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6 AN ACT RELATING TO THE UNIFORM COMMERCIAL CODE; REPEALING AND
7 REENACTING CHAPTER 5 PROVISION ON LETTERS OF CREDIT; AMENDING
8 RELATED PROVISIONS; MAKING TECHNICAL CHANGES; AND PROVIDING AN
9 EFFECTIVE DATE.
10 This act affects sections of Utah Code Annotated 1953 as follows:
12 70A-1-105, as last amended by Chapters 42 and 204, Laws of Utah 1996
13 70A-2-512, as enacted by Chapter 154, Laws of Utah 1965
14 70A-9-103, as last amended by Chapter 204, Laws of Utah 1996
15 70A-9-104, as last amended by Chapter 272, Laws of Utah 1977
16 70A-9-105, as last amended by Chapter 204, Laws of Utah 1996
17 70A-9-106, as last amended by Chapter 204, Laws of Utah 1996
18 70A-9-304, as last amended by Chapter 204, Laws of Utah 1996
19 70A-9-305, as last amended by Chapter 204, Laws of Utah 1996
21 70A-5-118, Utah Code Annotated 1953
22 70A-5-119, Utah Code Annotated 1953
23 REPEALS AND REENACTS:
24 70A-5-101, as enacted by Chapter 154, Laws of Utah 1965
25 70A-5-102, as enacted by Chapter 154, Laws of Utah 1965
26 70A-5-103, as last amended by Chapter 204, Laws of Utah 1996
27 70A-5-104, as enacted by Chapter 154, Laws of Utah 1965
1 70A-5-105, as enacted by Chapter 154, Laws of Utah 1965
2 70A-5-106, as enacted by Chapter 154, Laws of Utah 1965
3 70A-5-107, as enacted by Chapter 154, Laws of Utah 1965
4 70A-5-108, as enacted by Chapter 154, Laws of Utah 1965
5 70A-5-109, as enacted by Chapter 154, Laws of Utah 1965
6 70A-5-110, as enacted by Chapter 154, Laws of Utah 1965
7 70A-5-111, as enacted by Chapter 154, Laws of Utah 1965
8 70A-5-112, as enacted by Chapter 154, Laws of Utah 1965
9 70A-5-113, as enacted by Chapter 154, Laws of Utah 1965
10 70A-5-114, as last amended by Chapter 204, Laws of Utah 1996
11 70A-5-115, as enacted by Chapter 154, Laws of Utah 1965
12 70A-5-116, as last amended by Chapter 272, Laws of Utah 1977
13 70A-5-117, as enacted by Chapter 154, Laws of Utah 1965
14 Be it enacted by the Legislature of the state of Utah:
15 Section 1. Section 70A-1-105 is amended to read:
16 70A-1-105. Territorial application of title -- Parties' power to choose applicable law.
17 (1) Except as provided in this section, when a transaction bears a reasonable relation to
18 this state and also to another state or nation, the parties may agree that the law either of this state
19 or of such other state or nation shall govern their rights and duties. Failing such agreement, this
20 title applies to transactions bearing an appropriate relation to this state.
21 (2) Where one of the following provisions of this title specifies the applicable law, that
22 provision governs and a contrary agreement is effective only to the extent permitted by the law,
23 including the conflict of laws rules, so specified:
24 (a) rights of creditors against sold goods under Section 70A-2-402;
25 (b) applicability of the chapter on leases under Sections 70A-2a-105 and 70A-2a-106;
26 (c) applicability of the chapter on Bank Deposits and Collections under Section
28 (d) applicability of the chapter on Investment Securities under Section 70A-8-109; [
29 (e) perfection provisions of the chapter on Secured Transactions under Section
31 (f) applicability of the chapter on Letters of Credit under Section 70A-5-116.
1 Section 2. Section 70A-2-512 is amended to read:
2 70A-2-512. Payment by buyer before inspection.
3 (1) Where the contract requires payment before inspection, nonconformity of the goods
4 does not excuse the buyer from so making payment unless:
5 (a) the nonconformity appears without inspection; or
6 (b) despite tender of the required documents the circumstances would justify injunction
7 against honor under the provisions [
9 (2) Payment pursuant to Subsection (1) does not constitute an acceptance of goods or
10 impair the buyer's right to inspect or any of his remedies.
11 Section 3. Section 70A-5-101 is repealed and reenacted to read:
13 70A-5-101. Short title.
14 This chapter shall be known as "Uniform Commercial Code -- Letters of Credit."
15 Section 4. Section 70A-5-102 is repealed and reenacted to read:
16 70A-5-102. Definitions.
17 As used in this chapter:
18 (1) "Adviser" means a person who, at the request of the issuer, a confirmer, or another
19 adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been
20 issued, confirmed, or amended.
21 (2) "Applicant" means a person at whose request or for whose account a letter of credit is
22 issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of
23 another if the person making the request undertakes an obligation to reimburse the issuer.
24 (3) "Beneficiary" means a person who under the terms of a letter of credit is entitled to
25 have its complying presentation honored. The term includes a person to whom drawing rights
26 have been transferred under a transferable letter of credit.
27 (4) "Confirmer" means a nominated person who undertakes, at the request or with the
28 consent of the issuer, to honor a presentation under a letter of credit issued by another.
29 (5) "Dishonor" of a letter of credit means failure timely to honor or to take an interim
30 action, such as acceptance of a draft, that may be required by the letter of credit.
31 (6) "Document" means a draft or other demand, document of title, investment security,
1 certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion:
2 (a) which is presented in a written or other medium permitted by the letter of credit or,
3 unless prohibited by the letter of credit, by the standard practice referred to in Section
4 70A-5-108(5); and
5 (b) which is capable of being examined for compliance with the terms and conditions of
6 the letter of credit. A document may not be oral.
7 (7) "Good faith" means honesty in fact in the conduct or transaction concerned.
