS THAT IT 415
MAY SUFFER BECAUSE THE RELIEF IS GRANTED;
(3) ALL OF THE CONDITIONS TO ENTITLE A PERSON TO THE 417
RELIEF UNDER THE LAW OF THIS STATE HAVE BEEN MET; AND 418
(4) ON THE BASIS OF THE INFORMATION SUBMITTED TO THE 420
COURT, THE APPLICANT IS MORE LIKELY THAN NOT TO SUCCEED UNDER ITS 422
CLAIM OF FORGERY OR MATERIAL FRAUD AND THE PERSON DEMANDING HONOR 423
DOES NOT QUALIFY FOR PROTECTION UNDER DIVISION (A)(1) OF THIS 424
SECTION.
Sec. 1305.09. (A) IF ITS PRESENTATION IS HONORED, THE 426
BENEFICIARY WARRANTS: 427
(1) TO THE ISSUER, ANY OTHER PERSON TO WHOM PRESENTATION 430
IS MADE, AND THE APPLICANT THAT THERE IS NO FRAUD OR FORGERY OF 431
THE KIND DESCRIBED IN DIVISION (A) OF SECTION 1305.08 OF THE 432
REVISED CODE; AND
(2) TO THE APPLICANT THAT THE DRAWING DOES NOT VIOLATE ANY 435
AGREEMENT BETWEEN THE APPLICANT AND BENEFICIARY OR ANY OTHER
AGREEMENT INTENDED BY THEM TO BE AUGMENTED BY THE LETTER OF 436
CREDIT. 437
(B) THE WARRANTIES IN DIVISION (A) OF THIS SECTION ARE IN 440
ADDITION TO WARRANTIES ARISING UNDER CHAPTERS 1303., 1304., 441
1307., AND 1308. OF THE REVISED CODE BECAUSE OF THE PRESENTATION 443
OR TRANSFER OF DOCUMENTS COVERED BY ANY OF THOSE CHAPTERS. 444
Sec. 1305.10. (A) IF AN ISSUER WRONGFULLY DISHONORS OR 446
REPUDIATES ITS OBLIGATION TO PAY MONEY UNDER A LETTER OF CREDIT 448
BEFORE PRESENTATION, THE BENEFICIARY, SUCCESSOR, OR NOMINATED 449
PERSON PRESENTING ON ITS OWN BEHALF MAY RECOVER FROM THE ISSUER 450
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THE AMOUNT THAT IS THE SUBJECT OF THE DISHONOR OR REPUDIATION. 451
IF THE ISSUER'S OBLIGATION UNDER THE LETTER OF CREDIT IS NOT FOR 452
THE PAYMENT OF MONEY, THE CLAIMANT MAY OBTAIN SPECIFIC 453
PERFORMANCE OR, AT THE CLAIMANT'S ELECTION, RECOVER AN AMOUNT 454
EQUAL TO THE VALUE OF PERFORMANCE FROM THE ISSUER. IN EITHER 455
CASE, THE CLAIMANT MAY ALSO RECOVER INCIDENTAL BUT NOT 456
CONSEQUENTIAL DAMAGES. THE CLAIMANT IS NOT OBLIGATED TO TAKE 457
ACTION TO AVOID DAMAGES THAT MIGHT BE DUE FROM THE ISSUER UNDER 458
THIS DIVISION. IF, ALTHOUGH NOT OBLIGATED TO DO SO, THE CLAIMANT 459
AVOIDS DAMAGES, THE CLAIMANT'S RECOVERY FROM THE ISSUER MUST BE 460
REDUCED BY THE AMOUNT OF DAMAGES AVOIDED. THE ISSUER HAS THE 461
BURDEN OF PROVING THE AMOUNT OF DAMAGES AVOIDED. IN THE CASE OF 462
REPUDIATION THE CLAIMANT NEED NOT PRESENT ANY DOCUMENT. 463
(B) IF AN ISSUER WRONGFULLY DISHONORS A DRAFT OR DEMAND 465
PRESENTED UNDER A LETTER OF CREDIT OR HONORS A DRAFT OR DEMAND IN 466
BREACH OF ITS OBLIGATION TO THE APPLICANT, THE APPLICANT MAY 467
RECOVER DAMAGES RESULTING FROM THE BREACH, INCLUDING INCIDENTAL 468
BUT NOT CONSEQUENTIAL DAMAGES, LESS ANY AMOUNT SAVED AS A RESULT 469
OF THE BREACH. 470
(C) IF AN ADVISER OR NOMINATED PERSON OTHER THAN A 472
CONFIRMER BREACHES AN OBLIGATION UNDER THIS CHAPTER OR AN ISSUER 473
BREACHES AN OBLIGATION NOT COVERED IN DIVISION (A) OR (B) OF THIS 475
SECTION, A PERSON TO WHOM THE OBLIGATION IS OWED MAY RECOVER 476
DAMAGES RESULTING FROM THE BREACH, INCLUDING INCIDENTAL BUT NOT 477
CONSEQUENTIAL DAMAGES, LESS ANY AMOUNT SAVED AS A RESULT OF THE 478
BREACH. TO THE EXTENT OF THE CONFIRMATION, A CONFIRMER HAS THE 479
LIABILITY OF AN ISSUER SPECIFIED IN THIS DIVISION AND DIVISION 480
(A) OR (B) OF THIS SECTION. 481
(D) AN ISSUER, NOMINATED PERSON, OR ADVISER WHO IS FOUND 483
LIABLE UNDER DIVISION (A), (B), OR (C) OF THIS SECTION SHALL PAY 485
INTEREST ON THE AMOUNT OWED THEREUNDER FROM THE DATE OF WRONGFUL 486
DISHONOR OR OTHER APPROPRIATE DATE.
