2023 Texas Statutes › Business and Commerce Code › Title 1 - Uniform Commercial Code › Chapter 5 - Letters of Credit › Section 5.108. Issuer's Rights and Obligations

Sec. 5.108.  ISSUER'S RIGHTS AND OBLIGATIONS.  (a)  Except as otherwise provided in Section 5.109, an issuer shall honor a presentation that, as determined by the standard practice referred to in Subsection (e), appears on its face strictly to comply with the terms and conditions of the letter of credit.  Except as otherwise provided in Section 5.113 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 date 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 Subsection (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 Subsection (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 Section 5.109(a) 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 Subsection (e).
(g)  If an undertaking constituting a letter of credit under Section 5.102(a)(10) 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 chapter:
(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 3.414 and 3.415;
(4)  except as otherwise provided in Sections 5.110 and 5.117, 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 that 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.
Amended by Acts 1999, 76th Leg., ch. 4, Sec. 1, eff. Sept. 1, 1999.