8 (8) "Honor" of a letter of credit means performance of the issuer's undertaking in the letter
9 of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, "honor"
11 (a) upon payment;
12 (b) if the letter of credit provides for acceptance, upon acceptance of a draft and, at
13 maturity, its payment; or
14 (c) if the letter of credit provides for incurring a deferred obligation, upon incurring the
15 obligation and, at maturity, its performance.
16 (9) "Issuer" means a bank or other person that issues a letter of credit, but does not include
17 an individual who makes an engagement for personal, family, or household purposes.
18 (10) "Letter of credit" means a definite undertaking that satisfies the requirements of
19 Section 70A-5-104 by an issuer to a beneficiary at the request or for the account of an applicant
20 or, in the case of a financial institution, to itself or for its own account, to honor a documentary
21 presentation by payment or delivery of an item of value.
22 (11) "Nominated person" means a person whom the issuer:
23 (a) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter
24 of credit; and
25 (b) undertakes by agreement or custom and practice to reimburse.
26 (12) "Presentation" means delivery of a document to an issuer or nominated person for
27 honor or giving of value under a letter of credit.
28 (13) "Presenter" means a person making a presentation as or on behalf of a beneficiary or
29 nominated person.
30 (14) "Record" means information that is inscribed on a tangible medium, or that is stored
31 in an electronic or other medium and is retrievable in perceivable form.
1 (15) "Successor of a beneficiary" means a person who succeeds to substantially all of the
2 rights of a beneficiary by operation of law, including a corporation with or into which the
3 beneficiary has been merged or consolidated, an administrator, executor, personal representative,
4 trustee in bankruptcy, debtor in possession, liquidator, and receiver.
5 Section 5. Section 70A-5-103 is repealed and reenacted to read:
6 70A-5-103. Scope.
7 (1) This chapter applies to letters of credit and to certain rights and obligations arising out
8 of transactions involving letters of credit.
9 (2) The statement of a rule in this chapter does not by itself require, imply, or negate
10 application of the same or a different rule to a situation not provided for, or to a person not
11 specified, in this chapter.
12 (3) With the exception of this Subsection (3), Subsections (1) and (4), Subsections
13 70A-5-102(9) and (10), 70A-5-106(4), and 70A-5-114(4), and except to the extent prohibited in
14 Subsections 70A-1-102(3) and 70A-5-117(4), the effect of this chapter may be varied by
15 agreement or by a provision stated or incorporated by reference in an undertaking. A term in an
16 agreement or undertaking generally excusing liability or generally limiting remedies for failure to
17 perform obligations is not sufficient to vary obligations prescribed by this chapter.
18 (4) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter
19 of credit are independent of the existence, performance, or nonperformance of a contract or
20 arrangement out of which the letter of credit arises or which underlies it, including contracts or
21 arrangements between the issuer and the applicant and between the applicant and the beneficiary.
22 Section 6. Section 70A-5-104 is repealed and reenacted to read:
23 70A-5-104. Formal requirements.
24 A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued
25 in any form that is a record and is authenticated:
26 (1) by a signature; or
27 (2) in accordance with the agreement of the parties or the standard practice referred to in
28 Subsection 70A-5-108(5).
29 Section 7. Section 70A-5-105 is repealed and reenacted to read:
30 70A-5-105. Consideration.
31 Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice,
1 or confirmation.
2 Section 8. Section 70A-5-106 is repealed and reenacted to read:
3 70A-5-106. Issuance, amendment, cancellation, and duration.
4 (1) A letter of credit is issued and becomes enforceable according to its terms against the
5 issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the
6 beneficiary. A letter of credit is revocable only if it so provides.
7 (2) After a letter of credit is issued, rights and obligations of a beneficiary, applicant,
8 confirmer, and issuer are not affected by an amendment or cancellation to which that person has
9 not consented except to the extent the letter of credit provides that it is revocable or that the issuer
10 may amend or cancel the letter of credit without that consent.
11 (3) If there is no stated expiration date or other provision that determines its duration, a
12 letter of credit expires one year after its stated date of issuance or, if none is stated, after the date
13 on which it is issued.
14 (4) A letter of credit that states that it is perpetual expires five years after its stated date
15 of issuance, or if none is stated, after the date on which it is issued.
16 Section 9. Section 70A-5-107 is repealed and reenacted to read:
17 70A-5-107. Confirmer, nominated person, and adviser.
18 (1) A confirmer is directly obligated on a letter of credit and has the rights and obligations
19 of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations
20 to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at
21 the request and for the account of the issuer.
22 (2) A nominated person who is not a confirmer is not obligated to honor or otherwise give
23 value for a presentation.
24 (3) A person requested to advise may decline to act as an adviser. An adviser that is not
25 a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to
26 the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation,
27 amendment, or advice received by that person and undertakes to the beneficiary to check the
28 apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit,
29 confirmation, or amendment is enforceable as issued.
30 (4) A person who notifies a transferee beneficiary of the terms of a letter of credit,
31 confirmation, amendment, or advice has the rights and obligations of an adviser under Subsection
1 (3). The terms in the notice to the transferee beneficiary may differ from the terms in any notice
2 to the transferor beneficiary to the extent permitted by the letter of credit, confirmation,
3 amendment, or advice received by the person who so notifies.
4 Section 10. Section 70A-5-108 is repealed and reenacted to read:
5 70A-5-108. Issuer's rights and obligations.
6 (1) Except as otherwise provided in Section 70A-5-109, an issuer shall honor a
7 presentation that, as determined by the standard practice referred to in Subsection (5), appears on
8 its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise
9 provided in Section 70A-5-113 and unless otherwise agreed with the applicant, an issuer shall
10 dishonor a presentation that does not appear so to comply.
