As Passed by the House 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
MILLER-LEWIS-VERICH-GRENDELL-REID-TAVARES-SALERNO 10
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A B I L L
To amend sections 1301.05, 1302.56, 1309.01, 14
1309.03, 1309.04, 1309.23, and 1309.24, to enact 15
new sections 1305.01 to 1305.16, and to repeal 16
sections 1305.01, 1305.02, 1305.03, 1305.04, 17
1305.05, 1305.06, 1305.07, 1305.08, 1305.09, 18
1305.10, 1305.11, 1305.12, 1305.13, 1305.14, 19
1305.15, and 1305.16 of the Revised Code to adopt 20
Revised Article V--Letters of Credit of the 21
Uniform Commercial Code. 22
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO: 24
Section 1. That sections 1301.05, 1302.56, 1309.01, 26
1309.03, 1309.04, 1309.23, and 1309.24 be amended and new 28
sections 1305.01, 1305.02, 1305.03, 1305.04, 1305.05, 1305.06, 29
1305.07, 1305.08, 1305.09, 1305.10, 1305.11, 1305.12, 1305.13, 30
1305.14, 1305.15, and 1305.16 of the Revised Code be enacted to
read as follows: 31
Sec. 1301.05. (A) Except as otherwise provided in this 40
section, when a transaction bears a reasonable relation to this 41
state and also to another state or nation, the parties may agree 42
that the law either of this state or of the other state or nation 43
shall govern their rights and duties. Failing such an agreement 44
Chapters 1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., 46
and 1310. of the Revised Code apply to transactions bearing an 47
appropriate relation to this state.
2
(B) Where one of the following provisions of Chapters 49
1301., 1302., 1303., 1304., 1305., 1307., 1308., 1309., and 1310. 51
of the Revised Code specifies the applicable law, that provision 52
governs and a contrary agreement is effective only to the extent 53
permitted by the law, including the conflict of laws rules, so 54
specified:
(1) Rights of creditors against sold goods, as provided in 56
section 1302.43 of the Revised Code; 57
(2) Applicability of sections 1304.01 to 1304.40 of the 59
Revised Code, as provided in section 1304.02 of the Revised Code; 60
(3) Fund transfers under sections 1304.51 to 1304.85 of 62
the Revised Code, as provided in section 1304.85 of the Revised 63
Code; 64
(4) CHOICE OF LAW AS TO LETTERS OF CREDIT UNDER SECTION 66
1305.15 OF THE REVISED CODE;
(5) Applicability of sections 1308.01 to 1308.36 of the 68
Revised Code, as provided in section 1308.05 of the Revised Code; 69
(5)(6) Perfection provisions of section 1309.03 of the 71
Revised Code; 72
(6)(7) Applicability of sections 1310.01 to 1310.78 of the 74
Revised Code, as provided in sections 1310.03 and 1310.04 of the 75
Revised Code. 76
Sec. 1302.56. (A) Where the contract requires payment 85
before inspection, non-conformity NONCONFORMITY of the goods does 86
not excuse the buyer from so making payment unless: 87
(1) the non-conformity THE NONCONFORMITY appears without 89
inspection; or 90
(2) despite DESPITE tender of the required documents the 92
circumstances would justify injunction against honor under the 93
provisions DIVISION (B) of section 1305.13 1305.08 of the Revised 96
Code.
(B) Payment pursuant to division (A) of this section does 98
not constitute an acceptance of goods or impair the buyer's right 99
to inspect or any of his THE BUYER'S remedies. 100
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Sec. 1305.01. (A) AS USED IN THIS CHAPTER: 102
(1) "ADVISER" MEANS A PERSON WHO, AT THE REQUEST OF THE 105
ISSUER, A CONFIRMER, OR ANOTHER ADVISER, NOTIFIES OR REQUESTS 106
ANOTHER ADVISER TO NOTIFY THE BENEFICIARY THAT A LETTER OF CREDIT 107
HAS BEEN ISSUED, CONFIRMED, OR AMENDED.
(2) "APPLICANT" MEANS A PERSON AT WHOSE REQUEST OR FOR 109
WHOSE ACCOUNT A LETTER OF CREDIT IS ISSUED. THE TERM INCLUDES A 110
PERSON WHO REQUESTS AN ISSUER TO ISSUE A LETTER OF CREDIT ON 111
BEHALF OF ANOTHER IF THE PERSON MAKING THE REQUEST UNDERTAKES AN 112
OBLIGATION TO REIMBURSE THE ISSUER. 113
(3) "BENEFICIARY" MEANS A PERSON WHO, UNDER THE TERMS OF A 116
LETTER OF CREDIT, IS ENTITLED TO HAVE ITS COMPLYING PRESENTATION 117
HONORED. THE TERM INCLUDES A PERSON TO WHOM DRAWING RIGHTS HAVE 118
BEEN TRANSFERRED UNDER A TRANSFERABLE LETTER OF CREDIT. 119
(4) "CONFIRMER" MEANS A NOMINATED PERSON WHO UNDERTAKES, 122
AT THE REQUEST OR WITH THE CONSENT OF THE ISSUER, TO HONOR A 123
PRESENTATION UNDER A LETTER OF CREDIT ISSUED BY ANOTHER.
(5) "DISHONOR" OF A LETTER OF CREDIT MEANS FAILURE TIMELY 126
TO HONOR OR TO TAKE AN INTERIM ACTION, SUCH AS ACCEPTANCE OF A 127
DRAFT, THAT MAY BE REQUIRED BY THE LETTER OF CREDIT.
(6) "DOCUMENT" MEANS A DRAFT OR OTHER DEMAND, DOCUMENT OF 130
TITLE, INVESTMENT SECURITY, CERTIFICATE, INVOICE, OR OTHER
RECORD, STATEMENT, OR REPRESENTATION OF FACT, LAW, RIGHT, OR 131
OPINION THAT IS (a) PRESENTED IN A WRITTEN OR OTHER MEDIUM 132
PERMITTED BY THE LETTER OF CREDIT OR, UNLESS PROHIBITED BY THE 133
LETTER OF CREDIT, BY THE STANDARD PRACTICE REFERRED TO IN 134
DIVISION (E) OF SECTION 1305.07 OF THE REVISED CODE AND (b) 135
CAPABLE OF BEING EXAMINED FOR COMPLIANCE WITH THE TERMS AND 137
CONDITIONS OF THE LETTER OF CREDIT. A DOCUMENT MAY NOT BE ORAL. 138
(7) "GOOD FAITH" MEANS HONESTY IN FACT IN THE CONDUCT OR 141
TRANSACTION CONCERNED.
(8) "HONOR" OF A LETTER OF CREDIT MEANS PERFORMANCE OF THE 144
ISSUER'S UNDERTAKING IN THE LETTER OF CREDIT TO PAY OR DELIVER AN 145
ITEM OF VALUE. UNLESS THE LETTER OF CREDIT OTHERWISE PROVIDES, 146
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"HONOR" OCCURS:
(a) UPON PAYMENT; 148
(b) IF THE LETTER OF CREDIT PROVIDES FOR ACCEPTANCE, UPON 151
ACCEPTANCE OF A DRAFT AND, AT MATURITY, ITS PAYMENT; OR 152
(c) IF THE LETTER OF CREDIT PROVIDES FOR INCURRING A 155
DEFERRED OBLIGATION, UPON INCURRING THE OBLIGATION AND, AT
MATURITY, ITS PERFORMANCE. 156
(9) "ISSUER" MEANS A BANK OR OTHER PERSON THAT ISSUES A 159
LETTER OF CREDIT, BUT DOES NOT INCLUDE AN INDIVIDUAL WHO MAKES AN 160
ENGAGEMENT FOR PERSONAL, FAMILY, OR HOUSEHOLD PURPOSES.
(10) "LETTER OF CREDIT" MEANS A DEFINITE UNDERTAKING THAT 163
SATISFIES THE REQUIREMENTS OF SECTION 1305.03 OF THE REVISED CODE
BY AN ISSUER TO A BENEFICIARY AT THE REQUEST OR FOR THE ACCOUNT 164
OF AN APPLICANT OR, IN THE CASE OF A FINANCIAL INSTITUTION, TO 165
ITSELF OR FOR ITS OWN ACCOUNT, TO HONOR A DOCUMENTARY 166
PRESENTATION BY PAYMENT OR DELIVERY OF AN ITEM OF VALUE. 167
(11) "NOMINATED PERSON" MEANS A PERSON WHOM THE ISSUER (a) 170
DESIGNATES OR AUTHORIZES TO PAY, ACCEPT, NEGOTIATE, OR OTHERWISE 171
GIVE VALUE UNDER A LETTER OF CREDIT AND (b) UNDERTAKES BY 172
AGREEMENT OR CUSTOM AND PRACTICE TO REIMBURSE.
