CHAPTER 405
UNIFORM COMMERCIAL CODE — LETTERS OF CREDIT
405.104 Formal requirements; signing.
405.106 Time and effect of establishment of credit.
405.107 Advice of credit; confirmation; error in statement of terms.
405.108 "Notation credit"; exhaustion of credit.
405.109 Issuer's obligation to its customer.
405.110 Availability of credit in portions; presenter's reservation of lien or claim.
405.111 Warranties on transfer and presentment.
405.112 Time allowed for honor or rejection; withholding honor or rejection by consent; "presenter".
405.114 Issuer's duty and privilege to honor; right to reimbursement.
405.115 Remedy for improper dishonor or anticipatory repudiation.
405.116 Transfer and assignment.
405.117 Insolvency of bank holding funds for documentary credit.
405.118 Security interest of issuer or nominated person.
Ch. 405 Cross-reference
Cross-reference: See definitions in s.
401.201.
405.101
405.101
Short title. This chapter shall be known and may be cited as uniform commercial code—letters of credit.
405.102(1)(a)
(a) To a credit issued by a bank if the credit requires a documentary draft or a documentary demand for payment; and
405.102(1)(b)
(b) To a credit issued by a person other than a bank if the credit requires that the draft or demand for payment be accompanied by a document of title; and
405.102(1)(c)
(c) To a credit issued by a bank or other person if the credit is not within
par. (a) or
(b) but conspicuously states that it is a letter of credit or is conspicuously so entitled.
405.102(2)
(2) Unless the engagement meets the requirements of
sub. (1), this chapter does not apply to engagements to make advances or to honor drafts or demands for payment, to authorities to pay or purchase, to guarantees or to general agreements.
405.102(3)
(3) This chapter deals with some but not all of the rules and concepts of letters of credit as such rules or concepts have developed prior to
chs. 401 to
411 or may hereafter develop. The fact that this chapter states a rule does not by itself require, imply or negate application of the same or a converse rule to a situation not provided for or to a person not specified by this chapter.
405.102 History
History: 1979 c. 89;
1991 a. 148,
304,
315.
405.103(1)(1) In this chapter unless the context otherwise requires:
405.103(1)(a)
(a) An "advising bank" is a bank which gives notification of the issuance of a credit by another bank.
405.103(1)(b)
(b) A "beneficiary" of a credit is a person who is entitled under its terms to draw or demand payment.
405.103(1)(c)
(c) A "confirming bank" is a bank which engages either that it will itself honor a credit already issued by another bank or that such a credit will be honored by the issuer or a third bank.
405.103(1)(d)
(d) "Credit" or "letter of credit" means an engagement by a bank or other person made at the request of a customer and of a kind within the scope of this chapter (
s. 405.102) that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit. A credit may be either revocable or irrevocable. The engagement may be either an agreement to honor or a statement that the bank or other person is authorized to honor.
405.103(1)(e)
(e) A "customer" is a buyer or other person who causes an issuer to issue a credit. The term also includes a bank which procures issuance or confirmation on behalf of that bank's customer.
405.103(1)(f)
(f) A "documentary draft" or "documentary demand for payment" is one the honor of which is conditioned upon the presentation of a document or documents. "Document" means any paper including document of title, security, invoice, certificate, notice of default and the like.
405.103(1)(g)
(g) An "issuer" is a bank or other person issuing a credit.
405.103(2)
(2) Other definitions applying to this chapter and the sections in which they appear are:
405.103(3)
(3) Definitions in other chapters applying to this chapter and the sections in which they appear are:
405.103(4)
(4) In addition,
ch. 401 contains general definitions and principles of construction and interpretation applicable throughout this chapter.
405.103 History
History: 1983 a. 189;
1995 a. 449.
405.104
405.104
Formal requirements; signing. 405.104(1)
(1) Except as otherwise required in
s. 405.102 (1) (c) on scope, no particular form of phrasing is required for a credit. A credit must be in writing and signed by the issuer and a confirmation must be in writing and signed by the confirming bank. A modification of the terms of a credit or confirmation must be signed by the issuer or confirming bank.
405.104(2)
(2) A telegram may be a sufficient signed writing if it identifies its sender by an authorized authentication. The authentication may be in code and the authorized naming of the issuer in an advice of credit is a sufficient signing.
405.105
405.105
Consideration. No consideration is necessary to establish a credit or to enlarge or otherwise modify its terms.
