70A-5-109 - Fraud and forgery.
70A-5-109. Fraud and forgery.
(1) If a presentation is made that appears on its face strictly to comply with the terms andconditions of the letter of credit, but a required document is forged or materially fraudulent, orhonor of the presentation would facilitate a material fraud by the beneficiary on the issuer orapplicant:
(a) 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 ormaterial 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 takenafter acceptance by the issuer or nominated person; or
(iv) an assignee of the issuer's or nominated person's deferred obligation that was takenfor value and without notice of forgery or material fraud after the obligation was incurred by theissuer or nominated person; and
(b) the issuer, acting in good faith, may honor or dishonor the presentation in any othercase.
(2) If an applicant claims that a required document is forged or materially fraudulent orthat honor of the presentation would facilitate a material fraud by the beneficiary on the issuer orapplicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuerfrom honoring a presentation or grant similar relief against the issuer or other persons only if thecourt finds that:
(a) the relief is not prohibited under the law applicable to an accepted draft or deferredobligation incurred by the issuer;
(b) a beneficiary, issuer, or nominated person who may be adversely affected isadequately protected against loss that it may suffer because the relief is granted;
(c) all of the conditions to entitle a person to the relief under the law of this state havebeen met; and
(d) on the basis of the information submitted to the court, the applicant is more likely thannot to succeed under its claim of forgery or material fraud and the person demanding honor doesnot qualify for protection under Subsection (1)(a).
Repealed and Re-enacted by Chapter 241, 1997 General Session