(12) "PRESENTATION" MEANS DELIVERY OF A DOCUMENT TO AN 174
ISSUER OR NOMINATED PERSON FOR HONOR OR GIVING OF VALUE UNDER A 175
LETTER OF CREDIT. 176
(13) "PRESENTER" MEANS A PERSON MAKING A PRESENTATION AS, 179
OR ON BEHALF OF, A BENEFICIARY OR NOMINATED PERSON.
(14) "RECORD" MEANS INFORMATION THAT IS INSCRIBED ON A 181
TANGIBLE MEDIUM, OR THAT IS STORED IN AN ELECTRONIC OR OTHER 182
MEDIUM AND IS RETRIEVABLE IN PERCEIVABLE FORM. 183
(15) "SUCCESSOR OF A BENEFICIARY" MEANS A PERSON WHO 185
SUCCEEDS TO SUBSTANTIALLY ALL OF THE RIGHTS OF A BENEFICIARY BY 186
OPERATION OF LAW, INCLUDING A CORPORATION WITH OR INTO WHICH THE 187
BENEFICIARY HAS BEEN MERGED OR CONSOLIDATED, AN ADMINISTRATOR, 188
EXECUTOR, PERSONAL REPRESENTATIVE, TRUSTEE IN BANKRUPTCY, DEBTOR 189
IN POSSESSION, LIQUIDATOR, AND RECEIVER. 190
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(B) DEFINITIONS IN OTHER CHAPTERS APPLYING TO THIS CHAPTER 192
AND THE SECTIONS IN WHICH THEY APPEAR ARE: "ACCEPT" OR 193
"ACCEPTANCE" IN SECTION 1303.46 AND "VALUE" IN SECTIONS 1303.33 194
AND 1304.21 OF THE REVISED CODE.
(C) CHAPTER 1301. OF THE REVISED CODE CONTAINS CERTAIN 196
ADDITIONAL GENERAL DEFINITIONS AND PRINCIPLES OF CONSTRUCTION AND 197
INTERPRETATION APPLICABLE THROUGHOUT THIS CHAPTER. 198
Sec. 1305.02. (A) THIS CHAPTER APPLIES TO LETTERS OF 200
CREDIT AND TO CERTAIN RIGHTS AND OBLIGATIONS ARISING OUT OF 201
TRANSACTIONS INVOLVING LETTERS OF CREDIT. 202
(B) THE STATEMENT OF A RULE IN THIS CHAPTER DOES NOT BY 204
ITSELF REQUIRE, IMPLY, OR NEGATE APPLICATION OF THE SAME OR A 205
DIFFERENT RULE TO A SITUATION NOT PROVIDED FOR, OR TO A PERSON 206
NOT SPECIFIED, IN THIS CHAPTER. 207
(C) WITH THE EXCEPTION OF THIS DIVISION, DIVISIONS (A) AND 210
(D) OF THIS SECTION, DIVISIONS (A)(9) AND (10) OF SECTION 211
1305.01, DIVISION (D) OF SECTION 1305.05, AND DIVISION (D) OF 213
SECTION 1305.13, AND EXCEPT TO THE EXTENT PROHIBITED IN DIVISION 214
(C) OF SECTION 1301.02 AND DIVISION (D) OF SECTION 1305.16 OF THE 215
REVISED CODE, THE EFFECT OF THIS CHAPTER MAY BE VARIED BY 216
AGREEMENT OR BY A PROVISION STATED OR INCORPORATED BY REFERENCE 217
IN AN UNDERTAKING. A TERM IN AN AGREEMENT OR UNDERTAKING 218
GENERALLY EXCUSING LIABILITY OR GENERALLY LIMITING REMEDIES FOR 219
FAILURE TO PERFORM OBLIGATIONS IS NOT SUFFICIENT TO VARY 220
OBLIGATIONS PRESCRIBED BY THIS CHAPTER. 221
(D) RIGHTS AND OBLIGATIONS OF AN ISSUER TO A BENEFICIARY 223
OR A NOMINATED PERSON UNDER A LETTER OF CREDIT ARE INDEPENDENT OF 225
THE EXISTENCE, PERFORMANCE, OR NONPERFORMANCE OF A CONTRACT OR 226
ARRANGEMENT OUT OF WHICH THE LETTER OF CREDIT ARISES OR WHICH
UNDERLIES IT, INCLUDING CONTRACTS OR ARRANGEMENTS BETWEEN THE 227
ISSUER AND THE APPLICANT AND BETWEEN THE APPLICANT AND THE 228
BENEFICIARY. 229
Sec. 1305.03. A LETTER OF CREDIT, CONFIRMATION, ADVICE, 231
TRANSFER, AMENDMENT, OR CANCELLATION MAY BE ISSUED IN ANY FORM 232
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THAT IS A RECORD AND IS AUTHENTICATED BY A SIGNATURE OR IN 233
ACCORDANCE WITH THE AGREEMENT OF THE PARTIES OR THE STANDARD 234
PRACTICE REFERRED TO IN DIVISION (E) OF SECTION 1305.07 OF THE 235
REVISED CODE.
Sec. 1305.04. CONSIDERATION IS NOT REQUIRED TO ISSUE, 237
AMEND, TRANSFER, OR CANCEL A LETTER OF CREDIT, ADVICE, OR 238
CONFIRMATION.
Sec. 1305.05. (A) A LETTER OF CREDIT IS ISSUED AND 240
BECOMES ENFORCEABLE ACCORDING TO ITS TERMS AGAINST THE ISSUER 242
WHEN THE ISSUER SENDS OR OTHERWISE TRANSMITS IT TO THE PERSON 243
REQUESTED TO ADVISE OR TO THE BENEFICIARY. A LETTER OF CREDIT IS 244
REVOCABLE ONLY IF IT SO PROVIDES. 245
(B) AFTER A LETTER OF CREDIT IS ISSUED, RIGHTS AND 247
OBLIGATIONS OF A BENEFICIARY, APPLICANT, CONFIRMER, AND ISSUER 248
ARE NOT AFFECTED BY AN AMENDMENT OR CANCELLATION TO WHICH THAT 249
PERSON HAS NOT CONSENTED EXCEPT TO THE EXTENT THE LETTER OF 250
CREDIT PROVIDES THAT IT IS REVOCABLE OR THAT THE ISSUER MAY AMEND 251
OR CANCEL THE LETTER OF CREDIT WITHOUT THAT CONSENT. 252
(C) IF THERE IS NO STATED EXPIRATION DATE OR OTHER 254
PROVISION THAT DETERMINES ITS DURATION, A LETTER OF CREDIT 255
EXPIRES ONE YEAR AFTER ITS STATED DATE OF ISSUANCE OR, IF NONE IS 256
STATED, AFTER THE DATE ON WHICH IT IS ISSUED. 257
(D) A LETTER OF CREDIT THAT STATES THAT IT IS PERPETUAL 259
EXPIRES FIVE YEARS AFTER ITS STATED DATE OF ISSUANCE OR, IF NONE 260
IS STATED, AFTER THE DATE ON WHICH IT IS ISSUED. 261
Sec. 1305.06. (A) A CONFIRMER IS DIRECTLY OBLIGATED ON A 263
LETTER OF CREDIT AND HAS THE RIGHTS AND OBLIGATIONS OF AN ISSUER 265
TO THE EXTENT OF ITS CONFIRMATION. THE CONFIRMER ALSO HAS RIGHTS 266
AGAINST AND OBLIGATIONS TO THE ISSUER AS IF THE ISSUER WERE AN 267
APPLICANT AND THE CONFIRMER HAD ISSUED THE LETTER OF CREDIT AT 268
THE REQUEST AND FOR THE ACCOUNT OF THE ISSUER. 269
(B) A NOMINATED PERSON WHO IS NOT A CONFIRMER IS NOT 271
OBLIGATED TO HONOR OR OTHERWISE GIVE VALUE FOR A PRESENTATION. 272
(C) A PERSON REQUESTED TO ADVISE MAY DECLINE TO ACT AS AN 274
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ADVISER. AN ADVISER THAT IS NOT A CONFIRMER IS NOT OBLIGATED TO 275
HONOR OR GIVE VALUE FOR A PRESENTATION. AN ADVISER UNDERTAKES TO 276
THE ISSUER AND TO THE BENEFICIARY ACCURATELY TO ADVISE THE TERMS 277
OF THE LETTER OF CREDIT, CONFIRMATION, AMENDMENT, OR ADVICE 278
RECEIVED BY THAT PERSON AND UNDERTAKES TO THE BENEFICIARY TO 279
CHECK THE APPARENT AUTHENTICITY OF THE REQUEST TO ADVISE. EVEN 280
IF THE ADVICE IS INACCURATE, THE LETTER OF CREDIT, CONFIRMATION, 281
OR AMENDMENT IS ENFORCEABLE AS ISSUED. 282
(D) A PERSON WHO NOTIFIES A TRANSFEREE BENEFICIARY OF THE 284
TERMS OF A LETTER OF CREDIT, CONFIRMATION, AMENDMENT, OR ADVICE 285
HAS THE RIGHTS AND OBLIGATIONS OF AN ADVISER UNDER DIVISION (C) 286
OF THIS SECTION. THE TERMS IN THE NOTICE TO THE TRANSFEREE 287
BENEFICIARY MAY DIFFER FROM THE TERMS IN ANY NOTICE TO THE 288
TRANSFEROR BENEFICIARY TO THE EXTENT PERMITTED BY THE LETTER OF 289
CREDIT, CONFIRMATION, AMENDMENT, OR ADVICE RECEIVED BY THE PERSON 291
WHO SO NOTIFIES.
