House Bill 0515

CODING: Words stricken are deletions; words underlined are additions.







    Florida House of Representatives - 1999                 HB 515

        By Representative C. Green






  1                      A bill to be entitled

  2         An act relating to letters of credit under the

  3         Uniform Commercial Code; amending ss. 675.101,

  4         675.102, 675.103, 675.104, 675.105, 675.106,

  5         675.107, 675.108, 675.109, 675.110, 675.111,

  6         675.112, 675.113, 675.114, 675.115, 675.116,

  7         and 675.117, F.S.; revising article 5 of the

  8         Uniform Commercial Code relating to letters of

  9         credit; providing scope, application, effect;

10         providing definitions; providing formal

11         requirements; providing that consideration is

12         unnecessary; providing for issuance, amendment,

13         cancellation, and duration; specifying rights

14         and obligations of confirmers, nominated

15         persons, and advisers; providing issuer's

16         rights and obligations; providing procedures

17         for counteracting fraud and forgery; specifying

18         certain warranties; providing remedies;

19         providing for transfers of letters of credit;

20         providing for transfers by operation of law;

21         providing for assignment of proceeds of letters

22         of credit; providing a statute of limitations;

23         providing for a choice of law and forum;

24         providing for subrogation of issuers,

25         applicants, and nominated persons; providing

26         applications; amending ss. 671.105, 672.512,

27         679.103, 679.104, 679.105, 679.106, 679.304,

28         and 679.305, F.S., to conform; providing an

29         effective date.

30

31  Be It Enacted by the Legislature of the State of Florida:

                                  1

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         Section 1.  Sections 675.101, 675.102, 675.103,

  2  675.104, 675.105, 675.106, 675.107, 675.108, 675.109, 675.110,

  3  675.111, 675.112, 675.113, 675.115, 675.116, and 675.117,

  4  Florida Statutes, and section 675.114, Florida Statutes, 1998

  5  Supplement, are amended to read:

  6         (Substantial rewording of sections.  See

  7         ss. 675.101, 675.102, 675.103, 675.104, 675.105,

  8         675.106, 675.107, 675.108, 675.109, 675.110,

  9         675.111, 675.112, 675.113, 675.115, 675.116,

10         and 675.117, F.S., and s. 675.114, F.S.,

11         1998 Supp., for present text.)

12         675.101  Short title.--This chapter may be cited as the

13  "Uniform Commercial Code--Letters of Credit."

14         675.102  Scope.--

15         (1)  This chapter applies to letters of credit and to

16  certain rights and obligations arising out of transactions

17  involving letters of credit.

18         (2)  The statement of a rule in this chapter does not

19  by itself require, imply, or negate application of the same or

20  a different rule to a situation not provided for, or to a

21  person not specified, in this chapter.

22         (3)  With the exception of this subsection, subsections

23  (1) and (4), s. 675.103(1)(i) and (j), s. 675.106(4), and s.

24  675.114(4), and except to the extent prohibited in ss.

25  671.102(3) and 675.117(4), the effect of this chapter may be

26  varied by agreement or by a provision stated or incorporated

27  by reference in an undertaking.  A term in an agreement or

28  undertaking generally excusing liability or generally limiting

29  remedies for failure to perform obligations is not sufficient

30  to vary obligations prescribed by this chapter.

31

                                  2

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (4)  Rights and obligations of an issuer to a

  2  beneficiary or a nominated person under a letter of credit are

  3  independent of the existence, performance, or nonperformance

  4  of a contract or arrangement out of which the letter of credit

  5  arises or which underlies it, including contracts or

  6  arrangements between the issuer and the applicant and between

  7  the applicant and the beneficiary.

  8         675.103  Definitions.--

  9         (1)  For purposes of this chapter:

10         (a)  "Adviser" means a person who, at the request of

11  the issuer, a confirmer, or another adviser, notifies or

12  requests another adviser to notify the beneficiary that a

13  letter of credit has been issued, confirmed, or amended.

14         (b)  "Applicant" means a person at whose request or for

15  whose account a letter of credit is issued.  The term includes

16  a person who requests an issuer to issue a letter of credit on

17  behalf of another if the person making the request undertakes

18  an obligation to reimburse the issuer.