(E) REASONABLE ATTORNEY'S FEES AND OTHER EXPENSES OF 488
LITIGATION MUST BE AWARDED TO THE PREVAILING PARTY IN AN ACTION 489
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IN WHICH A REMEDY IS SOUGHT UNDER THIS CHAPTER. 490
(F) DAMAGES THAT WOULD OTHERWISE BE PAYABLE BY A PARTY FOR 492
BREACH OF AN OBLIGATION UNDER THIS CHAPTER MAY BE LIQUIDATED BY 493
AGREEMENT OR UNDERTAKING, BUT ONLY IN AN AMOUNT OR BY A FORMULA 494
THAT IS REASONABLE IN LIGHT OF THE HARM ANTICIPATED. 495
Sec. 1305.11. (A) EXCEPT AS OTHERWISE PROVIDED IN SECTION 497
1305.12 OF THE REVISED CODE, UNLESS A LETTER OF CREDIT PROVIDES 499
THAT IT IS TRANSFERABLE, THE RIGHT OF A BENEFICIARY TO DRAW OR 500
OTHERWISE DEMAND PERFORMANCE UNDER A LETTER OF CREDIT MAY NOT BE 501
TRANSFERRED.
(B) EVEN IF A LETTER OF CREDIT PROVIDES THAT IT IS 503
TRANSFERABLE, THE ISSUER MAY REFUSE TO RECOGNIZE OR CARRY OUT A 504
TRANSFER IF:
(1) THE TRANSFER WOULD VIOLATE APPLICABLE LAW; OR 506
(2) THE TRANSFEROR OR TRANSFEREE HAS FAILED TO COMPLY WITH 509
ANY REQUIREMENT STATED IN THE LETTER OF CREDIT OR ANY OTHER
REQUIREMENT RELATING TO TRANSFER IMPOSED BY THE ISSUER THAT IS 510
WITHIN THE STANDARD PRACTICE REFERRED TO IN DIVISION (E) OF 512
SECTION 1305.07 OF THE REVISED CODE OR IS OTHERWISE REASONABLE 513
UNDER THE CIRCUMSTANCES.
Sec. 1305.12. (A) A SUCCESSOR OF A BENEFICIARY MAY 515
CONSENT TO AMENDMENTS, SIGN AND PRESENT DOCUMENTS, AND RECEIVE 517
PAYMENT OR OTHER ITEMS OF VALUE IN THE NAME OF THE BENEFICIARY 518
WITHOUT DISCLOSING ITS STATUS AS A SUCCESSOR. 519
(B) A SUCCESSOR OF A BENEFICIARY MAY CONSENT TO 521
AMENDMENTS, SIGN AND PRESENT DOCUMENTS, AND RECEIVE PAYMENT OR 522
OTHER ITEMS OF VALUE IN ITS OWN NAME AS THE DISCLOSED SUCCESSOR 523
OF THE BENEFICIARY. EXCEPT AS OTHERWISE PROVIDED IN DIVISION (E) 524
OF THIS SECTION, AN ISSUER SHALL RECOGNIZE A DISCLOSED SUCCESSOR 525
OF A BENEFICIARY AS BENEFICIARY IN FULL SUBSTITUTION FOR ITS 526
PREDECESSOR UPON COMPLIANCE WITH THE REQUIREMENTS FOR RECOGNITION 528
BY THE ISSUER OF A TRANSFER OF DRAWING RIGHTS BY OPERATION OF LAW 529
UNDER THE STANDARD PRACTICE REFERRED TO IN DIVISION (E) OF 530
SECTION 1305.07 OF THE REVISED CODE OR, IN THE ABSENCE OF SUCH A 531
13
PRACTICE, COMPLIANCE WITH OTHER REASONABLE PROCEDURES SUFFICIENT 532
TO PROTECT THE ISSUER.
(C) AN ISSUER IS NOT OBLIGED TO DETERMINE WHETHER A 534
PURPORTED SUCCESSOR IS A SUCCESSOR OF A BENEFICIARY OR WHETHER 535
THE SIGNATURE OF A PURPORTED SUCCESSOR IS GENUINE OR AUTHORIZED. 536
(D) HONOR OF A PURPORTED SUCCESSOR'S APPARENTLY COMPLYING 538
PRESENTATION UNDER DIVISION (A) OR (B) OF THIS SECTION HAS THE 540
CONSEQUENCES SPECIFIED IN DIVISION (I) OF SECTION 1305.07 OF THE 541
REVISED CODE EVEN IF THE PURPORTED SUCCESSOR IS NOT THE SUCCESSOR 542
OF A BENEFICIARY. DOCUMENTS SIGNED IN THE NAME OF THE 543
BENEFICIARY OR OF A DISCLOSED SUCCESSOR BY A PERSON WHO IS 544
NEITHER THE BENEFICIARY NOR THE SUCCESSOR OF THE BENEFICIARY ARE 545
FORGED DOCUMENTS FOR THE PURPOSES OF SECTION 1305.08 OF THE 547
REVISED CODE.