11 (2) An issuer has a reasonable time after presentation, but not beyond the end of the
12 seventh business day of the issuer after the day of its receipt of documents:
13 (a) to honor;
14 (b) if the letter of credit provides for honor to be completed more than seven business days
15 after presentation, to accept a draft or incur a deferred obligation; or
16 (c) to give notice to the presenter of discrepancies in the presentation.
17 (3) Except as otherwise provided in Subsection (4), an issuer is precluded from asserting
18 as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated
19 in the notice if timely notice is given.
20 (4) Failure to give the notice specified in Subsection (2) or to mention fraud, forgery, or
21 expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud
22 or forgery as described in Subsection 70A-5-109(1) or expiration of the letter of credit before
24 (5) An issuer shall observe standard practice of financial institutions that regularly issue
25 letters of credit. Determination of the issuer's observance of the standard practice is a matter of
26 interpretation for the court. The court shall offer the parties a reasonable opportunity to present
27 evidence of the standard practice.
28 (6) An issuer is not responsible for:
29 (a) the performance or nonperformance of the underlying contract, arrangement, or
31 (b) an act or omission of others; or
1 (c) observance or knowledge of the usage of a particular trade other than the standard
2 practice referred to in Subsection (5).
3 (7) If an undertaking constituting a letter of credit under Subsection 70A-5-102(10)
4 contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and
5 treat them as if they were not stated.
6 (8) An issuer that has dishonored a presentation shall return the documents or hold them
7 at the disposal of, and send advice to that effect to, the presenter.
8 (9) An issuer that has honored a presentation as permitted or required by this chapter:
9 (a) is entitled to be reimbursed by the applicant in immediately available funds not later
10 than the date of its payment of funds;
11 (b) takes the documents free of claims of the beneficiary or presenter;
12 (c) is precluded from asserting a right of recourse on a draft under Sections 70A-3-414 and
14 (d) except as otherwise provided in Sections 70A-5-110 and 70A-5-117, is precluded from
15 restitution of money paid or other value given by mistake to the extent the mistake concerns
16 discrepancies in the documents or tender which are apparent on the face of the presentation; and
17 (e) is discharged to the extent of its performance under the letter of credit unless the issuer
18 honored a presentation in which a required signature of a beneficiary was forged.
19 Section 11. Section 70A-5-109 is repealed and reenacted to read:
20 70A-5-109. Fraud and forgery.
21 (1) If a presentation is made that appears on its face strictly to comply with the terms and
22 conditions of the letter of credit, but a required document is forged or materially fraudulent, or
23 honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or
25 (a) the issuer shall honor the presentation, if honor is demanded by:
26 (i) a nominated person who has given value in good faith and without notice of forgery
27 or material fraud;
28 (ii) a confirmer who has honored its confirmation in good faith;
29 (iii) a holder in due course of a draft drawn under the letter of credit which was taken after
30 acceptance by the issuer or nominated person; or
31 (iv) an assignee of the issuer's or nominated person's deferred obligation that was taken
1 for value and without notice of forgery or material fraud after the obligation was incurred by the
2 issuer or nominated person; and
3 (b) the issuer, acting in good faith, may honor or dishonor the presentation in any other
5 (2) If an applicant claims that a required document is forged or materially fraudulent or
6 that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or
7 applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from
8 honoring a presentation or grant similar relief against the issuer or other persons only if the court
9 finds that:
10 (a) the relief is not prohibited under the law applicable to an accepted draft or deferred
11 obligation incurred by the issuer;
12 (b) a beneficiary, issuer, or nominated person who may be adversely affected is adequately
13 protected against loss that it may suffer because the relief is granted;
14 (c) all of the conditions to entitle a person to the relief under the law of this state have been
15 met; and
16 (d) on the basis of the information submitted to the court, the applicant is more likely than
17 not to succeed under its claim of forgery or material fraud and the person demanding honor does
18 not qualify for protection under Subsection (1)(a).
19 Section 12. Section 70A-5-110 is repealed and reenacted to read:
20 70A-5-110. Warranties.
21 (1) If its presentation is honored, the beneficiary warrants:
22 (a) to the issuer, any other person to whom presentation is made, and the applicant that
23 there is no fraud or forgery of the kind described in Subsection 70A-5-109(1); and
24 (b) to the applicant that the drawing does not violate any agreement between the applicant
25 and beneficiary or any other agreement intended by them to be augmented by the letter of credit.
26 (2) The warranties in Subsection (1) are in addition to warranties arising under Chapters
27 3, 4, 7, and 8 because of the presentation or transfer of documents covered by any of those
29 Section 13. Section 70A-5-111 is repealed and reenacted to read:
30 70A-5-111. Remedies.
31 (1) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a
1 letter of credit before presentation, the beneficiary, successor, or nominated person presenting on
2 its own behalf may recover from the issuer the amount that is the subject of the dishonor or
3 repudiation. If the issuer's obligation under the letter of credit is not for the payment of money,
4 the claimant may obtain specific performance or, at the claimant's election, recover an amount
5 equal to the value of performance from the issuer. In either case, the claimant may also recover
6 incidental but not consequential damages. The claimant is not obligated to take action to avoid
7 damages that might be due from the issuer under this Subsection (1). If, although not obligated
8 to do so, the claimant avoids damages, the claimant's recovery from the issuer must be reduced by
9 the amount of damages avoided. The issuer has the burden of proving the amount of damages
10 avoided. In the case of repudiation the claimant need not present any document.
11 (2) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit
12 or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover
13 damages resulting from the breach, including incidental but not consequential damages, less any
14 amount saved as a result of the breach.