19         (c)  "Beneficiary" means a person who under the terms

20  of a letter of credit is entitled to have its complying

21  presentation honored.  The term includes a person to whom

22  drawing rights have been transferred under a transferable

23  letter of credit.

24         (d)  "Confirmer" means a nominated person who

25  undertakes, at the request or with the consent of the issuer,

26  to honor a presentation under a letter of credit issued by

27  another.

28         (e)  "Dishonor" of a letter of credit means failure

29  timely to honor or to take an interim action, such as

30  acceptance of a draft, that may be required by the letter of

31  credit.

                                  3

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (f)  "Document" means a draft or other demand, document

  2  of title, investment security, certificate, invoice, or other

  3  record, statement, or representation of fact, law, right, or

  4  opinion which is presented in a written or other medium

  5  permitted by the letter of credit or, unless prohibited by the

  6  letter of credit, by the standard practice referred to in s.

  7  675.108(5) and which is capable of being examined for

  8  compliance with the terms and conditions of the letter of

  9  credit.  A document may not be oral.

10         (g)  "Good faith" means honesty in fact in the conduct

11  or transaction concerned.

12         (h)  "Honor" of a letter of credit means performance of

13  the issuer's undertaking in the letter of credit to pay or

14  deliver an item of value.  Unless the letter of credit

15  otherwise provides, "honor" occurs

16         1.  Upon payment;

17         2.  If the letter of credit provides for acceptance,

18  upon acceptance of a draft and paying the draft at maturity;

19  or

20         3.  If the letter of credit provides for incurring a

21  deferred obligation, upon incurring the obligation and

22  performing the obligation at maturity.

23         (i)  "Issuer" means a bank or other person that issues

24  a letter of credit, but does not include an individual who

25  makes an engagement for personal, family, or household

26  purposes.

27         (j)  "Letter of credit" means a definite undertaking

28  that satisfies the requirements of s. 675.104 by an issuer to

29  a beneficiary at the request or for the account of an

30  applicant or, in the case of a financial institution, to

31

                                  4

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  itself or for its own account, to honor a documentary

  2  presentation by payment or delivery of an item of value.

  3         (k)  "Nominated person" means a person whom the issuer

  4  designates or authorizes to pay, accept, negotiate, or

  5  otherwise give value under a letter of credit and undertakes

  6  by agreement or custom and practice to reimburse.

  7         (l)  "Presentation" means delivery of a document to an

  8  issuer or nominated person for honor or giving of value under

  9  a letter of credit.

10         (m)  "Presenter" means a person making a presentation

11  as or on behalf of a beneficiary or nominated person.

12         (n)  "Record" means information that is inscribed on a

13  tangible medium or that is stored in an electronic or other

14  medium and is retrievable in perceivable form.

15         (o)  "Successor of a beneficiary" means a person who

16  succeeds to substantially all of the rights of a beneficiary

17  by operation of law, including a corporation with or into

18  which the beneficiary has been merged or consolidated, an

19  administrator, executor, personal representative, trustee in

20  bankruptcy, debtor in possession, liquidator, and receiver.

21         (2)  The following definitions and the sections in

22  which they appear in other chapters apply to this chapter:

23         "Acceptance," s. 673.4091.

24         "Value," s. 673.3031 and s. 674.2111.

25         (3)  The provisions of part II of chapter 671 apply to

26  this chapter.

27         675.104  Formal requirements.--A letter of credit,

28  confirmation, advice, transfer, amendment, or cancellation may

29  be issued in any form that is a record and is authenticated by

30  a signature or in accordance with the agreement of the parties

31  or the standard practice referred to in s. 675.108(5).

                                  5

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         675.105  Consideration.--Consideration is not required

  2  to issue, amend, transfer, or cancel a letter of credit,

  3  advice, or confirmation.

  4         675.106  Issuance, amendment, cancellation, and

  5  duration.--

  6         (1)  A letter of credit is issued and becomes

  7  enforceable according to its terms against the issuer when the

  8  issuer sends or otherwise transmits it to the person requested

  9  to advise or to the beneficiary.  A letter of credit is

10  revocable only if it so provides.

11         (2)  After a letter of credit is issued, rights and

12  obligations of a beneficiary, applicant, confirmer, and issuer

13  are not affected by an amendment or cancellation to which that

14  person has not consented except to the extent the letter of

15  credit provides that it is revocable or that the issuer may

16  amend or cancel the letter of credit without that consent.

17         (3)  If there is no stated expiration date or other

18  provision that determines its duration, a letter of credit

19  expires one year after its stated date of issuance or, if none

20  is stated, after the date on which it is issued.

21         (4)  A letter of credit that states that it is

22  perpetual expires 5 years after its stated date of issuance

23  or, if none is stated, after the date on which it is issued.

24         675.107  Confirmer, nominated person, and adviser.--

25         (1)  A confirmer is directly obligated on a letter of

26  credit and has the rights and obligations of an issuer to the

27  extent of its confirmation.  The confirmer also has rights

28  against and obligations to the issuer as if the issuer were an

29  applicant and the confirmer had issued the letter of credit at

30  the request and for the account of the issuer.

31

                                  6

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (2)  A nominated person who is not a confirmer is not

  2  obligated to honor or otherwise give value for a presentation.

  3         (3)  A person requested to advise may decline to act as

  4  an adviser.  An adviser that is not a confirmer is not

  5  obligated to honor or give value for a presentation.  An

  6  adviser undertakes to the issuer and to the beneficiary

  7  accurately to advise the terms of the letter of credit,

  8  confirmation, amendment, or advice received by that person and

  9  undertakes to the beneficiary to check the apparent

10  authenticity of the request to advise.  Even if the advice is

11  inaccurate, the letter of credit, confirmation, or amendment

12  is enforceable as issued.

13         (4)  A person who notifies a transferee beneficiary of

14  the terms of a letter of credit, confirmation, amendment, or

15  advice has the rights and obligations of an adviser under

16  subsection (3).  The terms in the notice to the transferee

17  beneficiary may differ from the terms in any notice to the

18  transferor beneficiary to the extent permitted by the letter

19  of credit, confirmation, amendment, or advice received by the

20  person who so notifies.

21         675.108  Issuer's rights and obligations.--

22         (1)  Except as otherwise provided in s. 675.109, an

23  issuer shall honor a presentation that, as determined by the

24  standard practice referred to in subsection (5), appears on

25  its face strictly to comply with the terms and conditions of

26  the letter of credit.  Except as otherwise provided in s.

27  675.113 and unless otherwise agreed with the applicant, an

28  issuer shall dishonor a presentation that does not appear so

29  to comply.

30

31

                                  7

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (2)  An issuer has a reasonable time after

  2  presentation, but not beyond the end of the seventh business

  3  day of the issuer after the day of its receipt of documents:

  4         (a)  To honor;

  5         (b)  If the letter of credit provides for honor to be

  6  completed more than 7 business days after presentation, to

  7  accept a draft or incur a deferred obligation; or

  8         (c)  To give notice to the presenter of discrepancies

  9  in the presentation.

10         (3)  Except as otherwise provided in subsection (4), an

11  issuer is precluded from asserting as a basis for dishonor any

12  discrepancy if timely notice is not given, or any discrepancy

13  not stated in the notice if timely notice is given.

14         (4)  Failure to give the notice specified in subsection

15  (2) or to mention fraud, forgery, or expiration in the notice

16  does not preclude the issuer from asserting as a basis for

17  dishonor fraud or forgery as described in s. 675.109(1) or

18  expiration of the letter of credit before presentation.

19         (5)  An issuer shall observe standard practice of

20  financial institutions that regularly issue letters of credit.

21  Determination of the issuer's observance of the standard

22  practice is a matter of interpretation for the court.  The

23  court shall offer the parties a reasonable opportunity to

24  present evidence of the standard practice.

25         (6)  An issuer is not responsible for:

26         (a)  The performance or nonperformance of the

27  underlying contract, arrangement, or transaction;

28         (b)  An act or omission of others; or

29         (c)  Observance or knowledge of the usage of a

30  particular trade other than the standard practice referred to

31  in subsection (5).

                                  8

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (7)  If an undertaking constituting a letter of credit

  2  under s. 675.103(1)(j) contains nondocumentary conditions, an

  3  issuer shall disregard the nondocumentary conditions and treat

  4  such conditions as if unstated.

  5         (8)  An issuer that has dishonored a presentation shall

  6  return the documents or hold them at the disposal of, and send

  7  advice to that effect to, the presenter.

  8         (9)  An issuer that has honored a presentation as

  9  permitted or required by this chapter:

10         (a)  Is entitled to be reimbursed by the applicant in

11  immediately available funds not later than the date of its

12  payment of funds.

13         (b)  Takes the documents free of claims of the

14  beneficiary or presenter.

15         (c)  Is precluded from asserting a right of recourse on

16  a draft under ss. 673.4141 and 673.4151.

17         (d)  Except as otherwise provided in ss. 675.110 and

18  675.117, is precluded from restitution of money paid or other

19  value given by mistake to the extent the mistake concerns

20  discrepancies in the documents or tender which are apparent on

21  the face of the presentation.

22         (e)  Is discharged to the extent of its performance

23  under the letter of credit unless the issuer honored a

24  presentation in which a required signature of a beneficiary

25  was forged.

26         675.109  Fraud and forgery.--

27         (1)  If a presentation is made that appears on its face

28  strictly to comply with the terms and conditions of the letter

29  of credit, but a required document is forged or materially

30  fraudulent, or honor of the presentation would facilitate a

31  material fraud by the beneficiary on the issuer or applicant:

                                  9

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (a)  The issuer shall honor the presentation, if honor

  2  is demanded by:

  3         1.  A nominated person who has given value in good

  4  faith and without notice of forgery or material fraud;

  5         2.  A confirmer who has honored its confirmation in

  6  good faith;

  7         3.  A holder in due course of a draft drawn under the

  8  letter of credit which was taken after acceptance by the

  9  issuer or nominated person; or

10         4.  An assignee of the issuer's or nominated person's

11  deferred obligation that was taken for value and without

12  notice of forgery or material fraud after the obligation was

13  incurred by the issuer or nominated person.

14         (b)  The issuer, acting in good faith, may honor or

15  dishonor the presentation in any other case.

16         (2)  If an applicant claims that a required document is

17  forged or materially fraudulent or that honor of the

18  presentation would facilitate a material fraud by the

19  beneficiary on the issuer or applicant, a court of competent

20  jurisdiction may temporarily or permanently enjoin the issuer

21  from honoring a presentation or grant similar relief against

22  the issuer or other persons only if the court finds that:

23         (a)  The relief is not prohibited under the law

24  applicable to an accepted draft or deferred obligation

25  incurred by the issuer;

26         (b)  A beneficiary, issuer, or nominated person who may

27  be adversely affected is adequately protected against loss

28  that it may suffer because the relief is granted;

29         (c)  All of the conditions to entitle a person to the

30  relief under the laws of this state have been met; and

31

                                  10

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (d)  On the basis of the information submitted to the

  2  court, the applicant is more likely than not to succeed under

  3  its claim of forgery or material fraud and the person

  4  demanding honor does not qualify for protection under

  5  paragraph (1)(a).

  6         675.110  Warranties.--

  7         (1)  If a beneficiary's presentation is honored, the

  8  beneficiary warrants:

  9         (a)  To the issuer, any other person to whom

10  presentation is made, and the applicant that there is no fraud

11  or forgery of the kind described in s. 675.109(1); and

12         (b)  To the applicant that the drawing does not violate

13  any agreement between the applicant and beneficiary or any

14  other agreement intended by them to be augmented by the letter

15  of credit.

16         (2)  The warranties in subsection (1) are in addition

17  to warranties arising under chapters 673, 674, 677, and 678

18  because of the presentation or transfer of documents covered

19  by any of those chapters.

20         675.111  Remedies.--

21         (1)  If an issuer wrongfully dishonors or repudiates

22  its obligation to pay money under a letter of credit before

23  presentation, the beneficiary, successor, or nominated person

24  presenting on its own behalf may recover from the issuer the

25  amount that is the subject of the dishonor or repudiation.  If

26  the issuer's obligation under the letter of credit is not for

27  the payment of money, the claimant may obtain specific

28  performance or, at the claimant's election, recover an amount

29  equal to the value of performance from the issuer.  In either

30  case, the claimant may also recover incidental but not

31  consequential damages.  The claimant is not obligated to take

                                  11

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  action to avoid damages that might be due from the issuer

  2  under this subsection.  If, although not obligated to do so,

  3  the claimant avoids damages, the claimant's recovery from the

  4  issuer must be reduced by the amount of damages avoided.  The

  5  issuer has the burden of proving the amount of damages

  6  avoided.  In the case of repudiation the claimant need not

  7  present any document.

  8         (2)  If an issuer wrongfully dishonors a draft or

  9  demand presented under a letter of credit or honors a draft or

10  demand in breach of its obligation to the applicant, the

11  applicant may recover damages resulting from the breach,

12  including incidental but not consequential damages, less any

13  amount saved as a result of the breach.

14         (3)  If an adviser or nominated person other than a

15  confirmer breaches an obligation under this chapter or an

16  issuer breaches an obligation not covered in subsection (1) or

17  subsection (2), a person to whom the obligation is owed may

18  recover damages resulting from the breach, including

19  incidental but not consequential damages, less any amount

20  saved as a result of the breach.  To the extent of the

21  confirmation, a confirmer has the liability of an issuer

22  specified in this subsection and subsections (1) and (2).

23         (4)  An issuer, nominated person, or adviser who is

24  found liable under subsection (1), subsection (2), or

25  subsection (3) shall pay interest on the amount owed

26  thereunder from the date of wrongful dishonor or other

27  appropriate date.

28         (5)  Reasonable attorney's fees and other expenses of

29  litigation must be awarded to the prevailing party in an

30  action in which a remedy is sought under this chapter.

31

                                  12

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (6)  Damages that would otherwise be payable by a party

  2  for breach of an obligation under this chapter may be

  3  liquidated by agreement or undertaking, but only in an amount

  4  or by a formula that is reasonable in light of the harm

  5  anticipated.

  6         675.112  Transfer of letter of credit.--

  7         (1)  Except as otherwise provided in s. 675.113, unless

  8  a letter of credit provides that it is transferable, the right

  9  of a beneficiary to draw or otherwise demand performance under

10  a letter of credit may not be transferred.

11         (2)  Even if a letter of credit provides that it is

12  transferable, the issuer may refuse to recognize or carry out

13  a transfer if:

14         (a)  The transfer would violate applicable law; or

15         (b)  The transferor or transferee has failed to comply

16  with any requirement stated in the letter of credit or any

17  other requirement relating to transfer imposed by the issuer

18  which is within the standard practice referred to in s.

19  675.108(5) or is otherwise reasonable under the circumstances.

20         675.113  Transfer by operation of law.--

21         (1)  A successor of a beneficiary may consent to

22  amendments, sign and present documents, and receive payment or

23  other items of value in the name of the beneficiary without

24  disclosing its status as a successor.

25         (2)  A successor of a beneficiary may consent to

26  amendments, sign and present documents, and receive payment or

27  other items of value in its own name as the disclosed

28  successor of the beneficiary.  Except as otherwise provided in

29  subsection (5), an issuer shall recognize a disclosed

30  successor of a beneficiary as beneficiary in full substitution

31  for its predecessor upon compliance with the requirements for

                                  13

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  recognition by the issuer of a transfer of drawing rights by

  2  operation of law under the standard practice referred to in s.

  3  675.108(5) or, in the absence of such a practice, compliance

  4  with other reasonable procedures sufficient to protect the

  5  issuer.

  6         (3)  An issuer is not obliged to determine whether a

  7  purported successor is a successor of a beneficiary or whether

  8  the signature of a purported successor is genuine or

  9  authorized.

10         (4)  Honor of a purported successor's apparently

11  complying presentation under subsection (1) or (2) has the

12  consequences specified in s. 675.108(9) even if the purported

13  successor is not the successor of a beneficiary.  Documents

14  signed in the name of the beneficiary or of a disclosed

15  successor by a person who is neither the beneficiary nor the

16  successor of the beneficiary are forged documents for the

17  purposes of s. 675.109.