Sec. 1305.07. (A) EXCEPT AS OTHERWISE PROVIDED IN SECTION 293
1305.08 OF THE REVISED CODE, AN ISSUER SHALL HONOR A PRESENTATION 295
THAT, AS DETERMINED BY THE STANDARD PRACTICE REFERRED TO IN 296
DIVISION (E) OF THIS SECTION, APPEARS ON ITS FACE STRICTLY TO 297
COMPLY WITH THE TERMS AND CONDITIONS OF THE LETTER OF CREDIT. 298
EXCEPT AS OTHERWISE PROVIDED IN SECTION 1305.12 OF THE REVISED 299
CODE AND, UNLESS OTHERWISE AGREED WITH THE APPLICANT, AN ISSUER 300
SHALL DISHONOR A PRESENTATION THAT DOES NOT APPEAR SO TO COMPLY. 301
(B) AN ISSUER HAS A REASONABLE TIME AFTER PRESENTATION, 303
BUT NOT BEYOND THE END OF THE SEVENTH BUSINESS DAY OF THE ISSUER 304
AFTER THE DAY OF ITS RECEIPT OF DOCUMENTS: 305
(1) TO HONOR; 307
(2) IF THE LETTER OF CREDIT PROVIDES FOR HONOR TO BE 309
COMPLETED MORE THAN SEVEN BUSINESS DAYS AFTER PRESENTATION, TO 310
ACCEPT A DRAFT OR INCUR A DEFERRED OBLIGATION; OR 311
(3) TO GIVE NOTICE TO THE PRESENTER OF DISCREPANCIES IN 313
THE PRESENTATION. 314
(C) EXCEPT AS OTHERWISE PROVIDED IN DIVISION (D) OF THIS 317
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SECTION, AN ISSUER IS PRECLUDED FROM ASSERTING AS A BASIS FOR 318
DISHONOR ANY DISCREPANCY IF TIMELY NOTICE IS NOT GIVEN OR ANY 319
DISCREPANCY NOT STATED IN THE NOTICE IF TIMELY NOTICE IS GIVEN. 320
(D) FAILURE TO GIVE THE NOTICE SPECIFIED IN DIVISION (B) 323
OF THIS SECTION OR TO MENTION FRAUD, FORGERY, OR EXPIRATION IN
THE NOTICE DOES NOT PRECLUDE THE ISSUER FROM ASSERTING AS A BASIS 325
FOR DISHONOR FRAUD OR FORGERY AS DESCRIBED IN DIVISION (A) OF 326
SECTION 1305.08 OF THE REVISED CODE OR EXPIRATION OF THE LETTER
OF CREDIT BEFORE PRESENTATION. 327
(E) AN ISSUER SHALL OBSERVE STANDARD PRACTICE OF FINANCIAL 329
INSTITUTIONS THAT REGULARLY ISSUE LETTERS OF CREDIT. 330
DETERMINATION OF THE ISSUER'S OBSERVANCE OF THE STANDARD PRACTICE 332
IS A MATTER OF INTERPRETATION FOR THE COURT. THE COURT SHALL 333
OFFER THE PARTIES A REASONABLE OPPORTUNITY TO PRESENT EVIDENCE OF 334
THE STANDARD PRACTICE.
(F) AN ISSUER IS NOT RESPONSIBLE FOR: 336
(1) THE PERFORMANCE OR NONPERFORMANCE OF THE UNDERLYING 338
CONTRACT, ARRANGEMENT, OR TRANSACTION; 339
(2) AN ACT OR OMISSION OF OTHERS; OR 341
(3) OBSERVANCE OR KNOWLEDGE OF THE USAGE OF A PARTICULAR 344
TRADE OTHER THAN THE STANDARD PRACTICE REFERRED TO IN DIVISION 345
(E) OF THIS SECTION.
(G) IF AN UNDERTAKING CONSTITUTING A LETTER OF CREDIT 347
UNDER DIVISION (A)(10) OF SECTION 1305.01 OF THE REVISED CODE 348
CONTAINS NONDOCUMENTARY CONDITIONS, AN ISSUER SHALL DISREGARD THE 350
NONDOCUMENTARY CONDITIONS AND TREAT THEM AS IF THEY WERE NOT
STATED. 351
(H) AN ISSUER THAT HAS DISHONORED A PRESENTATION SHALL 353
RETURN THE DOCUMENTS OR HOLD THEM AT THE DISPOSAL OF, AND SEND 354
ADVICE TO THAT EFFECT TO, THE PRESENTER. 355
(I) AN ISSUER THAT HAS HONORED A PRESENTATION AS PERMITTED 357
OR REQUIRED BY THIS CHAPTER: 358
(1) IS ENTITLED TO BE REIMBURSED BY THE APPLICANT IN 360
IMMEDIATELY AVAILABLE FUNDS NOT LATER THAN THE DATE OF ITS 361
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PAYMENT OF FUNDS; 362
(2) TAKES THE DOCUMENTS FREE OF CLAIMS OF THE BENEFICIARY 365
OR PRESENTER;
(3) IS PRECLUDED FROM ASSERTING A RIGHT OF RECOURSE ON A 368
DRAFT UNDER SECTIONS 1303.54 AND 1303.55 OF THE REVISED CODE;
(4) EXCEPT AS OTHERWISE PROVIDED IN SECTIONS 1305.09 AND 371
1305.16 OF THE REVISED CODE, IS PRECLUDED FROM RESTITUTION OF
MONEY PAID OR OTHER VALUE GIVEN BY MISTAKE TO THE EXTENT THE 372
MISTAKE CONCERNS DISCREPANCIES IN THE DOCUMENTS OR TENDER THAT 373
ARE APPARENT ON THE FACE OF THE PRESENTATION; AND 374
(5) IS DISCHARGED TO THE EXTENT OF ITS PERFORMANCE UNDER 377
THE LETTER OF CREDIT UNLESS THE ISSUER HONORED A PRESENTATION IN 378
WHICH A REQUIRED SIGNATURE OF A BENEFICIARY WAS FORGED. 379
Sec. 1305.08. (A) IF A PRESENTATION IS MADE THAT APPEARS 381
ON ITS FACE STRICTLY TO COMPLY WITH THE TERMS AND CONDITIONS OF 383
THE LETTER OF CREDIT, BUT A REQUIRED DOCUMENT IS FORGED OR 384
MATERIALLY FRAUDULENT, OR HONOR OF THE PRESENTATION WOULD 385
FACILITATE A MATERIAL FRAUD BY THE BENEFICIARY ON THE ISSUER OR 386
APPLICANT:
(1) THE ISSUER SHALL HONOR THE PRESENTATION, IF HONOR IS 388
DEMANDED BY (a) A NOMINATED PERSON WHO HAS GIVEN VALUE IN GOOD 389
FAITH AND WITHOUT NOTICE OF FORGERY OR MATERIAL FRAUD, (b) A 390
CONFIRMER WHO HAS HONORED ITS CONFIRMATION IN GOOD FAITH, (c) A 392
HOLDER IN DUE COURSE OF A DRAFT DRAWN UNDER THE LETTER OF CREDIT 393
WHICH WAS TAKEN AFTER ACCEPTANCE BY THE ISSUER OR NOMINATED 394
PERSON, OR (d) AN ASSIGNEE OF THE ISSUER'S OR NOMINATED PERSON'S 395
DEFERRED OBLIGATION THAT WAS TAKEN FOR VALUE AND WITHOUT NOTICE 396
OF FORGERY OR MATERIAL FRAUD AFTER THE OBLIGATION WAS INCURRED BY 397
THE ISSUER OR NOMINATED PERSON; AND
(2) THE ISSUER, ACTING IN GOOD FAITH, MAY HONOR OR 399
DISHONOR THE PRESENTATION IN ANY OTHER CASE. 400
(B) IF AN APPLICANT CLAIMS THAT A REQUIRED DOCUMENT IS 402
FORGED OR MATERIALLY FRAUDULENT OR THAT HONOR OF THE PRESENTATION 403
WOULD FACILITATE A MATERIAL FRAUD BY THE BENEFICIARY ON THE 404
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ISSUER OR APPLICANT, A COURT OF COMPETENT JURISDICTION MAY 405
TEMPORARILY OR PERMANENTLY ENJOIN THE ISSUER FROM HONORING A 406
PRESENTATION OR GRANT SIMILAR RELIEF AGAINST THE ISSUER OR OTHER 407
PERSONS ONLY IF THE COURT FINDS THAT: 408
(1) THE RELIEF IS NOT PROHIBITED UNDER THE LAW APPLICABLE 411
TO AN ACCEPTED DRAFT OR DEFERRED OBLIGATION INCURRED BY THE 412
ISSUER;
(2) A BENEFICIARY, ISSUER, OR NOMINATED PERSON WHO MAY BE 415
ADVERSELY AFFECTED IS ADEQUATELY PROTECTED AGAINST LOSS THAT IT 416
MAY SUFFER BECAUSE THE RELIEF IS GRANTED;
(3) ALL OF THE CONDITIONS TO ENTITLE A PERSON TO THE 418
RELIEF UNDER THE LAW OF THIS STATE HAVE BEEN MET; AND 419
(4) ON THE BASIS OF THE INFORMATION SUBMITTED TO THE 421
COURT, THE APPLICANT IS MORE LIKELY THAN NOT TO SUCCEED UNDER ITS 423
CLAIM OF FORGERY OR MATERIAL FRAUD AND THE PERSON DEMANDING HONOR 424
DOES NOT QUALIFY FOR PROTECTION UNDER DIVISION (A)(1) OF THIS 425
SECTION.