(E) AN ISSUER WHOSE RIGHTS OF REIMBURSEMENT ARE NOT 549
COVERED BY DIVISION (D) OF THIS SECTION OR SUBSTANTIALLY SIMILAR 551
LAW AND ANY CONFIRMER OR NOMINATED PERSON MAY DECLINE TO 552
RECOGNIZE A PRESENTATION UNDER DIVISION (B) OF THIS SECTION. 553
(F) A BENEFICIARY WHOSE NAME IS CHANGED AFTER THE ISSUANCE 556
OF A LETTER OF CREDIT HAS THE SAME RIGHTS AND OBLIGATIONS AS A 557
SUCCESSOR OF A BENEFICIARY UNDER THIS SECTION.
Sec. 1305.13. (A) AS USED IN THIS SECTION, "PROCEEDS OF A 559
LETTER OF CREDIT" MEANS THE CASH, CHECK, ACCEPTED DRAFT, OR OTHER 561
ITEM OF VALUE PAID OR DELIVERED UPON HONOR OR GIVING OF VALUE BY 562
THE ISSUER OR ANY NOMINATED PERSON UNDER THE LETTER OF CREDIT. 563
THE TERM DOES NOT INCLUDE A BENEFICIARY'S DRAWING RIGHTS OR 564
DOCUMENTS PRESENTED BY THE BENEFICIARY. 565
(B) A BENEFICIARY MAY ASSIGN ITS RIGHT TO PART OR ALL OF 567
THE PROCEEDS OF A LETTER OF CREDIT. THE BENEFICIARY MAY DO SO 568
BEFORE PRESENTATION AS A PRESENT ASSIGNMENT OF ITS RIGHT TO 569
RECEIVE PROCEEDS CONTINGENT UPON ITS COMPLIANCE WITH THE TERMS 570
AND CONDITIONS OF THE LETTER OF CREDIT. 571
(C) AN ISSUER OR NOMINATED PERSON NEED NOT RECOGNIZE AN 573
ASSIGNMENT OF PROCEEDS OF A LETTER OF CREDIT UNTIL IT CONSENTS TO 574
14
THE ASSIGNMENT. 575
(D) AN ISSUER OR NOMINATED PERSON HAS NO OBLIGATION TO 577
GIVE OR WITHHOLD ITS CONSENT TO AN ASSIGNMENT OF PROCEEDS OF A 578
LETTER OF CREDIT, BUT CONSENT MAY NOT BE UNREASONABLY WITHHELD IF 579
THE ASSIGNEE POSSESSES AND EXHIBITS THE LETTER OF CREDIT AND 580
PRESENTATION OF THE LETTER OF CREDIT IS A CONDITION TO HONOR. 581
(E) RIGHTS OF A TRANSFEREE BENEFICIARY OR NOMINATED PERSON 583
ARE INDEPENDENT OF THE BENEFICIARY'S ASSIGNMENT OF THE PROCEEDS 584
OF A LETTER OF CREDIT AND ARE SUPERIOR TO THE ASSIGNEE'S RIGHT TO 585
THE PROCEEDS. 586
(F) NEITHER THE RIGHTS RECOGNIZED BY THIS SECTION BETWEEN 588
AN ASSIGNEE AND AN ISSUER, TRANSFEREE BENEFICIARY, OR NOMINATED 589
PERSON NOR THE ISSUER'S OR NOMINATED PERSON'S PAYMENT OF PROCEEDS 591
TO AN ASSIGNEE OR A THIRD PERSON AFFECT THE RIGHTS BETWEEN THE 592
ASSIGNEE AND ANY PERSON OTHER THAN THE ISSUER, TRANSFEREE 593
BENEFICIARY, OR NOMINATED PERSON. THE MODE OF CREATING AND 594
PERFECTING A SECURITY INTEREST IN OR GRANTING AN ASSIGNMENT OF A 595
BENEFICIARY'S RIGHTS TO PROCEEDS IS GOVERNED BY CHAPTER 1309. OF 596
THE REVISED CODE OR OTHER LAW. AGAINST PERSONS OTHER THAN THE 597
ISSUER, TRANSFEREE BENEFICIARY, OR NOMINATED PERSON, THE RIGHTS 598
AND OBLIGATIONS ARISING UPON THE CREATION OF A SECURITY INTEREST 599
OR OTHER ASSIGNMENT OF A BENEFICIARY'S RIGHT TO PROCEEDS AND ITS 600
PERFECTION ARE GOVERNED BY CHAPTER 1309. OF THE REVISED CODE OR 602
OTHER LAW.
Sec. 1305.14. AN ACTION TO ENFORCE A RIGHT OR OBLIGATION 604
ARISING UNDER THIS CHAPTER MUST BE COMMENCED WITHIN ONE YEAR 605
AFTER THE EXPIRATION DATE OF THE RELEVANT LETTER OF CREDIT OR ONE 607
YEAR AFTER THE CAUSE OF ACTION ACCRUES, WHICHEVER OCCURS LATER. 608
A CAUSE OF ACTION ACCRUES WHEN THE BREACH OCCURS, REGARDLESS OF 609
THE AGGRIEVED PARTY'S LACK OF KNOWLEDGE OF THE BREACH. 610
Sec. 1305.15. (A) THE LIABILITY OF AN ISSUER, NOMINATED 612
PERSON, OR ADVISER FOR ACTION OR OMISSION IS GOVERNED BY THE LAW 613
OF THE JURISDICTION CHOSEN BY AN AGREEMENT IN THE FORM OF A 614
RECORD SIGNED OR OTHERWISE AUTHENTICATED BY THE AFFECTED PARTIES 615
15
IN THE MANNER PROVIDED IN SECTION 1305.03 OF THE REVISED CODE OR 617
BY A PROVISION IN THE PERSON'S LETTER OF CREDIT, CONFIRMATION, OR 618
OTHER UNDERTAKING. THE JURISDICTION WHOSE LAW IS CHOSEN NEED NOT 619
BEAR ANY RELATION TO THE TRANSACTION.