18         (5)  An issuer whose rights of reimbursement are not

19  covered by subsection (4) or substantially similar law and any

20  confirmer or nominated person may decline to recognize a

21  presentation under subsection (2).

22         (6)  A beneficiary whose name is changed after the

23  issuance of a letter of credit has the same rights and

24  obligations as a successor of a beneficiary under this

25  section.

26         675.114  Assignment of proceeds.--

27         (1)  For purposes of this section, the term "proceeds

28  of a letter of credit" means the cash, check, accepted draft,

29  or other item of value paid or delivered upon honor or giving

30  of value by the issuer or any nominated person under the

31

                                  14

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  letter of credit.  The term does not include a beneficiary's

  2  drawing rights or documents presented by the beneficiary.

  3         (2)  A beneficiary may assign its right to part or all

  4  of the proceeds of a letter of credit.  The beneficiary may do

  5  so before presentation as a present assignment of its right to

  6  receive proceeds contingent upon its compliance with the terms

  7  and conditions of the letter of credit.

  8         (3)  An issuer or nominated person need not recognize

  9  an assignment of proceeds of a letter of credit until it

10  consents to the assignment.

11         (4)  An issuer or nominated person has no obligation to

12  give or withhold its consent to an assignment of proceeds of a

13  letter of credit, but consent may not be unreasonably withheld

14  if the assignee possesses and exhibits the letter of credit

15  and presentation of the letter of credit is a condition to

16  honor.

17         (5)  Rights of a transferee beneficiary or nominated

18  person are independent of the beneficiary's assignment of the

19  proceeds of a letter of credit and are superior to the

20  assignee's right to the proceeds.

21         (6)  Neither the rights recognized by this section

22  between an assignee and an issuer, transferee beneficiary, or

23  nominated person nor the issuer's or nominated person's

24  payment of proceeds to an assignee or a third person affect

25  the rights between the assignee and any person other than the

26  issuer, transferee beneficiary, or nominated person.  The mode

27  of creating and perfecting a security interest in or granting

28  an assignment of a beneficiary's rights to proceeds is

29  governed by chapter 679 or other law.  Against persons other

30  than the issuer, transferee beneficiary, or nominated person,

31  the rights and obligations arising upon the creation of a

                                  15

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  security interest or other assignment of a beneficiary's right

  2  to proceeds and its perfection are governed by chapter 679 or

  3  other law.

  4         675.115  Statute of limitations.--An action to enforce

  5  a right or obligation arising under this chapter must be

  6  commenced within 1 year after the expiration date of the

  7  relevant letter of credit or 1 year after the cause of action

  8  accrues, whichever occurs later.  A cause of action accrues

  9  when the breach occurs, regardless of the aggrieved party's

10  lack of knowledge of the breach.

11         675.116  Choice of law and forum.--

12         (1)  The liability of an issuer, nominated person, or

13  adviser for action or omission is governed by the law of the

14  jurisdiction chosen by an agreement in the form of a record

15  signed or otherwise authenticated by the affected parties in

16  the manner provided in s. 675.104 or by a provision in the

17  person's letter of credit, confirmation, or other undertaking.

18  The jurisdiction whose law is chosen need not bear any

19  relation to the transaction.

20         (2)  Unless subsection (1) applies, the liability of an

21  issuer, nominated person, or adviser for action or omission is

22  governed by the law of the jurisdiction in which the person is

23  located.  The person is considered to be located at the

24  address indicated in the person's undertaking.  If more than

25  one address is indicated, the person is considered to be

26  located at the address from which the person's undertaking was

27  issued.  For the purpose of jurisdiction, choice of law, and

28  recognition of interbranch letters of credit, but not

29  enforcement of a judgment, all branches of a bank are

30  considered separate juridical entities and a bank is

31

                                  16

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  considered to be located at the place where its relevant

  2  branch is considered to be located under this subsection.