405.106
405.106
Time and effect of establishment of credit. 405.106(1)(1) Unless otherwise agreed a credit is established:
405.106(1)(a)
(a) As regards the customer as soon as a letter of credit is sent to the customer or the letter of credit or an authorized written advice of its issuance is sent to the beneficiary; and
405.106(1)(b)
(b) As regards the beneficiary when the beneficiary receives a letter of credit or an authorized written advice of its issuance.
405.106(2)
(2) Unless otherwise agreed once an irrevocable credit is established as regards the customer it can be modified or revoked only with the consent of the customer and once it is established as regards the beneficiary it can be modified or revoked only with the beneficiary's consent.
405.106(3)
(3) Unless otherwise agreed after a revocable credit is established it may be modified or revoked by the issuer without notice to or consent from the customer or beneficiary.
405.106(4)
(4) Notwithstanding any modification or revocation of a revocable credit any person authorized to honor or negotiate under the terms of the original credit is entitled to reimbursement for or honor of any draft or demand for payment duly honored or negotiated before receipt of notice of the modification or revocation and the issuer in turn is entitled to reimbursement from its customer.
405.106 History
History: 1991 a. 316.
405.107
405.107
Advice of credit; confirmation; error in statement of terms. 405.107(1)(1) Unless otherwise specified an advising bank by advising a credit issued by another bank does not assume any obligation to honor drafts drawn or demands for payment made under the credit but it does assume obligation for the accuracy of its own statement.
405.107(2)
(2) A confirming bank by confirming a credit becomes directly obligated on the credit to the extent of its confirmation as though it were its issuer and acquires the rights of an issuer.
405.107(3)
(3) Even though an advising bank incorrectly advises the terms of a credit it has been authorized to advise, the credit is established as against the issuer to the extent of its original terms.
405.107(4)
(4) Unless otherwise specified the customer bears as against the issuer all risks of transmission and reasonable translation or interpretation of any message relating to a credit.
405.107 Annotation
A correspondent bank whose function was to convey another bank's letter of credit to the beneficiary is an "advisory bank". Artex, S.R.L. v. Bank One, Milwaukee National Assoc.
801 F. Supp. 228 (1992).
405.108
405.108
"Notation credit"; exhaustion of credit. 405.108(1)
(1) A credit which specifies that any person purchasing or paying drafts drawn or demands for payment made under it must note the amount of the draft or demand on the letter or advice of credit is a "notation credit".
405.108(2)(a)
(a) A person paying the beneficiary or purchasing a draft or demand for payment from the beneficiary acquires a right to honor only if the appropriate notation is made and by transferring or forwarding for honor the documents under the credit such a person warrants to the issuer that the notation has been made; and
405.108(2)(b)
(b) Unless the credit or a signed statement that an appropriate notation has been made accompanies the draft or demand for payment the issuer may delay honor until evidence of notation has been procured which is satisfactory to it but its obligation and that of its customer continue for a reasonable time not exceeding 30 days to obtain such evidence.
405.108(3)
(3) If the credit is not a notation credit:
405.108(3)(a)
(a) The issuer may honor complying drafts or demands for payment presented to it in the order in which they are presented and is discharged to the extent of the draft or demand by honor of any such draft or demand;
405.108(3)(b)
(b) As between competing good faith purchasers of complying drafts or demands the person first purchasing has priority over a subsequent purchaser even though the later purchased draft or demand has been first honored.
405.108 History
History: 1979 c. 110; 199;
1991 a. 316.
405.109
405.109
Issuer's obligation to its customer. 405.109(1)
(1) An issuer's obligation to its customer includes good faith and observance of any general banking usage but unless otherwise agreed does not include liability or responsibility:
405.109(1)(a)
(a) For performance of the underlying contract for sale or other transaction between the customer and the beneficiary; or
405.109(1)(b)
(b) For any act or omission of any person other than itself or its own branch or for loss or destruction of a draft, demand or document in transit or in the possession of others; or
405.109(1)(c)
(c) Based on knowledge or lack of knowledge of any usage of any particular trade.
405.109(2)
(2) An issuer must examine documents with care so as to ascertain that on their face they appear to comply with the terms of the credit but unless otherwise agreed assumes no liability or responsibility for the genuineness, falsification or effect of any document which appears on such examination to be regular on its face.