Sec. 1305.09. (A) IF ITS PRESENTATION IS HONORED, THE 427
BENEFICIARY WARRANTS: 428
(1) TO THE ISSUER, ANY OTHER PERSON TO WHOM PRESENTATION 431
IS MADE, AND THE APPLICANT THAT THERE IS NO FRAUD OR FORGERY OF 432
THE KIND DESCRIBED IN DIVISION (A) OF SECTION 1305.08 OF THE 433
REVISED CODE; AND
(2) TO THE APPLICANT THAT THE DRAWING DOES NOT VIOLATE ANY 436
AGREEMENT BETWEEN THE APPLICANT AND BENEFICIARY OR ANY OTHER
AGREEMENT INTENDED BY THEM TO BE AUGMENTED BY THE LETTER OF 437
CREDIT. 438
(B) THE WARRANTIES IN DIVISION (A) OF THIS SECTION ARE IN 441
ADDITION TO WARRANTIES ARISING UNDER CHAPTERS 1303., 1304., 442
1307., AND 1308. OF THE REVISED CODE BECAUSE OF THE PRESENTATION 444
OR TRANSFER OF DOCUMENTS COVERED BY ANY OF THOSE CHAPTERS. 445
Sec. 1305.10. (A) IF AN ISSUER WRONGFULLY DISHONORS OR 447
REPUDIATES ITS OBLIGATION TO PAY MONEY UNDER A LETTER OF CREDIT 449
BEFORE PRESENTATION, THE BENEFICIARY, SUCCESSOR, OR NOMINATED 450
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PERSON PRESENTING ON ITS OWN BEHALF MAY RECOVER FROM THE ISSUER 451
THE AMOUNT THAT IS THE SUBJECT OF THE DISHONOR OR REPUDIATION. 452
IF THE ISSUER'S OBLIGATION UNDER THE LETTER OF CREDIT IS NOT FOR 453
THE PAYMENT OF MONEY, THE CLAIMANT MAY OBTAIN SPECIFIC 454
PERFORMANCE OR, AT THE CLAIMANT'S ELECTION, RECOVER AN AMOUNT 455
EQUAL TO THE VALUE OF PERFORMANCE FROM THE ISSUER. IN EITHER 456
CASE, THE CLAIMANT MAY ALSO RECOVER INCIDENTAL BUT NOT 457
CONSEQUENTIAL DAMAGES. THE CLAIMANT IS NOT OBLIGATED TO TAKE 458
ACTION TO AVOID DAMAGES THAT MIGHT BE DUE FROM THE ISSUER UNDER 459
THIS DIVISION. IF, ALTHOUGH NOT OBLIGATED TO DO SO, THE CLAIMANT 460
AVOIDS DAMAGES, THE CLAIMANT'S RECOVERY FROM THE ISSUER MUST BE 461
REDUCED BY THE AMOUNT OF DAMAGES AVOIDED. THE ISSUER HAS THE 462
BURDEN OF PROVING THE AMOUNT OF DAMAGES AVOIDED. IN THE CASE OF 463
REPUDIATION THE CLAIMANT NEED NOT PRESENT ANY DOCUMENT. 464
(B) IF AN ISSUER WRONGFULLY DISHONORS A DRAFT OR DEMAND 466
PRESENTED UNDER A LETTER OF CREDIT OR HONORS A DRAFT OR DEMAND IN 467
BREACH OF ITS OBLIGATION TO THE APPLICANT, THE APPLICANT MAY 468
RECOVER DAMAGES RESULTING FROM THE BREACH, INCLUDING INCIDENTAL 469
BUT NOT CONSEQUENTIAL DAMAGES, LESS ANY AMOUNT SAVED AS A RESULT 470
OF THE BREACH. 471
(C) IF AN ADVISER OR NOMINATED PERSON OTHER THAN A 473
CONFIRMER BREACHES AN OBLIGATION UNDER THIS CHAPTER OR AN ISSUER 474
BREACHES AN OBLIGATION NOT COVERED IN DIVISION (A) OR (B) OF THIS 476
SECTION, A PERSON TO WHOM THE OBLIGATION IS OWED MAY RECOVER 477
DAMAGES RESULTING FROM THE BREACH, INCLUDING INCIDENTAL BUT NOT 478
CONSEQUENTIAL DAMAGES, LESS ANY AMOUNT SAVED AS A RESULT OF THE 479
BREACH. TO THE EXTENT OF THE CONFIRMATION, A CONFIRMER HAS THE 480
LIABILITY OF AN ISSUER SPECIFIED IN THIS DIVISION AND DIVISION 481
(A) OR (B) OF THIS SECTION. 482
(D) AN ISSUER, NOMINATED PERSON, OR ADVISER WHO IS FOUND 484
LIABLE UNDER DIVISION (A), (B), OR (C) OF THIS SECTION SHALL PAY 486
INTEREST ON THE AMOUNT OWED THEREUNDER FROM THE DATE OF WRONGFUL 487
DISHONOR OR OTHER APPROPRIATE DATE.
(E) REASONABLE ATTORNEY'S FEES AND OTHER EXPENSES OF 489
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LITIGATION MUST BE AWARDED TO THE PREVAILING PARTY IN AN ACTION 490
IN WHICH A REMEDY IS SOUGHT UNDER THIS CHAPTER. 491
(F) DAMAGES THAT WOULD OTHERWISE BE PAYABLE BY A PARTY FOR 493
BREACH OF AN OBLIGATION UNDER THIS CHAPTER MAY BE LIQUIDATED BY 494
AGREEMENT OR UNDERTAKING, BUT ONLY IN AN AMOUNT OR BY A FORMULA 495
THAT IS REASONABLE IN LIGHT OF THE HARM ANTICIPATED. 496
Sec. 1305.11. (A) EXCEPT AS OTHERWISE PROVIDED IN SECTION 498
1305.12 OF THE REVISED CODE, UNLESS A LETTER OF CREDIT PROVIDES 500
THAT IT IS TRANSFERABLE, THE RIGHT OF A BENEFICIARY TO DRAW OR 501
OTHERWISE DEMAND PERFORMANCE UNDER A LETTER OF CREDIT MAY NOT BE 502
TRANSFERRED.
(B) EVEN IF A LETTER OF CREDIT PROVIDES THAT IT IS 504
TRANSFERABLE, THE ISSUER MAY REFUSE TO RECOGNIZE OR CARRY OUT A 505
TRANSFER IF:
(1) THE TRANSFER WOULD VIOLATE APPLICABLE LAW; OR 507
(2) THE TRANSFEROR OR TRANSFEREE HAS FAILED TO COMPLY WITH 510
ANY REQUIREMENT STATED IN THE LETTER OF CREDIT OR ANY OTHER
REQUIREMENT RELATING TO TRANSFER IMPOSED BY THE ISSUER THAT IS 511
WITHIN THE STANDARD PRACTICE REFERRED TO IN DIVISION (E) OF 513
SECTION 1305.07 OF THE REVISED CODE OR IS OTHERWISE REASONABLE 514
UNDER THE CIRCUMSTANCES.