15 (3) If an adviser or nominated person other than a confirmer breaches an obligation under
16 this chapter or an issuer breaches an obligation not covered in Subsection (1) or (2), a person to
17 whom the obligation is owed may recover damages resulting from the breach, including incidental
18 but not consequential damages, less any amount saved as a result of the breach. To the extent of
19 the confirmation, a confirmer has the liability of an issuer specified in this Subsection (3) and
20 Subsections (1) and (2).
21 (4) An issuer, nominated person, or adviser who is found liable under Subsection (1), (2),
22 or (3) shall pay interest on the amount owed thereunder from the date of wrongful dishonor or
23 other appropriate date.
24 (5) Reasonable attorney's fees and other expenses of litigation must be awarded to the
25 prevailing party in an action in which a remedy is sought under this chapter.
26 (6) Damages that would otherwise be payable by a party for breach of an obligation under
27 this chapter may be liquidated by agreement or undertaking, but only in an amount or by a formula
28 that is reasonable in light of the harm anticipated.
29 Section 14. Section 70A-5-112 is repealed and reenacted to read:
30 70A-5-112. Transfer of letter of credit.
31 (1) Except as otherwise provided in Section 70A-5-113, unless a letter of credit provides
1 that it is transferable, the right of a beneficiary to draw or otherwise demand performance under
2 a letter of credit may not be transferred.
3 (2) Even if a letter of credit provides that it is transferable, the issuer may refuse to
4 recognize or carry out a transfer if:
5 (a) the transfer would violate applicable law; or
6 (b) the transferor or transferee has failed to comply with any requirement stated in the
7 letter of credit or any other requirement relating to transfer imposed by the issuer which is within
8 the standard practice referred to in Subsection 70A-5-108(5) or is otherwise reasonable under the
10 Section 15. Section 70A-5-113 is repealed and reenacted to read:
11 70A-5-113. Transfer by operation of law.
12 (1) A successor of a beneficiary may consent to amendments, sign and present documents,
13 and receive payment or other items of value in the name of the beneficiary without disclosing its
14 status as a successor.
15 (2) A successor of a beneficiary may consent to amendments, sign and present documents,
16 and receive payment or other items of value in its own name as the disclosed successor of the
17 beneficiary. Except as otherwise provided in Subsection (5), an issuer shall recognize a disclosed
18 successor of a beneficiary as beneficiary in full substitution for its predecessor upon compliance
19 with the requirements for recognition by the issuer of a transfer of drawing rights by operation of
20 law under the standard practice referred to in Subsection 70A-5-108(5) or, in the absence of such
21 a practice, compliance with other reasonable procedures sufficient to protect the issuer.
22 (3) An issuer is not obliged to determine whether a purported successor is a successor of
23 a beneficiary or whether the signature of a purported successor is genuine or authorized.
24 (4) Honor of a purported successor's apparently complying presentation under Subsection
25 (1) or (2) has the consequences specified in Subsection 70A-5-108(9) even if the purported
26 successor is not the successor of a beneficiary. Documents signed in the name of the beneficiary
27 or of a disclosed successor by a person who is neither the beneficiary nor the successor of the
28 beneficiary are forged documents for the purposes of Section 70A-5-109.
29 (5) An issuer whose rights of reimbursement are not covered by Subsection (4) or
30 substantially similar law and any confirmer or nominated person may decline to recognize a
31 presentation under Subsection (2).
1 (6) A beneficiary whose name is changed after the issuance of a letter of credit has the
2 same rights and obligations as a successor of a beneficiary under this section.
3 Section 16. Section 70A-5-114 is repealed and reenacted to read:
4 70A-5-114. Assignment of proceeds.
5 (1) In this section, "proceeds of a letter of credit" means the cash, check, accepted draft,
6 or other item of value paid or delivered upon honor or giving of value by the issuer or any
7 nominated person under the letter of credit. The term does not include a beneficiary's drawing
8 rights or documents presented by the beneficiary.
9 (2) A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The
10 beneficiary may do so before presentation as a present assignment of its right to receive proceeds
11 contingent upon its compliance with the terms and conditions of the letter of credit.
12 (3) An issuer or nominated person need not recognize an assignment of proceeds of a letter
13 of credit until it consents to the assignment.
14 (4) An issuer or nominated person has no obligation to give or withhold its consent to an
15 assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the
16 assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a
17 condition to honor.
18 (5) Rights of a transferee beneficiary or nominated person are independent of the
19 beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right
20 to the proceeds.
21 (6) Neither the rights recognized by this section between an assignee and an issuer,
22 transferee beneficiary, or nominated person nor the issuer's or nominated person's payment of
23 proceeds to an assignee or a third person affect the rights between the assignee and any person
24 other than the issuer, transferee beneficiary, or nominated person. The mode of creating and
25 perfecting a security interest in or granting an assignment of a beneficiary's rights to proceeds is
26 governed by Chapter 9 or other law. Against persons other than the issuer, transferee beneficiary,
27 or nominated person, the rights and obligations arising upon the creation of a security interest or
28 other assignment of a beneficiary's right to proceeds and its perfection are governed by Chapter
29 9 or other law.
30 Section 17. Section 70A-5-115 is repealed and reenacted to read:
31 70A-5-115. Statute of limitations.
1 An action to enforce a right or obligation arising under this chapter must be commenced
2 within one year after the expiration date of the relevant letter of credit or one year after the cause
3 of action accrues, whichever occurs later. A cause of action accrues when the breach occurs,
4 regardless of the aggrieved party's lack of knowledge of the breach.
5 Section 18. Section 70A-5-116 is repealed and reenacted to read:
6 70A-5-116. Choice of law and forum.
7 (1) The liability of an issuer, nominated person, or adviser for action or omission is
8 governed by the law of the jurisdiction chosen by an agreement in the form of a record signed or
9 otherwise authenticated by the affected parties in the manner provided in Section 70A-5-104 or
10 by a provision in the person's letter of credit, confirmation, or other undertaking. The jurisdiction
11 whose law is chosen need not bear any relation to the transaction.