(B) UNLESS DIVISION (A) OF THIS SECTION APPLIES, THE 622
LIABILITY OF AN ISSUER, NOMINATED PERSON, OR ADVISER FOR ACTION 623
OR OMISSION IS GOVERNED BY THE LAW OF THE JURISDICTION IN WHICH 624
THE PERSON IS LOCATED. THE PERSON IS CONSIDERED TO BE LOCATED AT 625
THE ADDRESS INDICATED IN THE PERSON'S UNDERTAKING. IF MORE THAN 626
ONE ADDRESS IS INDICATED, THE PERSON IS CONSIDERED TO BE LOCATED 627
AT THE ADDRESS FROM WHICH THE PERSON'S UNDERTAKING WAS ISSUED. 628
FOR THE PURPOSE OF JURISDICTION, CHOICE OF LAW, AND RECOGNITION 629
OF INTERBRANCH LETTERS OF CREDIT, BUT NOT ENFORCEMENT OF A 630
JUDGMENT, ALL BRANCHES OF A BANK ARE CONSIDERED SEPARATE 631
JURIDICAL ENTITIES AND A BANK IS CONSIDERED TO BE LOCATED AT THE 632
PLACE WHERE ITS RELEVANT BRANCH IS CONSIDERED TO BE LOCATED UNDER 633
THIS DIVISION.
(C) EXCEPT AS OTHERWISE PROVIDED IN THIS DIVISION, THE 635
LIABILITY OF AN ISSUER, NOMINATED PERSON, OR ADVISER IS GOVERNED 636
BY ANY RULES OF CUSTOM OR PRACTICE, SUCH AS THE UNIFORM CUSTOMS 637
AND PRACTICE FOR DOCUMENTARY CREDITS, TO WHICH THE LETTER OF 638
CREDIT, CONFIRMATION, OR OTHER UNDERTAKING IS EXPRESSLY MADE 639
SUBJECT. IF (1) THIS CHAPTER WOULD GOVERN THE LIABILITY OF AN 640
ISSUER, NOMINATED PERSON, OR ADVISER UNDER DIVISION (A) OR (B) OF 644
THIS SECTION, (2) THE RELEVANT UNDERTAKING INCORPORATES RULES OF 645
CUSTOM OR PRACTICE, AND (3) THERE IS CONFLICT BETWEEN THIS 646
CHAPTER AND THOSE RULES AS APPLIED TO THAT UNDERTAKING, THOSE 647
RULES GOVERN EXCEPT TO THE EXTENT OF ANY CONFLICT WITH THE
NONVARIABLE PROVISIONS SPECIFIED IN DIVISION (C) OF SECTION 648
1305.02 OF THE REVISED CODE. 649
(D) IF THERE IS CONFLICT BETWEEN THIS CHAPTER AND CHAPTER 651
1303., 1304., OR 1309. OF THE REVISED CODE, THIS CHAPTER GOVERNS. 653
(E) THE FORUM FOR SETTLING DISPUTES ARISING OUT OF AN 655
UNDERTAKING WITHIN THIS CHAPTER MAY BE CHOSEN IN THE MANNER AND 656
16
WITH THE BINDING EFFECT THAT GOVERNING LAW MAY BE CHOSEN IN 657
ACCORDANCE WITH DIVISION (A) OF THIS SECTION. 658
Sec. 1305.16. (A) AN ISSUER THAT HONORS A BENEFICIARY'S 660
PRESENTATION IS SUBROGATED TO THE RIGHTS OF THE BENEFICIARY TO 661
THE SAME EXTENT AS IF THE ISSUER WERE A SECONDARY OBLIGOR OF THE 662
UNDERLYING OBLIGATION OWED TO THE BENEFICIARY AND OF THE 663
APPLICANT TO THE SAME EXTENT AS IF THE ISSUER WERE THE SECONDARY 664
OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE APPLICANT. 665
(B) AN APPLICANT THAT REIMBURSES AN ISSUER IS SUBROGATED 667
TO THE RIGHTS OF THE ISSUER AGAINST ANY BENEFICIARY, PRESENTER, 668
OR NOMINATED PERSON TO THE SAME EXTENT AS IF THE APPLICANT WERE 669
THE SECONDARY OBLIGOR OF THE OBLIGATIONS OWED TO THE ISSUER AND 670
HAS THE RIGHTS OF SUBROGATION OF THE ISSUER TO THE RIGHTS OF THE 671
BENEFICIARY STATED IN DIVISION (A) OF THIS SECTION. 672
(C) A NOMINATED PERSON WHO PAYS OR GIVES VALUE AGAINST A 674
DRAFT OR DEMAND PRESENTED UNDER A LETTER OF CREDIT IS SUBROGATED 675
TO THE RIGHTS OF: 676
(1) THE ISSUER AGAINST THE APPLICANT TO THE SAME EXTENT AS 679
IF THE NOMINATED PERSON WERE A SECONDARY OBLIGOR OF THE
OBLIGATION OWED TO THE ISSUER BY THE APPLICANT; 680
(2) THE BENEFICIARY TO THE SAME EXTENT AS IF THE ISSUER 682
WERE A SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE 684
BENEFICIARY; AND
(3) THE APPLICANT TO THE SAME EXTENT AS IF THE NOMINATED 687
PERSON WERE THE SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION 688
OWED TO THE APPLICANT.
(D) NOTWITHSTANDING ANY AGREEMENT OR TERM TO THE CONTRARY, 690
THE RIGHTS OF SUBROGATION STATED IN DIVISIONS (A) AND (B) OF THIS 692
SECTION DO NOT ARISE UNTIL THE ISSUER HONORS THE LETTER OF CREDIT 693
OR OTHERWISE PAYS AND THE RIGHTS IN DIVISION (C) OF THIS SECTION 694
DO NOT ARISE UNTIL THE NOMINATED PERSON PAYS OR OTHERWISE GIVES 695
VALUE. UNTIL THEN, THE ISSUER, NOMINATED PERSON, AND THE 696
APPLICANT DO NOT DERIVE UNDER THIS SECTION PRESENT OR PROSPECTIVE 697
RIGHTS FORMING THE BASIS OF A CLAIM, DEFENSE, OR EXCUSE. 698
17
Sec. 1309.01. (A) As used in sections 1309.01 to 1309.50 707
of the Revised Code, unless the context otherwise requires: 708
(1) "Account debtor" means the person who is obligated on 710
an account, chattel paper, or general intangible. 711
(2) "Chattel paper" means a writing or writings which 713
evidence both a monetary obligation and a security interest in or 714
a lease of specific goods, but a charter or other contract 715
involving the use or hire of a vessel is not chattel paper. When 716
a transaction is evidenced both by such a security agreement or a 717
lease and by an instrument or a series of instruments, the group 718
of writings taken together constitutes chattel paper. 719
(3) "Collateral" means the property subject to a security 721
interest, and includes accounts and chattel paper which have been 722
sold. 723
(4) "Debtor" means the person who owes payment or other 725
performance of the obligations secured, whether or not he THE 726
PERSON owns or has rights in the collateral, and includes the 727
seller of accounts or chattel paper. Where the debtor and the 728
owner of the collateral are not the same person, the term 729
"debtor" means the owner of the collateral in any provision of 730
sections 1309.01 to 1309.50 of the Revised Code dealing with the 731
collateral, the obligor in any provision dealing with the 732
obligation and may include both where the context so requires. 733
(5) "Deposit account" means a demand, time, savings, 735
passbook or like account maintained with a bank, savings and loan 736
association, credit union, or like organization, other than an 737
account evidenced by a certificate of deposit. 738
(6) "Document" means document of title as defined in 740
division (O) of section 1301.01 of the Revised Code, and a 741
receipt of the kind described in division (B) of section 1307.06 742
of the Revised Code. 743
(7) "Encumbrance" includes real estate mortgages and other 745
liens on real estate and all other rights in real estate that are 746
not ownership interests. 747
18
(8) "Goods" includes all things which are movable at the 749
time the security interest attaches or which are fixtures under 750
section 1309.32 of the Revised Code, but does not include money, 751
documents, instruments, accounts, chattel paper, general 752
intangibles, or minerals or the like, including oil and gas, 753
before extraction. "Goods" also include standing timber which is 754
to be cut and removed under a conveyance or contract for sale, 755
the unborn young of animals, and growing crops. 756
(9) "Instrument" means a negotiable instrument as defined 758
in section 1303.03 of the Revised Code, or a certificated 759
security as defined in section 1308.01 of the Revised Code, or 760
any other writing which evidences a right to the payment of money 761
and is not itself a security agreement or lease and is of a type 762
which is in ordinary course of business transferred by delivery 763
with any necessary indorsement or assignment. 764
(10) "Mortgage" means a consensual interest created by a 766
real estate mortgage, a trust deed on real estate, or the like. 767
(11) An advance is made "pursuant to commitment" if the 769
secured party has bound himself ITSELF to make it, whether or not 771
a subsequent event of default or other event not within his THE
SECURED PARTY'S control has relieved or may relieve him THE 772
SECURED PARTY from his THE SECURED PARTY'S obligation. 773
(12) "Security agreement" means an agreement which creates 775
or provides for a security interest. 776
(13) "Secured party" means a lender, seller, or other 778
person in whose favor there is a security interest, including a 779
person to whom accounts or chattel paper have been sold. When 780
the holders of obligations issued under an indenture of trust, 781
equipment trust agreement, or the like are represented by a 782
trustee or other person, the representative is the secured party. 783
(14) "Transmitting utility" means any person primarily 785
engaged in the railroad, street railway, or trolley bus business, 786
the electric or electronic communications business, the 787
transmission of goods by pipeline, or the transmission or the 788
19
production and transmission of electricity, steam, gas, or water, 789
or the provision of sewer service. 790
(15) "Account" means any right to payment for goods sold 792
or leased or for services rendered which is not evidenced by an 793
instrument or chattel paper, whether or not it has been earned by 794
performance. 795
(16) "General intangible" means any personal property, 797
including things in action, other than goods, accounts, chattel 798
paper, documents, instruments, RIGHTS TO PROCEEDS OF LETTERS OF 799
CREDIT, and money. All rights to payment earned or unearned 801
under a charter or other contract involving the use or hire of a 802
vessel and all rights incident to the charter or contract are 803
accounts.
(B) Other definitions applying to sections 1309.01 to 805
1309.50 of the Revised Code are: 806
(1) "Attach," as defined in section 1309.14 of the Revised 808
Code; 809
(2) "Construction mortgage," as defined in section 1309.32 811
of the Revised Code; 812
(3) "Consumer goods," as defined in section 1309.07 of the 814
Revised Code; 815
(4) "Equipment," as defined in section 1309.07 of the 817
Revised Code; 818
(5) "Farm products," as defined in section 1309.07 of the 820
Revised Code; 821
(6) "Fixture," as defined in section 1309.32 of the 823
Revised Code; 824
(7) "Fixture filing," as defined in section 1309.32 of the 826
Revised Code; 827
(8) "Inventory," as defined in section 1309.07 of the 829
Revised Code; 830
(9) "Lien creditor," as defined in section 1309.20 of the 832
Revised Code; 833
(10) "Proceeds," as defined in section 1309.25 of the 835
20
Revised Code; 836
(11) "Purchase money security interest," as defined in 838
section 1309.05 of the Revised Code; 839
(12) "United States," as defined in section 1309.03 of the 841
Revised Code; 842
(13) "LETTER OF CREDIT," AS DEFINED IN SECTION 1305.01 OF 844
THE REVISED CODE;
(14) "PROCEEDS OF A LETTER OF CREDIT," AS DEFINED IN 846
SECTION 1305.13 OF THE REVISED CODE.
(C) As used in sections 1309.01 to 1309.50 of the Revised 848
Code, "check" and "note" have the meaning set forth in section 849
1303.03 of the Revised Code; "contract for sale" and "sale" have 850
the meaning set forth in section 1302.01 of the Revised Code; and 851
"holder in due course" has the meaning set forth in section 852
1303.31 of the Revised Code. 853
(D) The terms and principles of construction and 855
interpretation set forth in sections 1301.01 to 1301.14 of the 856
Revised Code are applicable to sections 1309.01 to 1309.50 of the 857
Revised Code. 858
Sec. 1309.03. (A) Documents, instruments, LETTERS OF 867
CREDIT, and ordinary goods: 868
(1) This division applies to documents and, instruments, 870
RIGHTS TO PROCEEDS OF LETTERS OF CREDIT, and to goods other than 871
those covered by a certificate of title described in division (B) 873
of this section, mobile goods described in division (C) of this 874
section, and minerals described in division (E) of this section. 875
(2) Except as otherwise provided in this division, 877
perfection and the effect of perfection or nonperfection of a 878
security interest in collateral are governed by the law of the 879
jurisdiction where the collateral is when the last event occurs 880
on which is based the assertion that the security interest is 881
perfected or unperfected. 882
(3) If the parties to a transaction creating a purchase 884
money security interest in goods in one jurisdiction understand 885
21
at the time that the security interest attaches that the goods 886
will be kept in another jurisdiction, then the law of the other 887
jurisdiction governs the perfection and the effect of perfection 888
or nonperfection of the security interest from the time it 889
attaches until thirty days after the debtor receives possession 890
of the goods and thereafter if the goods are taken to the other 891
jurisdiction before the end of the thirty-day period. 892
(4) When collateral is brought into and kept in this state 894
while subject to a security interest perfected under the law of 895
the jurisdiction from which the collateral was removed, the 896
security interest remains perfected, but if action is required by 897
sections 1309.20 to 1309.37 of the Revised Code to perfect the 898
security interest: 899
(a) If the action is not taken before the expiration of 901
the period of perfection in the other jurisdiction or the end of 902
four months after the collateral is brought into this state, 903
whichever period first expires, the security interest becomes 904
unperfected at the end of that period and is thereafter deemed to 905
have been unperfected as against a person who became a purchaser 906
after removal; 907
(b) If the action is taken before the expiration of the 909
period specified in division (A)(4)(a) of this section, the 910
security interest continues perfected thereafter; 911
(c) For the purpose of priority over a buyer of consumer 913
goods, division (B) of section 1309.26 of the Revised Code, the 914
period of the effectiveness of a filing in the jurisdiction from 915
which the collateral is removed is governed by the rules with 916
respect to perfection in divisions (A)(4)(a) and (b) of this 917
section. 918
(B) Certificate of title. 920
(1) This division applies to goods covered by a 922
certificate of title issued under a statute of this state or of 923
another jurisdiction under the law of which indication of a 924
security interest on the certificate is required as a condition 925
22
of perfection. 926
(2) Except as otherwise provided in this division, 928
perfection and the effect of perfection or nonperfection of the 929
security interest are governed by the law, including the conflict 930
of laws rules, of the jurisdiction issuing the certificate until 931
four months after the goods are removed from that jurisdiction 932
and thereafter until the goods are registered in another 933
jurisdiction, but in any event not beyond surrender of the 934
certificate. After the expiration of that period, the goods are 935
not covered by the certificate of title within the meaning of 936
this section. 937
(3) Except with respect to the rights of a buyer described 939
in division (B)(4) of this section a security interest, perfected 940
in another jurisdiction otherwise than by notation on a 941
certificate of title, in goods brought into this state and 942
thereafter covered by a certificate of title issued by this state 943
is subject to the rules stated in division (A)(4) of this 944
section. 945
(4) If goods are brought into this state while a security 947
interest therein is perfected in any manner under the law of the 948
jurisdiction from which the goods are removed and a certificate 949
of title is issued by this state and the certificate does not 950
show that the goods are subject to the security interest or that 951