Sec. 1305.12. (A) A SUCCESSOR OF A BENEFICIARY MAY 516
CONSENT TO AMENDMENTS, SIGN AND PRESENT DOCUMENTS, AND RECEIVE 518
PAYMENT OR OTHER ITEMS OF VALUE IN THE NAME OF THE BENEFICIARY 519
WITHOUT DISCLOSING ITS STATUS AS A SUCCESSOR. 520
(B) A SUCCESSOR OF A BENEFICIARY MAY CONSENT TO 522
AMENDMENTS, SIGN AND PRESENT DOCUMENTS, AND RECEIVE PAYMENT OR 523
OTHER ITEMS OF VALUE IN ITS OWN NAME AS THE DISCLOSED SUCCESSOR 524
OF THE BENEFICIARY. EXCEPT AS OTHERWISE PROVIDED IN DIVISION (E) 525
OF THIS SECTION, AN ISSUER SHALL RECOGNIZE A DISCLOSED SUCCESSOR 526
OF A BENEFICIARY AS BENEFICIARY IN FULL SUBSTITUTION FOR ITS 527
PREDECESSOR UPON COMPLIANCE WITH THE REQUIREMENTS FOR RECOGNITION 529
BY THE ISSUER OF A TRANSFER OF DRAWING RIGHTS BY OPERATION OF LAW 530
UNDER THE STANDARD PRACTICE REFERRED TO IN DIVISION (E) OF 531
13
SECTION 1305.07 OF THE REVISED CODE OR, IN THE ABSENCE OF SUCH A 532
PRACTICE, COMPLIANCE WITH OTHER REASONABLE PROCEDURES SUFFICIENT 533
TO PROTECT THE ISSUER.
(C) AN ISSUER IS NOT OBLIGED TO DETERMINE WHETHER A 535
PURPORTED SUCCESSOR IS A SUCCESSOR OF A BENEFICIARY OR WHETHER 536
THE SIGNATURE OF A PURPORTED SUCCESSOR IS GENUINE OR AUTHORIZED. 537
(D) HONOR OF A PURPORTED SUCCESSOR'S APPARENTLY COMPLYING 539
PRESENTATION UNDER DIVISION (A) OR (B) OF THIS SECTION HAS THE 541
CONSEQUENCES SPECIFIED IN DIVISION (I) OF SECTION 1305.07 OF THE 542
REVISED CODE EVEN IF THE PURPORTED SUCCESSOR IS NOT THE SUCCESSOR 543
OF A BENEFICIARY. DOCUMENTS SIGNED IN THE NAME OF THE 544
BENEFICIARY OR OF A DISCLOSED SUCCESSOR BY A PERSON WHO IS 545
NEITHER THE BENEFICIARY NOR THE SUCCESSOR OF THE BENEFICIARY ARE 546
FORGED DOCUMENTS FOR THE PURPOSES OF SECTION 1305.08 OF THE 548
REVISED CODE.
(E) AN ISSUER WHOSE RIGHTS OF REIMBURSEMENT ARE NOT 550
COVERED BY DIVISION (D) OF THIS SECTION OR SUBSTANTIALLY SIMILAR 552
LAW AND ANY CONFIRMER OR NOMINATED PERSON MAY DECLINE TO 553
RECOGNIZE A PRESENTATION UNDER DIVISION (B) OF THIS SECTION. 554
(F) A BENEFICIARY WHOSE NAME IS CHANGED AFTER THE ISSUANCE 557
OF A LETTER OF CREDIT HAS THE SAME RIGHTS AND OBLIGATIONS AS A 558
SUCCESSOR OF A BENEFICIARY UNDER THIS SECTION.
Sec. 1305.13. (A) AS USED IN THIS SECTION, "PROCEEDS OF A 560
LETTER OF CREDIT" MEANS THE CASH, CHECK, ACCEPTED DRAFT, OR OTHER 562
ITEM OF VALUE PAID OR DELIVERED UPON HONOR OR GIVING OF VALUE BY 563
THE ISSUER OR ANY NOMINATED PERSON UNDER THE LETTER OF CREDIT. 564
THE TERM DOES NOT INCLUDE A BENEFICIARY'S DRAWING RIGHTS OR 565
DOCUMENTS PRESENTED BY THE BENEFICIARY. 566
(B) A BENEFICIARY MAY ASSIGN ITS RIGHT TO PART OR ALL OF 568
THE PROCEEDS OF A LETTER OF CREDIT. THE BENEFICIARY MAY DO SO 569
BEFORE PRESENTATION AS A PRESENT ASSIGNMENT OF ITS RIGHT TO 570
RECEIVE PROCEEDS CONTINGENT UPON ITS COMPLIANCE WITH THE TERMS 571
AND CONDITIONS OF THE LETTER OF CREDIT. 572
(C) AN ISSUER OR NOMINATED PERSON NEED NOT RECOGNIZE AN 574
14
ASSIGNMENT OF PROCEEDS OF A LETTER OF CREDIT UNTIL IT CONSENTS TO 575
THE ASSIGNMENT. 576
(D) AN ISSUER OR NOMINATED PERSON HAS NO OBLIGATION TO 578
GIVE OR WITHHOLD ITS CONSENT TO AN ASSIGNMENT OF PROCEEDS OF A 579
LETTER OF CREDIT, BUT CONSENT MAY NOT BE UNREASONABLY WITHHELD IF 580
THE ASSIGNEE POSSESSES AND EXHIBITS THE LETTER OF CREDIT AND 581
PRESENTATION OF THE LETTER OF CREDIT IS A CONDITION TO HONOR. 582
(E) RIGHTS OF A TRANSFEREE BENEFICIARY OR NOMINATED PERSON 584
ARE INDEPENDENT OF THE BENEFICIARY'S ASSIGNMENT OF THE PROCEEDS 585
OF A LETTER OF CREDIT AND ARE SUPERIOR TO THE ASSIGNEE'S RIGHT TO 586
THE PROCEEDS. 587
(F) NEITHER THE RIGHTS RECOGNIZED BY THIS SECTION BETWEEN 589
AN ASSIGNEE AND AN ISSUER, TRANSFEREE BENEFICIARY, OR NOMINATED 590
PERSON NOR THE ISSUER'S OR NOMINATED PERSON'S PAYMENT OF PROCEEDS 592
TO AN ASSIGNEE OR A THIRD PERSON AFFECT THE RIGHTS BETWEEN THE 593
ASSIGNEE AND ANY PERSON OTHER THAN THE ISSUER, TRANSFEREE 594
BENEFICIARY, OR NOMINATED PERSON. THE MODE OF CREATING AND 595
PERFECTING A SECURITY INTEREST IN OR GRANTING AN ASSIGNMENT OF A 596
BENEFICIARY'S RIGHTS TO PROCEEDS IS GOVERNED BY CHAPTER 1309. OF 597
THE REVISED CODE OR OTHER LAW. AGAINST PERSONS OTHER THAN THE 598
ISSUER, TRANSFEREE BENEFICIARY, OR NOMINATED PERSON, THE RIGHTS 599
AND OBLIGATIONS ARISING UPON THE CREATION OF A SECURITY INTEREST 600
OR OTHER ASSIGNMENT OF A BENEFICIARY'S RIGHT TO PROCEEDS AND ITS 601
PERFECTION ARE GOVERNED BY CHAPTER 1309. OF THE REVISED CODE OR 603
OTHER LAW.
Sec. 1305.14. AN ACTION TO ENFORCE A RIGHT OR OBLIGATION 605
ARISING UNDER THIS CHAPTER MUST BE COMMENCED WITHIN ONE YEAR 606
AFTER THE EXPIRATION DATE OF THE RELEVANT LETTER OF CREDIT OR ONE 608
YEAR AFTER THE CAUSE OF ACTION ACCRUES, WHICHEVER OCCURS LATER. 609
A CAUSE OF ACTION ACCRUES WHEN THE BREACH OCCURS, REGARDLESS OF 610
THE AGGRIEVED PARTY'S LACK OF KNOWLEDGE OF THE BREACH. 611
Sec. 1305.15. (A) THE LIABILITY OF AN ISSUER, NOMINATED 613
PERSON, OR ADVISER FOR ACTION OR OMISSION IS GOVERNED BY THE LAW 614
OF THE JURISDICTION CHOSEN BY AN AGREEMENT IN THE FORM OF A 615
15
RECORD SIGNED OR OTHERWISE AUTHENTICATED BY THE AFFECTED PARTIES 616
IN THE MANNER PROVIDED IN SECTION 1305.03 OF THE REVISED CODE OR 618
BY A PROVISION IN THE PERSON'S LETTER OF CREDIT, CONFIRMATION, OR 619
OTHER UNDERTAKING. THE JURISDICTION WHOSE LAW IS CHOSEN NEED NOT 620
BEAR ANY RELATION TO THE TRANSACTION.
