(a) If a presentation is made that appears on its face strictly to comply with the
terms and conditions of the letter of credit, but a required document is forged or
materially fraudulent, or honor of the presentation would facilitate a material fraud
by the beneficiary on the issuer or applicant:
(1) The issuer shall honor the presentation, if honor is demanded by (i) a nominated
person who has given value in good faith and without notice of forgery or material
fraud, (ii) a confirmer who has honored its confirmation in good faith, (iii) a holder
in due course of a draft drawn under the letter of credit which was taken after acceptance
by the issuer or nominated person, or (iv) an assignee of the issuer's or nominated
person's deferred obligation that was taken for value and without notice of forgery
or material fraud after the obligation was incurred by the issuer or nominated person;
(2) The issuer, acting in good faith, may honor or dishonor the presentation in any
(b) If an applicant claims that a required document is forged or materially fraudulent
or that honor of the presentation would facilitate a material fraud by the beneficiary
on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently
enjoin the issuer from honoring a presentation or grant similar relief against the
issuer or other persons only if the court finds that:
(1) The relief is not prohibited under the law applicable to an accepted draft or
deferred obligation incurred by the issuer;
(2) A beneficiary, issuer, or nominated person who may be adversely affected is adequately
protected against loss that it may suffer because the relief is granted;
(3) All of the conditions to entitle a person to the relief under the law of this
State have been met; and
(4) On the basis of the information submitted to the court, the applicant is more
likely than not to succeed under its claim of forgery or material fraud and the person
demanding honor does not qualify for protection under subsection (a)(1).
FindLaw Codes may not reflect the most recent version of the law in your jurisdiction. Please verify the status of the code you are researching with the state legislature or via Westlaw before relying on it for your legal needs.
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