Date of enactment: March 27, 2006
2005 Assembly Bill 1036 Date of publication*: April 10, 2006
* Section 991.11, Wisconsin Statutes 2003-04 : Effective date of acts. "Every act and every portion of an act enacted by the legislature over the governor's partial veto which does not expressly prescribe the time when it takes effect shall take effect on the day after its date of publication as designated" by the secretary of state [the date of publication may not be more than 10 working days after the date of enactment].
An Act to amend 402.512 (1) (b), 440.92 (3) (c) 3., 565.25 (5) (b) 3. and 707.49 (4); to repeal and recreate chapter 405; and to create 401.105 (2) (bm) of the statutes; relating to: adopting revised Article 5 of the Uniform Commercial Code, concerning letters of credit.
The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:
213,1 Section 1. 401.105 (2) (bm) of the statutes is created to read:
401.105 (2) (bm) Section 405.116 on letters of credit.
213,2 Section 2. 402.512 (1) (b) of the statutes is amended to read:
402.512 (1) (b) Despite tender of the required documents the circumstances would justify injunction against honor under s. 405.114 405.109 (2).
213,3 Section 3. Chapter 405 of the statutes is repealed and recreated to read:
Chapter 405
Uniform Commercial Code —
Letters of Credit
405.101 Short title. This chapter may be cited as uniform commercial code — letters of credit.
405.102 Definitions. (1) In this chapter:
(a) "Adviser" means a person who, at the request of the issuer, a confirmer, or another adviser, notifies, or requests another adviser to notify, the beneficiary that a letter of credit has been issued, confirmed, or amended.
(b) "Applicant" means a person at whose request or for whose account a letter of credit is issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer.
(c) "Beneficiary" means a person who under the terms of a letter of credit is entitled to have its complying presentation honored. The term includes a person to whom drawing rights have been transferred under a transferable letter of credit.
(d) "Confirmer" means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another.
(e) "Dishonor" of a letter of credit means failure timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit.
(f) "Document" means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion that is presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in s. 405.108 (5) and that is capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral.
(g) "Good faith" means honesty in fact in the conduct or transaction concerned.
(h) "Honor" of a letter of credit means performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, honor occurs in any of the following circumstances:
1. Upon payment.
2. If the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment.
3. If the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.
(i) "Issuer" means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes.
(j) "Letter of credit" means a definite undertaking that satisfies the requirements of s. 405.104 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value.
(k) "Nominated person" means a person whom the issuer:
1. Designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit; and
2. Undertakes by agreement or custom and practice to reimburse.
(L) "Presentation" means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.
(m) "Presenter" means a person making a presentation as or on behalf of a beneficiary or nominated person.
(n) "Record" means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium, and is retrievable in perceivable form.
(o) "Successor of a beneficiary" means a person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator, and receiver.
(2) Definitions in other chapters applying to this chapter and the sections in which they appear are:
(a) "Accept" or "acceptance", s. 403.409.
(b) "Value", ss. 403.303 and 404.211
(3) Chapter 401 contains certain additional general definitions and principles of construction and interpretation applicable throughout this chapter.
405.103 Scope. (1) This chapter applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.
(2) The statement of a rule in this chapter does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this chapter.
(3) With the exception of this subsection, subs. (1) and (4), ss. 405.102 (1) (i) and (j), 405.106 (4) and 405.114 (4), and except to the extent prohibited in ss. 401.102 (3) and 405.117 (4), the effect of this chapter may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this chapter.
(4) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.
405.104 Formal requirements. A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a record and is authenticated by any of the following methods:
(1) A signature.
(2) In accordance with the agreement of the parties or the standard practice referred to in s. 405.108 (5).
405.105 Consideration. Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation.
405.106 Issuance, amendment, cancellation, and duration. (1) A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it so provides.
(2) After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmer, and issuer are not affected by an amendment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent.
(3) If there is no stated expiration date or other provision that determines its duration, a letter of credit expires one year after its stated date of issuance or, if none is stated, after the date on which it is issued.
(4) A letter of credit that states that it is perpetual expires 5 years after its stated date of issuance, or if none is stated, after the date on which it is issued.
405.107 Confirmer, nominated person, and adviser. (1) A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the letter of credit at the request and for the account of the issuer.
(2) A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.
(3) A person requested to advise may decline to act as an adviser. An adviser that is not a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation, amendment, or advice received by that person and undertakes to the beneficiary to check the apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit, confirmation, or amendment is enforceable as issued.
(4) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under sub. (3). The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who so notifies.
405.108 Issuer's rights and obligations. (1) Except as otherwise provided in s. 405.109, an issuer shall honor a presentation that, as determined by the standard practice referred to in sub. (5), appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in s. 405.113 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.
(2) An issuer has a reasonable time after presentation, but not beyond the end of the 7th business day of the issuer after the day of its receipt of documents, to do any of the following:
(a) To honor.
(b) If the letter of credit provides for honor to be completed more than 7 business days after presentation, to accept a draft or incur a deferred obligation.
(c) To give notice to the presenter of discrepancies in the presentation.
(3) Except as otherwise provided in sub. (4), an issuer is precluded from asserting as a basis for dishonor any discrepancy if timely notice is not given, or any discrepancy not stated in the notice if timely notice is given.
(4) Failure to give the notice specified in sub. (2) or to mention fraud, forgery, or expiration in the notice does not preclude the issuer from asserting as a basis for dishonor fraud or forgery as described in s. 405.109 (1) or expiration of the letter of credit before presentation.
(5) An issuer shall observe standard practice of financial institutions that regularly issue letters of credit. Determination of the standard practice is a matter of interpretation for the court. The court shall offer the parties a reasonable opportunity to present evidence of the standard practice.
(6) An issuer is not responsible for any of the following:
(a) The performance or nonperformance of the underlying contract, arrangement, or transaction.
(b) An act or omission of others.
(c) Observance or knowledge of the usage of a particular trade other than the standard practice referred to in sub. (5).
(7) If an undertaking constituting a letter of credit contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.
(8) An issuer that has dishonored a presentation shall return the documents or hold them at the disposal of, and send advice to that effect to, the presenter.
(9) An issuer that has honored a presentation as permitted or required by this chapter:
(a) Is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds;