Sec. 42a-5-109. Fraud and forgery.
Sec. 42a-5-109. Fraud and forgery. (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; and (2) the issuer, acting in good
faith, may honor or dishonor the presentation in any other case.
(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 subdivision (1) of subsection (a) of this
section.
(1959, P.A. 133, S. 5-109; P.A. 96-198, S. 9.)
History: P.A. 96-198 entirely replaced former provisions re the obligation of the issuer to its customer with provisions
re the honoring of a presentation when there is fraud or forgery, in part a restatement of Sec. 42a-5-114(2), revised to 1995,
and the standards for the issuance of injunctive or other relief.
See Sec. 42a-5-108 for successor provisions to Sec. 42a-5-109, revised to 1995, re issuer's obligation to its customer.
Cited. 173 C. 492. Cited. 203 C. 394.