they may be subject to security interests not shown on the 952
certificate, the security interest is subordinate to the rights 953
of a buyer of the goods who is not in the business of selling 954
goods of that kind to the extent that he THE BUYER gives value 955
and receives delivery of the goods after issuance of the 956
certificate and without knowledge of the security interest. 957
(C) Accounts, general intangibles, and mobile goods. 959
(1) This division applies to accounts, other than an 961
account described in division (E) of this section on minerals, 962
and general intangibles, other than uncertificated securities, 963
and to goods which are mobile and which are of a type normally 964
23
used in more than one jurisdiction, such as motor vehicles, 965
trailers, rolling stock, airplanes, shipping containers, road 966
building and construction machinery, and commercial harvesting 967
machinery and the like, if the goods are equipment or are 968
inventory leased or held for lease by the debtor to others, and 969
are not covered by a certificate of title described in division 970
(B) of this section. 971
(2) The law, including the conflict of laws rules, of the 973
jurisdiction in which the debtor is located governs the 974
perfection and the effect of perfection or nonperfection of the 975
security interest. 976
(3) If, however, the debtor is located in a jurisdiction 978
which is not a part of the United States, and which does not 979
provide for perfection of the security interest by filing or 980
recording in that jurisdiction, the law of the jurisdiction in 981
the United States in which the debtor has its major executive 982
office in the United States governs the perfection and the effect 983
of perfection or nonperfection of the security interest through 984
filing. In the alternative, if the debtor is located in a 985
jurisdiction which is not a part of the United States or Canada 986
and the collateral is accounts or general intangibles for money 987
due or to become due, the security interest may be perfected by 988
notification to the account debtor. As used in this division, 989
"United States" includes its territories and possessions and the 990
Commonwealth of Puerto Rico. 991
(4) A debtor shall be deemed located at his THE DEBTOR'S 993
place of business if he THE DEBTOR has one, at his THE DEBTOR'S 995
chief executive office if he THE DEBTOR has more than one place 997
of business; otherwise at his THE DEBTOR'S residence. If, 998
however, the debtor is a foreign air carrier under the "Federal
Aviation Act of 1958," as amended, it shall be deemed located at 999
the designated office of the agent upon whom service of process 1,000
may be made on behalf of the foreign air carrier. 1,001
(5) A security interest perfected under the law of the 1,003
24
jurisdiction of the location of the debtor is perfected until the 1,004
expiration of four months after a change of the debtor's location 1,005
to another jurisdiction, or until perfection would have ceased by 1,006
the law of the first jurisdiction, whichever period first 1,007
expires. Unless perfected in the new jurisdiction before the end 1,008
of that period, it becomes unperfected thereafter and is deemed 1,009
to have been unperfected as against a person who became a 1,010
purchaser after the change. 1,011
(D) Chattel Paper. 1,013
The rules stated for goods in division (A) of this section 1,015
apply to a possessory security interest in chattel paper. The 1,016
rule stated for accounts in division (C) of this section applies 1,017
to a nonpossessory security in chattel paper, but the security 1,018
interest may not be perfected by notification to the account 1,019
debtor. 1,020
(E) Minerals. 1,022
Perfection and the effect of perfection or nonperfection of 1,024
a security interest which is created by a debtor who has an 1,025
interest in minerals or the like, including oil and gas, before 1,026
extraction and which attaches thereto as extracted, or which 1,027
attaches to an account resulting from the sale thereof at the 1,028
wellhead or minehead are governed by the law, including the 1,029
conflict of laws rules, of the jurisdiction wherein the wellhead 1,030
or minehead is located. 1,031
(F) Uncertificated securities. 1,033
The law, including the conflict of laws rules, of the 1,035
jurisdiction of organization of the issuer governs the perfection 1,036
and the effect of perfection or non-perfection NONPERFECTION of a 1,037
security interest in uncertificated securities. 1,038
Sec. 1309.04. Sections 1309.01 to 1309.50 of the Revised 1,047
Code do not apply: 1,048
(A) to TO a security interest subject to any statute of 1,050
the United States such as the "Ship Mortgage Act, 1920," 41 Stat. 1,051
1000, 46 U.S.C. 911, to the extent that such statute governs the 1,052
25
rights of parties to and third parties affected by transactions 1,053
in particular types of property; or 1,054
(B) to TO a lien given by statute or other rule of law for 1,056
services or materials except as provided in section 1309.29 of 1,057
the Revised Code on priority of such liens; or 1,058
(C) to TO a transfer of a claim for wages, salary, or 1,060
other compensation of an employee; or 1,061
(D) to TO a transfer by a governmental subdivision or 1,063
agency; or 1,064
(E) to TO a sale of accounts or chattel paper as part of a 1,066
sale of the business out of which they arose, or an assignment of 1,067
accounts or chattel paper which is for the purpose of collection 1,068
only, or a transfer of a right to payment under a contract to an 1,069
assignee who is also to do the performance under the contract, or 1,070
a transfer of a single account to an assignee in whole or partial 1,071
satisfaction of a pre-existing indebtedness; or 1,072
(F) to TO a transfer of an interest or claim in or under 1,074
any policy of insurance, except as provided with respect to 1,075
proceeds under section 1309.25 of the Revised Code and priorities 1,076
in proceeds under section 1309.31 of the Revised Code; or 1,077
(G) to TO a right represented by a judgment, other than a 1,079