(B) UNLESS DIVISION (A) OF THIS SECTION APPLIES, THE 623
LIABILITY OF AN ISSUER, NOMINATED PERSON, OR ADVISER FOR ACTION 624
OR OMISSION IS GOVERNED BY THE LAW OF THE JURISDICTION IN WHICH 625
THE PERSON IS LOCATED. THE PERSON IS CONSIDERED TO BE LOCATED AT 626
THE ADDRESS INDICATED IN THE PERSON'S UNDERTAKING. IF MORE THAN 627
ONE ADDRESS IS INDICATED, THE PERSON IS CONSIDERED TO BE LOCATED 628
AT THE ADDRESS FROM WHICH THE PERSON'S UNDERTAKING WAS ISSUED. 629
FOR THE PURPOSE OF JURISDICTION, CHOICE OF LAW, AND RECOGNITION 630
OF INTERBRANCH LETTERS OF CREDIT, BUT NOT ENFORCEMENT OF A 631
JUDGMENT, ALL BRANCHES OF A BANK ARE CONSIDERED SEPARATE 632
JURIDICAL ENTITIES AND A BANK IS CONSIDERED TO BE LOCATED AT THE 633
PLACE WHERE ITS RELEVANT BRANCH IS CONSIDERED TO BE LOCATED UNDER 634
THIS DIVISION.
(C) EXCEPT AS OTHERWISE PROVIDED IN THIS DIVISION, THE 636
LIABILITY OF AN ISSUER, NOMINATED PERSON, OR ADVISER IS GOVERNED 637
BY ANY RULES OF CUSTOM OR PRACTICE, SUCH AS THE UNIFORM CUSTOMS 638
AND PRACTICE FOR DOCUMENTARY CREDITS, TO WHICH THE LETTER OF 639
CREDIT, CONFIRMATION, OR OTHER UNDERTAKING IS EXPRESSLY MADE 640
SUBJECT. IF (1) THIS CHAPTER WOULD GOVERN THE LIABILITY OF AN 641
ISSUER, NOMINATED PERSON, OR ADVISER UNDER DIVISION (A) OR (B) OF 645
THIS SECTION, (2) THE RELEVANT UNDERTAKING INCORPORATES RULES OF 646
CUSTOM OR PRACTICE, AND (3) THERE IS CONFLICT BETWEEN THIS 647
CHAPTER AND THOSE RULES AS APPLIED TO THAT UNDERTAKING, THOSE 648
RULES GOVERN EXCEPT TO THE EXTENT OF ANY CONFLICT WITH THE
NONVARIABLE PROVISIONS SPECIFIED IN DIVISION (C) OF SECTION 649
1305.02 OF THE REVISED CODE. 650
(D) IF THERE IS CONFLICT BETWEEN THIS CHAPTER AND CHAPTER 652
1303., 1304., OR 1309. OF THE REVISED CODE, THIS CHAPTER GOVERNS. 654
(E) THE FORUM FOR SETTLING DISPUTES ARISING OUT OF AN 656
16
UNDERTAKING WITHIN THIS CHAPTER MAY BE CHOSEN IN THE MANNER AND 657
WITH THE BINDING EFFECT THAT GOVERNING LAW MAY BE CHOSEN IN 658
ACCORDANCE WITH DIVISION (A) OF THIS SECTION. 659
Sec. 1305.16. (A) AN ISSUER THAT HONORS A BENEFICIARY'S 661
PRESENTATION IS SUBROGATED TO THE RIGHTS OF THE BENEFICIARY TO 662
THE SAME EXTENT AS IF THE ISSUER WERE A SECONDARY OBLIGOR OF THE 663
UNDERLYING OBLIGATION OWED TO THE BENEFICIARY AND OF THE 664
APPLICANT TO THE SAME EXTENT AS IF THE ISSUER WERE THE SECONDARY 665
OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE APPLICANT. 666
(B) AN APPLICANT THAT REIMBURSES AN ISSUER IS SUBROGATED 668
TO THE RIGHTS OF THE ISSUER AGAINST ANY BENEFICIARY, PRESENTER, 669
OR NOMINATED PERSON TO THE SAME EXTENT AS IF THE APPLICANT WERE 670
THE SECONDARY OBLIGOR OF THE OBLIGATIONS OWED TO THE ISSUER AND 671
HAS THE RIGHTS OF SUBROGATION OF THE ISSUER TO THE RIGHTS OF THE 672
BENEFICIARY STATED IN DIVISION (A) OF THIS SECTION. 673
(C) A NOMINATED PERSON WHO PAYS OR GIVES VALUE AGAINST A 675
DRAFT OR DEMAND PRESENTED UNDER A LETTER OF CREDIT IS SUBROGATED 676
TO THE RIGHTS OF: 677
(1) THE ISSUER AGAINST THE APPLICANT TO THE SAME EXTENT AS 680
IF THE NOMINATED PERSON WERE A SECONDARY OBLIGOR OF THE
OBLIGATION OWED TO THE ISSUER BY THE APPLICANT; 681
(2) THE BENEFICIARY TO THE SAME EXTENT AS IF THE ISSUER 683
WERE A SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION OWED TO THE 685
BENEFICIARY; AND
(3) THE APPLICANT TO THE SAME EXTENT AS IF THE NOMINATED 688
PERSON WERE THE SECONDARY OBLIGOR OF THE UNDERLYING OBLIGATION 689
OWED TO THE APPLICANT.
(D) NOTWITHSTANDING ANY AGREEMENT OR TERM TO THE CONTRARY, 691
THE RIGHTS OF SUBROGATION STATED IN DIVISIONS (A) AND (B) OF THIS 693
SECTION DO NOT ARISE UNTIL THE ISSUER HONORS THE LETTER OF CREDIT 694
OR OTHERWISE PAYS AND THE RIGHTS IN DIVISION (C) OF THIS SECTION 695
DO NOT ARISE UNTIL THE NOMINATED PERSON PAYS OR OTHERWISE GIVES 696
VALUE. UNTIL THEN, THE ISSUER, NOMINATED PERSON, AND THE 697
APPLICANT DO NOT DERIVE UNDER THIS SECTION PRESENT OR PROSPECTIVE 698
17
RIGHTS FORMING THE BASIS OF A CLAIM, DEFENSE, OR EXCUSE. 699
Sec. 1309.01. (A) As used in sections 1309.01 to 1309.50 708
of the Revised Code, unless the context otherwise requires: 709
(1) "Account debtor" means the person who is obligated on 711
an account, chattel paper, or general intangible. 712
(2) "Chattel paper" means a writing or writings which 714
evidence both a monetary obligation and a security interest in or 715
a lease of specific goods, but a charter or other contract 716
involving the use or hire of a vessel is not chattel paper. When 717
a transaction is evidenced both by such a security agreement or a 718
lease and by an instrument or a series of instruments, the group 719
of writings taken together constitutes chattel paper. 720
(3) "Collateral" means the property subject to a security 722
interest, and includes accounts and chattel paper which have been 723
sold. 724
(4) "Debtor" means the person who owes payment or other 726
performance of the obligations secured, whether or not he THE 727
PERSON owns or has rights in the collateral, and includes the 728
seller of accounts or chattel paper. Where the debtor and the 729
owner of the collateral are not the same person, the term 730
"debtor" means the owner of the collateral in any provision of 731
sections 1309.01 to 1309.50 of the Revised Code dealing with the 732
collateral, the obligor in any provision dealing with the 733
obligation and may include both where the context so requires. 734
(5) "Deposit account" means a demand, time, savings, 736
passbook or like account maintained with a bank, savings and loan 737
association, credit union, or like organization, other than an 738
account evidenced by a certificate of deposit. 739
(6) "Document" means document of title as defined in 741
division (O) of section 1301.01 of the Revised Code, and a 742
receipt of the kind described in division (B) of section 1307.06 743
of the Revised Code. 744
(7) "Encumbrance" includes real estate mortgages and other 746
liens on real estate and all other rights in real estate that are 747
18
not ownership interests. 748
(8) "Goods" includes all things which are movable at the 750
time the security interest attaches or which are fixtures under 751
section 1309.32 of the Revised Code, but does not include money, 752
documents, instruments, accounts, chattel paper, general 753
intangibles, or minerals or the like, including oil and gas, 754
before extraction. "Goods" also include standing timber which is 755
to be cut and removed under a conveyance or contract for sale, 756
the unborn young of animals, and growing crops. 757
(9) "Instrument" means a negotiable instrument as defined 759
in section 1303.03 of the Revised Code, or a certificated 760
security as defined in section 1308.01 of the Revised Code, or 761
any other writing which evidences a right to the payment of money 762
and is not itself a security agreement or lease and is of a type 763
which is in ordinary course of business transferred by delivery 764
with any necessary indorsement or assignment. 765
(10) "Mortgage" means a consensual interest created by a 767
real estate mortgage, a trust deed on real estate, or the like. 768
(11) An advance is made "pursuant to commitment" if the 770
secured party has bound himself ITSELF to make it, whether or not 772
a subsequent event of default or other event not within his THE
SECURED PARTY'S control has relieved or may relieve him THE 773
SECURED PARTY from his THE SECURED PARTY'S obligation. 774
(12) "Security agreement" means an agreement which creates 776
or provides for a security interest. 777
(13) "Secured party" means a lender, seller, or other 779
person in whose favor there is a security interest, including a 780
person to whom accounts or chattel paper have been sold. When 781
the holders of obligations issued under an indenture of trust, 782
equipment trust agreement, or the like are represented by a 783
trustee or other person, the representative is the secured party. 784
(14) "Transmitting utility" means any person primarily 786
engaged in the railroad, street railway, or trolley bus business, 787
the electric or electronic communications business, the 788
19
transmission of goods by pipeline, or the transmission or the 789
production and transmission of electricity, steam, gas, or water, 790
or the provision of sewer service. 791
(15) "Account" means any right to payment for goods sold 793
or leased or for services rendered which is not evidenced by an 794
instrument or chattel paper, whether or not it has been earned by 795
performance. 796
(16) "General intangible" means any personal property, 798
including things in action, other than goods, accounts, chattel 799
paper, documents, instruments, RIGHTS TO PROCEEDS OF LETTERS OF 800
CREDIT, and money. All rights to payment earned or unearned 802
under a charter or other contract involving the use or hire of a 803
vessel and all rights incident to the charter or contract are 804
accounts.
(B) Other definitions applying to sections 1309.01 to 806
1309.50 of the Revised Code are: 807
(1) "Attach," as defined in section 1309.14 of the Revised 809
Code; 810
(2) "Construction mortgage," as defined in section 1309.32 812
of the Revised Code; 813
(3) "Consumer goods," as defined in section 1309.07 of the 815
Revised Code; 816
(4) "Equipment," as defined in section 1309.07 of the 818
Revised Code; 819
(5) "Farm products," as defined in section 1309.07 of the 821
Revised Code; 822
(6) "Fixture," as defined in section 1309.32 of the 824
Revised Code; 825
(7) "Fixture filing," as defined in section 1309.32 of the 827
Revised Code; 828
(8) "Inventory," as defined in section 1309.07 of the 830
Revised Code; 831
(9) "Lien creditor," as defined in section 1309.20 of the 833
Revised Code; 834
20
(10) "Proceeds," as defined in section 1309.25 of the 836
Revised Code; 837
(11) "Purchase money security interest," as defined in 839
section 1309.05 of the Revised Code; 840
(12) "United States," as defined in section 1309.03 of the 842
Revised Code; 843
(13) "LETTER OF CREDIT," AS DEFINED IN SECTION 1305.01 OF 845
THE REVISED CODE;
(14) "PROCEEDS OF A LETTER OF CREDIT," AS DEFINED IN 847
SECTION 1305.13 OF THE REVISED CODE.
(C) As used in sections 1309.01 to 1309.50 of the Revised 849
Code, "check" and "note" have the meaning set forth in section 850
1303.03 of the Revised Code; "contract for sale" and "sale" have 851
the meaning set forth in section 1302.01 of the Revised Code; and 852
"holder in due course" has the meaning set forth in section 853
1303.31 of the Revised Code. 854
(D) The terms and principles of construction and 856
interpretation set forth in sections 1301.01 to 1301.14 of the 857
Revised Code are applicable to sections 1309.01 to 1309.50 of the 858
Revised Code. 859
Sec. 1309.03. (A) Documents, instruments, LETTERS OF 868
CREDIT, and ordinary goods: 869
(1) This division applies to documents and, instruments, 871
RIGHTS TO PROCEEDS OF LETTERS OF CREDIT, and to goods other than 872
those covered by a certificate of title described in division (B) 874
of this section, mobile goods described in division (C) of this 875
section, and minerals described in division (E) of this section. 876
(2) Except as otherwise provided in this division, 878
perfection and the effect of perfection or nonperfection of a 879
security interest in collateral are governed by the law of the 880
jurisdiction where the collateral is when the last event occurs 881
on which is based the assertion that the security interest is 882
perfected or unperfected. 883
(3) If the parties to a transaction creating a purchase 885
21
money security interest in goods in one jurisdiction understand 886
at the time that the security interest attaches that the goods 887
will be kept in another jurisdiction, then the law of the other 888
jurisdiction governs the perfection and the effect of perfection 889
or nonperfection of the security interest from the time it 890
attaches until thirty days after the debtor receives possession 891
of the goods and thereafter if the goods are taken to the other 892
jurisdiction before the end of the thirty-day period. 893
(4) When collateral is brought into and kept in this state 895
while subject to a security interest perfected under the law of 896
the jurisdiction from which the collateral was removed, the 897
security interest remains perfected, but if action is required by 898
sections 1309.20 to 1309.37 of the Revised Code to perfect the 899
security interest: 900
(a) If the action is not taken before the expiration of 902
the period of perfection in the other jurisdiction or the end of 903
four months after the collateral is brought into this state, 904
whichever period first expires, the security interest becomes 905
unperfected at the end of that period and is thereafter deemed to 906
have been unperfected as against a person who became a purchaser 907
after removal; 908
(b) If the action is taken before the expiration of the 910
period specified in division (A)(4)(a) of this section, the 911
security interest continues perfected thereafter; 912
(c) For the purpose of priority over a buyer of consumer 914
goods, division (B) of section 1309.26 of the Revised Code, the 915
period of the effectiveness of a filing in the jurisdiction from 916
which the collateral is removed is governed by the rules with 917
respect to perfection in divisions (A)(4)(a) and (b) of this 918
section. 919
(B) Certificate of title. 921
(1) This division applies to goods covered by a 923
certificate of title issued under a statute of this state or of 924
another jurisdiction under the law of which indication of a 925
22
security interest on the certificate is required as a condition 926
of perfection. 927
(2) Except as otherwise provided in this division, 929
perfection and the effect of perfection or nonperfection of the 930
security interest are governed by the law, including the conflict 931
of laws rules, of the jurisdiction issuing the certificate until 932
four months after the goods are removed from that jurisdiction 933
and thereafter until the goods are registered in another 934
jurisdiction, but in any event not beyond surrender of the 935
certificate. After the expiration of that period, the goods are 936
not covered by the certificate of title within the meaning of 937
this section. 938
(3) Except with respect to the rights of a buyer described 940
in division (B)(4) of this section a security interest, perfected 941
in another jurisdiction otherwise than by notation on a 942
certificate of title, in goods brought into this state and 943
thereafter covered by a certificate of title issued by this state 944
is subject to the rules stated in division (A)(4) of this 945
section. 946
(4) If goods are brought into this state while a security 948
interest therein is perfected in any manner under the law of the 949
jurisdiction from which the goods are removed and a certificate 950
of title is issued by this state and the certificate does not 951
show that the goods are subject to the security interest or that 952
they may be subject to security interests not shown on the 953
certificate, the security interest is subordinate to the rights 954
of a buyer of the goods who is not in the business of selling 955
goods of that kind to the extent that he THE BUYER gives value 956
and receives delivery of the goods after issuance of the 957
certificate and without knowledge of the security interest. 958
(C) Accounts, general intangibles, and mobile goods. 960
(1) This division applies to accounts, other than an 962
account described in division (E) of this section on minerals, 963
and general intangibles, other than uncertificated securities, 964
23
and to goods which are mobile and which are of a type normally 965
used in more than one jurisdiction, such as motor vehicles, 966
trailers, rolling stock, airplanes, shipping containers, road 967
building and construction machinery, and commercial harvesting 968
machinery and the like, if the goods are equipment or are 969
inventory leased or held for lease by the debtor to others, and 970
are not covered by a certificate of title described in division 971
(B) of this section. 972
(2) The law, including the conflict of laws rules, of the 974
jurisdiction in which the debtor is located governs the 975
perfection and the effect of perfection or nonperfection of the 976
security interest. 977
(3) If, however, the debtor is located in a jurisdiction 979
which is not a part of the United States, and which does not 980
provide for perfection of the security interest by filing or 981
recording in that jurisdiction, the law of the jurisdiction in 982
the United States in which the debtor has its major executive 983
office in the United States governs the perfection and the effect 984
of perfection or nonperfection of the security interest through 985
filing. In the alternative, if the debtor is located in a 986
jurisdiction which is not a part of the United States or Canada 987
and the collateral is accounts or general intangibles for money 988
due or to become due, the security interest may be perfected by 989
notification to the account debtor. As used in this division, 990
"United States" includes its territories and possessions and the 991
Commonwealth of Puerto Rico. 992
(4) A debtor shall be deemed located at his THE DEBTOR'S 994
place of business if he THE DEBTOR has one, at his THE DEBTOR'S 996
chief executive office if he THE DEBTOR has more than one place 998
of business; otherwise at his THE DEBTOR'S residence. If, 999
however, the debtor is a foreign air carrier under the "Federal
Aviation Act of 1958," as amended, it shall be deemed located at 1,000
the designated office of the agent upon whom service of process 1,001
may be made on behalf of the foreign air carrier. 1,002
24
(5) A security interest perfected under the law of the 1,004
jurisdiction of the location of the debtor is perfected until the 1,005
expiration of four months after a change of the debtor's location 1,006
to another jurisdiction, or until perfection would have ceased by 1,007
the law of the first jurisdiction, whichever period first 1,008
