CA Com Code Section 5108


(a)

Except as otherwise provided in Section 5109, an issuer shall honor a presentation that, as determined by the standard practice referred to in subdivision (e), appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise provided in Section 5113 and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.

(b)

An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day of its receipt of documents:

(1)

to honor,

(2)

if the letter of credit provides for honor to be completed more than seven business days after presentation, to accept a draft or incur a deferred obligation, or

(3)

to give notice to the presenter of discrepancies in the presentation.

(c)

Except as otherwise provided in subdivision (d), 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.

(d)

Failure to give the notice specified in subdivision (b) 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 subdivision (a) of Section 5109 or expiration of the letter of credit before presentation.

(e)

An issuer shall observe standard practice of financial institutions that regularly issue letters of credit. Determination of the issuer’s observance 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.

(f)

An issuer is not responsible for:

(1)

the performance or nonperformance of the underlying contract, arrangement, or transaction,

(2)

an act or omission of others, or

(3)

observance or knowledge of the usage of a particular trade other than the standard practice referred to in subdivision (e).

(g)

If an undertaking constituting a letter of credit under paragraph (10) of subdivision (a) of Section 5102 contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.

(h)

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.

(i)

An issuer that has honored a presentation as permitted or required by this division:

(1)

is entitled to be reimbursed by the applicant in immediately available funds not later than the date of its payment of funds;

(2)

takes the documents free of claims of the beneficiary or presenter;

(3)

is precluded from asserting a right of recourse on a draft under Sections 3414 and 3415;

(4)

except as otherwise provided in Sections 5110 and 5117, is precluded from restitution of money paid or other value given by mistake to the extent the mistake concerns discrepancies in the documents or tender which are apparent on the face of the presentation; and

(5)

is discharged to the extent of its performance under the letter of credit unless the issuer honored a presentation in which a required signature of a beneficiary was forged.
Last Updated

Aug. 19, 2023

§ 5108’s source at ca​.gov