judgment taken on a right to payment which was collateral; or 1,080
(H) to TO any right of set-off; or 1,082
(I) except EXCEPT to the extent that provision is made for 1,084
fixtures in section 1309.32 of the Revised Code, to the creation 1,085
or transfer of an interest in or lien on real estate, including a 1,086
lease or rents thereunder; or 1,087
(J) to TO a transfer in whole or in part of any claim 1,089
arising out of a tort; or 1,090
(K) to TO a transfer of an interest in any deposit 1,092
account, division (A)(5) of section 1309.01 of the Revised Code, 1,093
except as provided with respect to proceeds under section 1309.25 1,094
of the Revised Code, and priorities in proceeds under section 1,095
1309.31 of the Revised Code; OR 1,096
26
(L) TO A TRANSFER OF AN INTEREST IN A LETTER OF CREDIT 1,098
OTHER THAN THE RIGHTS TO PROCEEDS OF A LETTER OF CREDIT. 1,099
Sec. 1309.23. (A) A security interest in chattel paper or 1,108
negotiable documents may be perfected by filing. A SECURITY 1,109
INTEREST IN THE RIGHT TO PROCEEDS OF A LETTER OF CREDIT CAN BE 1,110
PERFECTED ONLY BY THE SECURED PARTY'S TAKING POSSESSION OF THE 1,111
LETTER OF CREDIT. A security interest in money or instruments, 1,112
other than certificated securities or instruments which 1,113
constitute part of chattel paper, can be perfected only by the 1,114
secured party's taking possession, except as provided in 1,115
divisions (D) and (E) of this section and divisions (B) and (C) 1,116
of section 1309.25 of the Revised Code on proceeds. 1,117
(B) During the period that goods are in the possession of 1,119
the issuer of a negotiable document therefor, a security interest 1,120
in the goods is perfected by perfecting a security interest in 1,121
the document, and any security interest in the goods otherwise 1,122
perfected during such period is subject thereto. 1,123
(C) A security interest in goods in the possession of a 1,125
bailee other than one who has issued a negotiable document 1,126
therefor is perfected by issuance of a document in the name of 1,127
the secured party or by the bailee's receipt of notification of 1,128
the secured party's interest or by filing as to the goods. 1,129
(D) A security interest in instruments, other than 1,131
certificated securities, or negotiable documents is perfected 1,132
without filing or the taking of possession for a period of 1,133
twenty-one days from the time it attaches to the extent that it 1,134
arises for new value given under a written security agreement. 1,135
(E) A security interest remains perfected for a period of 1,137
twenty-one days without filing where a secured party having a 1,138
perfected security interest in an instrument, other than a 1,139
certificated security, a negotiable document, or goods in 1,140
possession of a bailee other than one who has issued a negotiable 1,141
document therefor: 1,142
(1) Makes available to the debtor the goods or documents 1,144
27
representing the goods for the purpose of ultimate sale or 1,145
exchange or for the purpose of loading, unloading, storing, 1,146
shipping, trans-shipping, manufacturing, processing, or otherwise 1,147
dealing with them in a manner preliminary to their sale or 1,148
exchange, but priority between conflicting security interests in 1,149
the goods is subject to division (C) of section 1309.31 of the 1,150
Revised Code; or 1,151
(2) Delivers the instrument to the debtor for the purpose 1,153
of ultimate sale or exchange or of presentation, collection, 1,154
renewal, or registration of transfer. 1,155
(F) After the twenty-one day period set forth in divisions 1,157
(D) and (E) of this section, perfection depends upon compliance 1,158
with applicable provisions of sections 1309.01 to 1309.50 of the 1,159
Revised Code. 1,160
Sec. 1309.24. A security interest in letters of credit and 1,169
advices of credit, as provided in division (B)(1)(F) of section 1,171
1305.15 1305.13 of the Revised Code, goods, instruments, other 1,172
than certificated securities, negotiable documents, money, or 1,173
chattel paper may be perfected by the secured party's taking 1,174
possession of the collateral. A SECURITY INTEREST IN THE RIGHT 1,175
TO PROCEEDS OF A LETTER OF CREDIT MAY BE PERFECTED BY THE SECURED 1,176
PARTY'S TAKING POSSESSION OF THE LETTER OF CREDIT. If such 1,177
collateral other than goods covered by a negotiable document is 1,178
held by a bailee, the secured party is deemed to have possession 1,179
from the time the bailee receives notification of the secured 1,180
party's interest. A security interest is perfected by possession 1,181
from the time possession is taken without relation back and 1,182
continues only so long as possession is retained, unless 1,183
otherwise specified in sections 1309.01 to 1309.50 of the Revised 1,184
Code. The security interest may be otherwise perfected as 1,185
provided in sections 1309.01 to 1309.50 of the Revised Code, 1,186
before or after the period of possession by the secured party. 1,187
Section 2. That existing sections 1301.05, 1302.56, 1,189
1309.01, 1309.03, 1309.04, 1309.23, and 1309.24 and sections 1,190
28
1305.01, 1305.02, 1305.03, 1305.04, 1305.05, 1305.06, 1305.07, 1,191
1305.08, 1305.09, 1305.10, 1305.11, 1305.12, 1305.13, 1305.14, 1,192
1305.15, and 1305.16 of the Revised Code are hereby repealed. 1,193
Section 3. Sections 1 and 2 of this act shall become 1,195
effective July 1, 1998. 1,196
Section 4. This act applies to a letter of credit that is 1,198
issued on or after July 1, 1998. This act does not apply to a 1,199
transaction, event, obligation, or duty arising out of or 1,200
associated with a letter of credit that was issued before July 1, 1,201
1998.
Section 5. A transaction arising out of or associated with 1,203
a letter of credit that was issued before July 1, 1998, and the 1,204
rights, obligations, and interests flowing from that transaction 1,205
are governed by any statute or other law amended or repealed by 1,206
this act as if the amendment or repeal had not occurred and may 1,207
be terminated, completed, consummated, or enforced under that
statute or other law. 1,208