expires. Unless perfected in the new jurisdiction before the end 1,009
of that period, it becomes unperfected thereafter and is deemed 1,010
to have been unperfected as against a person who became a 1,011
purchaser after the change. 1,012
(D) Chattel Paper. 1,014
The rules stated for goods in division (A) of this section 1,016
apply to a possessory security interest in chattel paper. The 1,017
rule stated for accounts in division (C) of this section applies 1,018
to a nonpossessory security in chattel paper, but the security 1,019
interest may not be perfected by notification to the account 1,020
debtor. 1,021
(E) Minerals. 1,023
Perfection and the effect of perfection or nonperfection of 1,025
a security interest which is created by a debtor who has an 1,026
interest in minerals or the like, including oil and gas, before 1,027
extraction and which attaches thereto as extracted, or which 1,028
attaches to an account resulting from the sale thereof at the 1,029
wellhead or minehead are governed by the law, including the 1,030
conflict of laws rules, of the jurisdiction wherein the wellhead 1,031
or minehead is located. 1,032
(F) Uncertificated securities. 1,034
The law, including the conflict of laws rules, of the 1,036
jurisdiction of organization of the issuer governs the perfection 1,037
and the effect of perfection or non-perfection NONPERFECTION of a 1,038
security interest in uncertificated securities. 1,039
Sec. 1309.04. Sections 1309.01 to 1309.50 of the Revised 1,048
Code do not apply: 1,049
(A) to TO a security interest subject to any statute of 1,051
the United States such as the "Ship Mortgage Act, 1920," 41 Stat. 1,052
25
1000, 46 U.S.C. 911, to the extent that such statute governs the 1,053
rights of parties to and third parties affected by transactions 1,054
in particular types of property; or 1,055
(B) to TO a lien given by statute or other rule of law for 1,057
services or materials except as provided in section 1309.29 of 1,058
the Revised Code on priority of such liens; or 1,059
(C) to TO a transfer of a claim for wages, salary, or 1,061
other compensation of an employee; or 1,062
(D) to TO a transfer by a governmental subdivision or 1,064
agency; or 1,065
(E) to TO a sale of accounts or chattel paper as part of a 1,067
sale of the business out of which they arose, or an assignment of 1,068
accounts or chattel paper which is for the purpose of collection 1,069
only, or a transfer of a right to payment under a contract to an 1,070
assignee who is also to do the performance under the contract, or 1,071
a transfer of a single account to an assignee in whole or partial 1,072
satisfaction of a pre-existing indebtedness; or 1,073
(F) to TO a transfer of an interest or claim in or under 1,075
any policy of insurance, except as provided with respect to 1,076
proceeds under section 1309.25 of the Revised Code and priorities 1,077
in proceeds under section 1309.31 of the Revised Code; or 1,078
(G) to TO a right represented by a judgment, other than a 1,080
judgment taken on a right to payment which was collateral; or 1,081
(H) to TO any right of set-off; or 1,083
(I) except EXCEPT to the extent that provision is made for 1,085
fixtures in section 1309.32 of the Revised Code, to the creation 1,086
or transfer of an interest in or lien on real estate, including a 1,087
lease or rents thereunder; or 1,088
(J) to TO a transfer in whole or in part of any claim 1,090
arising out of a tort; or 1,091
(K) to TO a transfer of an interest in any deposit 1,093
account, division (A)(5) of section 1309.01 of the Revised Code, 1,094
except as provided with respect to proceeds under section 1309.25 1,095
of the Revised Code, and priorities in proceeds under section 1,096
26
1309.31 of the Revised Code; OR 1,097
(L) TO A TRANSFER OF AN INTEREST IN A LETTER OF CREDIT 1,099
OTHER THAN THE RIGHTS TO PROCEEDS OF A LETTER OF CREDIT. 1,100
Sec. 1309.23. (A) A security interest in chattel paper or 1,109
negotiable documents may be perfected by filing. A SECURITY 1,110
INTEREST IN THE RIGHT TO PROCEEDS OF A LETTER OF CREDIT CAN BE 1,111
PERFECTED ONLY BY THE SECURED PARTY'S TAKING POSSESSION OF THE 1,112
LETTER OF CREDIT. A security interest in money or instruments, 1,113
other than certificated securities or instruments which 1,114
constitute part of chattel paper, can be perfected only by the 1,115
secured party's taking possession, except as provided in 1,116
divisions (D) and (E) of this section and divisions (B) and (C) 1,117
of section 1309.25 of the Revised Code on proceeds. 1,118
(B) During the period that goods are in the possession of 1,120
the issuer of a negotiable document therefor, a security interest 1,121
in the goods is perfected by perfecting a security interest in 1,122
the document, and any security interest in the goods otherwise 1,123
perfected during such period is subject thereto. 1,124
(C) A security interest in goods in the possession of a 1,126
bailee other than one who has issued a negotiable document 1,127
therefor is perfected by issuance of a document in the name of 1,128
the secured party or by the bailee's receipt of notification of 1,129
the secured party's interest or by filing as to the goods. 1,130
(D) A security interest in instruments, other than 1,132
certificated securities, or negotiable documents is perfected 1,133
without filing or the taking of possession for a period of 1,134
twenty-one days from the time it attaches to the extent that it 1,135
arises for new value given under a written security agreement. 1,136
(E) A security interest remains perfected for a period of 1,138
twenty-one days without filing where a secured party having a 1,139
perfected security interest in an instrument, other than a 1,140
certificated security, a negotiable document, or goods in 1,141
possession of a bailee other than one who has issued a negotiable 1,142
document therefor: 1,143
27
(1) Makes available to the debtor the goods or documents 1,145
representing the goods for the purpose of ultimate sale or 1,146
exchange or for the purpose of loading, unloading, storing, 1,147
shipping, trans-shipping, manufacturing, processing, or otherwise 1,148
dealing with them in a manner preliminary to their sale or 1,149
exchange, but priority between conflicting security interests in 1,150
the goods is subject to division (C) of section 1309.31 of the 1,151
Revised Code; or 1,152
(2) Delivers the instrument to the debtor for the purpose 1,154
of ultimate sale or exchange or of presentation, collection, 1,155
renewal, or registration of transfer. 1,156
(F) After the twenty-one day period set forth in divisions 1,158
(D) and (E) of this section, perfection depends upon compliance 1,159
with applicable provisions of sections 1309.01 to 1309.50 of the 1,160
Revised Code. 1,161
Sec. 1309.24. A security interest in letters of credit and 1,170
advices of credit, as provided in division (B)(1)(F) of section 1,172
1305.15 1305.13 of the Revised Code, goods, instruments, other 1,173
than certificated securities, negotiable documents, money, or 1,174
chattel paper may be perfected by the secured party's taking 1,175
possession of the collateral. A SECURITY INTEREST IN THE RIGHT 1,176
TO PROCEEDS OF A LETTER OF CREDIT MAY BE PERFECTED BY THE SECURED 1,177
PARTY'S TAKING POSSESSION OF THE LETTER OF CREDIT. If such 1,178
collateral other than goods covered by a negotiable document is 1,179
held by a bailee, the secured party is deemed to have possession 1,180
from the time the bailee receives notification of the secured 1,181
party's interest. A security interest is perfected by possession 1,182
from the time possession is taken without relation back and 1,183
continues only so long as possession is retained, unless 1,184
otherwise specified in sections 1309.01 to 1309.50 of the Revised 1,185
Code. The security interest may be otherwise perfected as 1,186
provided in sections 1309.01 to 1309.50 of the Revised Code, 1,187
before or after the period of possession by the secured party. 1,188
Section 2. That existing sections 1301.05, 1302.56, 1,190
28
1309.01, 1309.03, 1309.04, 1309.23, and 1309.24 and sections 1,191
1305.01, 1305.02, 1305.03, 1305.04, 1305.05, 1305.06, 1305.07, 1,192
1305.08, 1305.09, 1305.10, 1305.11, 1305.12, 1305.13, 1305.14, 1,193
1305.15, and 1305.16 of the Revised Code are hereby repealed. 1,194
Section 3. Sections 1 and 2 of this act shall become 1,196
effective July 1, 1998. 1,197
Section 4. This act applies to a letter of credit that is 1,199
issued on or after July 1, 1998. This act does not apply to a 1,200
transaction, event, obligation, or duty arising out of or 1,201
associated with a letter of credit that was issued before July 1, 1,202
1998.
Section 5. A transaction arising out of or associated with 1,204
a letter of credit that was issued before July 1, 1998, and the 1,205
rights, obligations, and interests flowing from that transaction 1,206
are governed by any statute or other law amended or repealed by 1,207
this act as if the amendment or repeal had not occurred and may 1,208
be terminated, completed, consummated, or enforced under that
statute or other law. 1,209