12 (2) Unless Subsection (1) applies, the liability of an issuer, nominated person, or adviser
13 for action or omission is governed by the law of the jurisdiction in which the person is located.
14 The person is considered to be located at the address indicated in the person's undertaking. If more
15 than one address is indicated, the person is considered to be located at the address from which the
16 person's undertaking was issued. For the purpose of jurisdiction, choice of law, and recognition
17 of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are
18 considered separate juridical entities and a bank is considered to be located at the place where its
19 relevant branch is considered to be located under this Subsection (2).
20 (3) (a) Except as otherwise provided in this Subsection (3)(a), the liability of an issuer,
21 nominated person, or adviser is governed by any rules of custom or practice, such as the Uniform
22 Customs and Practice for Documentary Credits, to which the letter of credit, confirmation, or other
23 undertaking is expressly made subject.
24 (b) If this chapter would govern the liability of an issuer, nominated person, or adviser
25 under Subsection (1) or (2):
26 (i) the relevant undertaking incorporates rules of custom or practice; and
27 (ii) there is conflict between this chapter and those rules as applied to that undertaking,
28 those rules govern except to the extent of any conflict with the nonvariable provisions specified
29 in Subsection 70A-5-103(3).
30 (4) If there is conflict between this chapter and Chapter 3, 4, 4A, or 9, this chapter governs.
31 (5) The forum for settling disputes arising out of an undertaking within this chapter may
1 be chosen in the manner and with the binding effect that governing law may be chosen in
2 accordance with Subsection (1).
3 Section 19. Section 70A-5-117 is repealed and reenacted to read:
4 70A-5-117. Subrogation of issuer, applicant, and nominated person.
5 (1) An issuer that honors a beneficiary's presentation is subrogated to the rights of the
6 beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation
7 owed to the beneficiary and of the applicant to the same extent as if the issuer were the secondary
8 obligor of the underlying obligation owed to the applicant.
9 (2) An applicant that reimburses an issuer is subrogated to the rights of the issuer against
10 any beneficiary, presenter, or nominated person to the same extent as if the applicant were the
11 secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the
12 issuer to the rights of the beneficiary stated in Subsection (1).
13 (3) A nominated person who pays or gives value against a draft or demand presented under
14 a letter of credit is subrogated to the rights of:
15 (a) the issuer against the applicant to the same extent as if the nominated person were a
16 secondary obligor of the obligation owed to the issuer by the applicant;
17 (b) the beneficiary to the same extent as if the nominated person were a secondary obligor
18 of the underlying obligation owed to the beneficiary; and
19 (c) the applicant to the same extent as if the nominated person were a secondary obligor
20 of the underlying obligation owed to the applicant.
21 (4) Notwithstanding any agreement or term to the contrary, the rights of subrogation stated
22 in Subsections (1) and (2) do not arise until the issuer honors the letter of credit or otherwise pays
23 and the rights in Subsection (3) do not arise until the nominated person pays or otherwise gives
24 value. Until then, the issuer, nominated person, and the applicant do not derive under this section
25 present or prospective rights forming the basis of a claim, defense, or excuse.
26 Section 20. Section 70A-5-118 is enacted to read:
27 70A-5-118. Applicability.
28 This act applies to a letter of credit that is issued on or after July 1, 1997. This act does not
29 apply to a transaction, event, obligation, or duty arising out of or associated with a letter of credit
30 that was issued before July 1, 1997.
31 Section 21. Section 70A-5-119 is enacted to read:
1 70A-5-119. Savings clause.
2 A transaction arising out of or associated with a letter of credit that was issued before July
3 1, 1997, and the rights, obligations, and interests flowing from that transaction are governed by
4 any statute or other law amended or repealed by this act as if repeal or amendment had not
5 occurred and may be terminated, completed, consummated, or enforced under that statute or other
7 Section 22. Section 70A-9-103 is amended to read:
8 70A-9-103. Perfection of security interests in multiple state transactions.
9 (1) Documents, instruments, letters of credit, and ordinary goods.
10 (a) This Subsection (1) applies to documents [
11 written letters of credit, and [
12 in Subsection (2), mobile goods described in Subsection (3), and minerals described in Subsection
14 (b) Except as otherwise provided in this subsection, perfection and the effect of perfection
15 or nonperfection of a security interest in collateral are governed by the law of the jurisdiction
16 where the collateral is when the last event occurs on which is based the assertion that the security
17 interest is perfected or unperfected.
18 (c) If the parties to a transaction creating a purchase money security interest in goods in
19 one jurisdiction understand at the time that the security interest attaches that the goods will be kept
20 in another jurisdiction, then the law of the other jurisdiction governs the perfection and the effect
21 of perfection or nonperfection of the security interest from the time it attaches until 30 days after
22 the debtor receives possession of the goods and thereafter if the goods are taken to the other
23 jurisdiction before the end of the 30-day period.
24 (d) When collateral is brought into and kept in this state while subject to a security interest
25 perfected under the law of the jurisdiction from which the collateral was removed, the security
26 interest remains perfected, but if action is required by Part 3 of this chapter to perfect the security
28 (i) if the action is not taken before the expiration of the period of perfection in the other
29 jurisdiction or the end of four months after the collateral is brought into this state, whichever
30 period first expires, the security interest becomes unperfected at the end of that period and is
31 thereafter [
1 purchaser after removal;
2 (ii) if the action is taken before the expiration of the period specified in Subsection (i), the
3 security interest continues perfected thereafter; or
4 (iii) for the purpose of priority over a buyer of consumer goods as provided in Subsection
5 70A-9-307(2), the period of the effectiveness of a filing in the jurisdiction from which the
6 collateral is removed is governed by the rules with respect to perfection in Subsections (i) and (ii).
7 (2) Certificate of title.
8 (a) This subsection applies to goods covered by a certificate of title issued under a statute
9 of this state or of another jurisdiction under the law of which indication of a security interest on
10 the certificate is required as a condition of perfection.
11 (b) Except as otherwise provided in this subsection, perfection and the effect of perfection
12 or nonperfection of the security interest are governed by the laws, including the conflict of law
13 rules, of the jurisdiction issuing the certificate until four months after the goods are removed from
14 that jurisdiction and thereafter until the goods are registered in another jurisdiction, but in any
15 event not beyond surrender of the certificate. After the expiration of that period, the goods are not
16 covered by the certificate of title within the meaning of this section.
17 (c) Except with respect to the rights of a buyer described in the next paragraph, a security
18 interest, perfected in another jurisdiction otherwise than by notation on a certificate of title, in
19 goods brought into this state and thereafter covered by a certificate of title issued by this state is
20 subject to the rules stated in Subsection (1)(d).
21 (d) If goods are brought into this state while a security interest therein is perfected in any
22 manner under the law of the jurisdiction from which the goods are removed and a certificate of
23 title is issued by this state and the certificate does not show that the goods are subject to the
24 security interest or that they may be subject to security interests not shown on the certificate, the
25 security interest is subordinate to the rights of a buyer of the goods who is not in the business of
26 selling goods of that kind to the extent that he gives value and receives delivery of the goods after
27 issuance of the certificate and without knowledge of the security interest.
28 (3) Accounts, general intangibles, and mobile goods.
29 (a) This subsection applies to accounts, other than an account described in Subsection (5)
30 on minerals, and general intangibles, other than uncertificated securities, and to goods which are
31 mobile and which are of a type normally used in more than one jurisdiction, such as motor
1 vehicles, trailers, rolling stock, airplanes, shipping containers, road building and construction
2 machinery, and commercial harvesting machinery and the like, if the goods are equipment or are
3 inventory leased or held for lease by the debtor to others and are not covered by a certificate of title
4 described in Subsection (2).
5 (b) The law, including the conflict of laws rules, of the jurisdiction in which the debtor is
6 located governs the perfection and the effect of perfection or nonperfection of the security interest.
7 (c) If, however, the debtor is located in a jurisdiction which is not a part of the United
8 States, and which does not provide for perfection of the security interest by filing or recording in
9 that jurisdiction, the law of the jurisdiction in the United States in which the debtor has its major
10 executive office in the United States governs the perfection and the effect of perfection or
11 nonperfection of the security interest through filing. In the alternative, if the debtor is located in
12 a jurisdiction which is not a part of the United States or Canada and the collateral is accounts or
13 general intangibles for money due or to become due, the security interest may be perfected by
14 notification to the account debtor. As used in this paragraph, "United States" includes its
15 territories and possessions and the Commonwealth of Puerto Rico.
16 (d) A debtor shall be deemed located at his place of business if he has one, at his chief
17 executive office if he has more than one place of business, otherwise at his residence. If, however,
18 the debtor is a foreign air carrier under the Federal Aviation Act of 1958, as amended, it shall be
19 deemed located at the designated office of the agent upon whom service of process may be made
20 on behalf of the foreign air carrier.
21 (e) A security interest perfected under the law of the jurisdiction of the location of the
22 debtor is perfected until the expiration of four months after a change of the debtor's location to
23 another jurisdiction, or until perfection would have ceased by the law of the first jurisdiction,
24 whichever period first expires. Unless perfected in the new jurisdiction before the end of that
25 period, it becomes unperfected thereafter and is deemed to have been unperfected as against a
26 person who became a purchaser after the change.
27 (4) Chattel paper. The rules stated for goods in Subsection (1) apply to a possessory
28 security interest in chattel paper. The rules stated for accounts in Subsection (3) apply to a
29 nonpossessory security interest in chattel paper, but the security interest may not be perfected by
30 notification to the account debtor.
31 (5) Minerals. Perfection and the effect of perfection or nonperfection of a security interest
1 which is created by a debtor who has an interest in minerals or the like, including oil and gas,
2 before extraction and which attaches thereto as extracted, or which attaches to an account resulting
3 from the sale thereof at the wellhead or minehead are governed by the law, including the conflict
4 of laws rules, of the jurisdiction wherein the wellhead or minehead is located.
5 (6) Investment property.
6 (a) Except as otherwise provided in Subsection (e), during the time that a security
7 certificate is located in a jurisdiction, perfection of a security interest, the effect of perfection or
8 nonperfection, and the priority of a security interest in the certificated security represented thereby
9 are governed by the local law of that jurisdiction.
10 (b) Except as otherwise provided in Subsection (e), perfection of a security interest, the
11 effect of perfection or nonperfection, and the priority of a security interest in an uncertificated
12 security are governed by the local law of the issuer's jurisdiction as specified in Subsection
14 (c) Except as otherwise provided in Subsection (e), perfection of a security interest, the
15 effect of perfection or nonperfection, and the priority of a security interest in a security entitlement
16 or securities account are governed by the local law of the securities intermediary's jurisdiction as
17 specified in Subsection 70A-8-109(5).
18 (d) Except as otherwise provided in Subsection (e), perfection of a security interest, the
19 effect of perfection or nonperfection, and the priority of a security interest in a commodity contract
20 or commodity account are governed by the local law of the commodity intermediary's jurisdiction.
21 The following rules determine a "commodity intermediary's jurisdiction" for purposes of this
22 Subsection (6):
23 (i) If an agreement between the commodity intermediary and commodity customer
24 specifies that it is governed by the law of a particular jurisdiction, that jurisdiction is the
25 commodity intermediary's jurisdiction.
26 (ii) If an agreement between the commodity intermediary and commodity customer does
27 not specify the governing law as provided in Subsection (i), but expressly specifies that the
28 commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the
29 commodity intermediary's jurisdiction.
30 (iii) If an agreement between the commodity intermediary and commodity customer does
31 not specify a jurisdiction as provided in Subsection (i) or (ii), the commodity intermediary's
1 jurisdiction is the jurisdiction in which is located the office identified in an account statement as
2 the office serving the commodity customer's account.
3 (iv) If an agreement between the commodity intermediary and commodity customer does
4 not specify a jurisdiction as provided in Subsection (i) or (ii) and an account statement does not
5 identify an office serving the commodity customer's account as provided in Subsection (iii), the
6 commodity intermediary's jurisdiction is the jurisdiction in which is located the chief executive
7 office of the commodity intermediary.
8 (e) Perfection of a security interest by filing, automatic perfection of a security interest in
9 investment property granted by a broker or securities intermediary, and automatic perfection of
10 a security interest in a commodity contract or commodity account granted by a commodity
11 intermediary are governed by the local law of the jurisdiction in which the debtor is located. The
12 rules in Subsections (3)(c), (d), and (e) apply to security interests to which this paragraph applies.
13 Section 23. Section 70A-9-104 is amended to read:
14 70A-9-104. Transactions excluded from chapter.
15 This chapter does not apply:
16 (a) to a security interest subject to any statute of the United States to the extent that such
17 statute governs the rights of parties to and third parties affected by transactions in particular types
18 of property; [
19 (b) to a landlord's lien; [
20 (c) to a lien given by statute or other rule of law for services or materials except as
21 provided in Section 70A-9-310 on priority of such liens; [
22 (d) to a transfer of a claim for wages, salary, or other compensation of an employee; [
23 (e) to a transfer by a government or governmental subdivision or agency; [
24 (f) to a sale of accounts or chattel paper as part of a sale of the business out of which they
25 arose, or an assignment of accounts or chattel paper which is for the purpose of collection only,
26 or a transfer of a right to payment under a contract to an assignee who is also to do the
27 performance under the contract, or a transfer of a single account to an assignee in whole or partial
28 satisfaction of a preexisting indebtedness; [
29 (g) to a transfer of an interest or claim in or under any policy of insurance or any contract
30 for an annuity (including a variable annuity), except as provided with respect to proceeds (Section
31 70A-9-306) and priorities in proceeds (Section 70A-9-312); [
1 (h) to a right represented by a judgment (other than a judgment taken on a right to payment
2 which was collateral); [
3 (i) to any right of setoff; [
4 (j) except to the extent that provision is made for fixtures in Section 70A-9-313, to the
5 creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder; or
6 (k) to a transfer in whole or in part of any claim arising out of tort; [
7 (l) to a transfer of interest in any deposit account (Subsection (1) of Section 70A-9-105),
8 except as provided with respect to proceeds (Section 70A-9-306) and priorities in proceeds
9 (Section 70A-9-312)[
10 (m) to a transfer of an interest in a letter of credit other than the rights to proceeds of a
11 written letter of credit.
12 Section 24. Section 70A-9-105 is amended to read:
13 70A-9-105. Definitions and index of definitions.
14 (1) In this chapter unless the context otherwise requires:
15 (a) "Account debtor" means the person who is obligated on an account, chattel paper, or
16 general intangible.
17 (b) "Chattel paper" means a writing or writings which evidence both a monetary obligation
18 and a security interest in or a lease of specific goods, but a charter or other contract involving the
19 use or hire of a vessel is not chattel paper. When a transaction is evidenced both by such a security
20 agreement or a lease and by an instrument or a series of instruments, the group of writings taken
21 together constitutes chattel paper.
22 (c) "Collateral" means the property subject to a security interest, and includes accounts and
23 chattel paper which have been sold.
24 (d) "Debtor" means the person who owes payment or other performance of the obligation
25 secured, whether or not he owns or has rights in the collateral, and includes the seller of accounts
26 or chattel paper. Where the debtor and the owner of the collateral are not the same person, the
27 term "debtor" means the owner of the collateral in any provision of the chapter dealing with the
28 collateral, the obligor in any provision dealing with the obligation, and may include both where
29 the context so requires.
30 (e) "Deposit account" means a demand, time, savings, passbook, or like account
31 maintained with a bank, savings and loan association, credit union, or like organization, other than
1 an account evidenced by a certificate of deposit.
2 (f) "Document" means document of title as defined in the general definitions of Chapter
3 1 (Section 70A-1-201), and a receipt of the kind described in Subsection 70A-7-201(2).
4 (g) "Encumbrance" includes real estate mortgages and other liens on real estate and all
5 other rights in real estate that are not ownership interests.
6 (h) "Goods" includes all things which are movable at the time the security interest attaches
7 or which are fixtures as provided in Section 70A-9-313, but does not include money, documents,
8 instruments, investment property, accounts, chattel paper, general intangibles, or minerals or the
9 like, including oil and gas, before extraction. "Goods" also include standing timber which is to
10 be cut and removed under a conveyance or contract for sale, the unborn young of animals, and
11 growing crops.
12 (i) "Instrument" means a negotiable instrument, as defined in Section 70A-3-104, or any
13 other writing which evidences a right to the payment of money and is not itself a security
14 agreement or lease and is of a type which is in ordinary course of business transferred by delivery
15 with any necessary indorsement or assignment. The term does not include investment property.
16 (j) "Letter of credit" means the definition as provided in Section 70A-5-102.
18 deed on real estate or the like.
19 (l) "Proceeds of a letter of credit" means the definition as provided in Section 70A-5-114.
21 himself to make it, whether or not a subsequent event of default or other event not within his
22 control has relieved or may relieve him from his obligation.
26 a security interest, including a person to whom accounts or chattel paper have been sold. When
27 the holders of obligations issued under an indenture of trust, equipment trust agreement, or the like
28 are represented by a trustee or other person, the representative is the secured party.
30 railway or trolley bus business, the electric or electronics communications transmission business,
31 the transmission of goods by pipeline, or the transmission or the production and transmission of
1 electricity, steam, gas, or water, or the provision of sewer service.
2 (2) Other definitions applying to this chapter and the sections in which they appear are:
3 "Account," Section 70A-9-106;
4 "Attach," Section 70A-9-203;
5 "Commodity contract," Section 70A-9-115;
6 "Commodity customer," Section 70A-9-115;
7 "Commodity intermediary," Section 70A-9-115;
8 "Construction mortgage," [
9 "Consumer goods," [
10 "Control," Section 70A-9-115;
11 "Equipment," [
12 "Farm products," [
13 "Fixture," Section 70A-9-313;
14 "Fixture filing," Section 70A-9-313;
15 "General intangibles," Section 70A-9-106;
16 "Inventory," [
17 "Investment property," Section 70A-9-115;
18 "Lien creditor," [
19 "Proceeds," [
20 "Purchase money security interest," Section 70A-9-107; and
21 "United States;" Section 70A-9-103.
22 (3) The following definitions in other chapters apply to this chapter:
23 "Broker," Section 70A-8-101;
24 "Certificated security," Section 70A-8-101;
25 "Check," Section 70A-3-104;
26 "Clearing corporation," Section 70A-8-101;
27 "Contract for sale," Section 70A-2-106;
28 "Control," Section 70A-8-105;
29 "Delivery," Section 70A-8-301;
30 "Entitlement holder," Section 70A-8-101;
31 "Financial asset," Section 70A-8-101;
1 "Holder in due course," Section 70A-3-302;
2 "Note," Section 70A-3-104;
3 "Sale;" Section 70A-2-106;
4 "Securities intermediary," Section 70A-8-101;
5 "Security," Section 70A-8-101;
6 "Security certificate," Section 70A-8-101;
7 "Security entitlement," Section 70A-8-101; and
8 "Uncertificated security," Section 70A-8-101.
9 (4) In addition, Chapter 1 contains general definitions and principles of construction and
10 interpretation applicable throughout this chapter.
11 Section 25. Section 70A-9-106 is amended to read:
12 70A-9-106. Definitions -- "Account" -- "General intangibles."
13 "Account" means any right to payment for goods sold or leased or for services rendered
14 which is not evidenced by an instrument or chattel paper, whether or not it has been earned by
15 performance. "General intangibles" means any personal property (including things in action) other
16 than goods, accounts, chattel paper, documents, instruments, investment property, rights to
17 proceeds of written letters of credit, and money. All rights to payment earned or unearned under
18 a charter or other contract involving the use or hire of a vessel and all rights incident to the charter
19 or contract are accounts.
20 Section 26. Section 70A-9-304 is amended to read:
21 70A-9-304. Perfection of security interest in instruments, documents, proceeds of a
22 written letter of credit, and goods covered by documents -- Perfection by permissive filing
23 -- Temporary perfection without filing or transfer of possession.
24 (1) A security interest in chattel paper or negotiable documents may be perfected by filing.
25 A security interest in the rights to proceeds of a written letter of credit can be perfected only by the
26 secured party's taking possession of the letter of credit. A security interest in money or
27 instruments, other than instruments which constitute part of chattel paper, can be perfected only
28 by the secured party's taking possession, except as provided in Subsections (4) and (5) of this
29 section and Subsections (2) and (3) of Section 70A-9-306 on proceeds.
30 (2) During the period that goods are in the possession of the issuer of a negotiable
31 document therefor, a security interest in the goods is perfected by perfecting a security interest in
1 the document, and any security interest in the goods otherwise perfected during such period is
2 subject thereto.
3 (3) A security interest in goods in the possession of a bailee other than one who has issued
4 a negotiable document therefor is perfected by issuance of a document in the name of the secured
5 party or by the bailee's receipt of notification of the secured party's interest or by filing as to the
7 (4) A security interest in instruments, certificated securities, or negotiable documents is
8 perfected without filing or the taking of possession for a period of 21 days from the time it attaches
9 to the extent that it arises for new value given under a written security agreement.
10 (5) A security interest remains perfected for a period of 21 days without filing where a
11 secured party having a perfected security interest in an instrument, a certificated security, a
12 negotiable document, or goods in possession of a bailee other than one who has issued a negotiable
13 document therefor:
14 (a) makes available to the debtor the goods or documents representing the goods for the
15 purpose of ultimate sale or exchange or for the purpose of loading, unloading, storing, shipping,
16 transshipping, manufacturing, processing, or otherwise dealing with them in a manner preliminary
17 to their sale or exchange, but priority between conflicting security interests in the goods is subject
18 to Section 70A-9-312; or
19 (b) delivers the instrument or certificated security to the debtor for the purpose of ultimate
20 sale or exchange or of presentation, collection, renewal, or registration of transfer.
21 (6) After the 21-day period in Subsections (4) and (5) perfection depends upon compliance
22 with applicable provisions of this chapter.
23 Section 27. Section 70A-9-305 is amended to read:
24 70A-9-305. When possession by secured party perfects security interest without
26 A security interest in [
28 perfected by the secured party's taking possession of the collateral. A security interest in the right
29 to proceeds of a written letter of credit may be perfected by the secured party's taking possession
30 of a letter of credit. If such collateral other than goods covered by a negotiable document is held
31 by a bailee, the secured party is deemed to have possession from the time the bailee receives
1 notification of the secured party's interest. A security interest is perfected by possession from the
2 time possession is taken without relation back and continues only so long as possession is retained,
3 unless otherwise specified in this chapter. The security interest may be otherwise perfected as
4 provided in this chapter before or after the period of possession by the secured party.
5 Section 28. Effective date.
6 This act takes effect on July 1, 1997.
Legislative Review Note
as of 1-30-97 9:29 AM
A limited legal review of this bill raises no obvious constitutional or statutory concerns.
Office of Legislative Research and General Counsel
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