  3         (3)  Except as otherwise provided in this subsection,

  4  the liability of an issuer, nominated person, or adviser is

  5  governed by any rules of custom or practice, such as the

  6  Uniform Customs and Practice for Documentary Credits, to which

  7  the letter of credit, confirmation, or other undertaking is

  8  expressly made subject.  If this chapter governs the liability

  9  of an issuer, nominated person, or adviser under subsection

10  (1) or (2), the relevant undertaking incorporates rules of

11  custom or practice, and there is conflict between this chapter

12  and such rules as applied to that undertaking, such rules

13  govern except to the extent of any conflict with the

14  nonvariable provisions specified in s. 675.102(3).

15         (4)  This chapter governs to the extent of any conflict

16  between this chapter and chapter 670, chapter 673, chapter

17  674, or chapter 679.

18         (5)  The forum for settling disputes arising out of an

19  undertaking within this chapter may be chosen in the manner

20  and with the binding effect that governing law may be chosen

21  in accordance with subsection (1).

22         675.117  Subrogation of issuer, applicant, and

23  nominated person.--

24         (1)  An issuer that honors a beneficiary's presentation

25  is subrogated to the rights of the beneficiary to the same

26  extent as if the issuer were a secondary obligor of the

27  underlying obligation owed to the beneficiary and of the

28  applicant to the same extent as if the issuer were the

29  secondary obligor of the underlying obligation owed to the

30  applicant.

31

                                  17

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         (2)  An applicant that reimburses an issuer is

  2  subrogated to the rights of the issuer against any

  3  beneficiary, presenter, or nominated person to the same extent

  4  as if the applicant were the secondary obligor of the

  5  obligations owed to the issuer and has the rights of

  6  subrogation of the issuer to the rights of the beneficiary

  7  stated in subsection (1).

  8         (3)  A nominated person who pays or gives value against

  9  a draft or demand presented under a letter of credit is

10  subrogated to the rights of:

11         (a)  The issuer against the applicant to the same

12  extent as if the nominated person were a secondary obligor of

13  the obligation owed to the issuer by the applicant;

14         (b)  The beneficiary to the same extent as if the

15  nominated person were a secondary obligor of the underlying

16  obligation owed to the beneficiary; and

17         (c)  The applicant to the same extent as if the

18  nominated person were a secondary obligor of the underlying

19  obligation owed to the applicant.

20         (4)  Notwithstanding any agreement or term to the

21  contrary, the rights of subrogation stated in subsections (1)

22  and (2) do not arise until the issuer honors the letter of

23  credit or otherwise pays and the rights in subsection (3) do

24  not arise until the nominated person pays or otherwise gives

25  value.  Until then, the issuer, nominated person, and the

26  applicant do not derive under this section present or

27  prospective rights forming the basis of a claim, defense, or

28  excuse.

29         Section 2.  Subsection (2) of section 671.105, Florida

30  Statutes, 1998 Supplement, is amended to read:

31

                                  18

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         671.105  Territorial application of the code; parties'

  2  power to choose applicable law.--

  3         (2)  When one of the following provisions of this code

  4  specifies the applicable law, that provision governs; and a

  5  contrary agreement is effective only to the extent permitted

  6  by the law (including the conflict-of-laws rules) so

  7  specified:

  8         (a)  Governing law in the chapter on funds transfers.

  9  (s. 670.507)

10         (b)  Rights of sellers' creditors against sold goods.

11  (s. 672.402)

12         (c)  Applicability of the chapter on bank deposits and

13  collections. (s. 674.102)

14         (d)  Applicability of the chapter on letters of credit.

15  (s. 675.116)

16         (e)(d)  Applicability of the chapter on investment

17  securities. (s. 678.1061)

18         (f)(e)  Perfection provisions of the chapter on secured

19  transactions. (s. 679.103)

20         (g)(f)  Applicability of the chapter on leases.  (ss.

21  680.1051 and 680.1061)

22         Section 3.  Paragraph (b) of subsection (1) of section

23  672.512, Florida Statutes, is amended to read:

24         672.512  Payment by buyer before inspection.--

25         (1)  Where the contract requires payment before

26  inspection nonconformity of the goods does not excuse the

27  buyer from so making payment unless:

28         (b)  Despite tender of the required documents the

29  circumstances would justify injunction against honor under the

30  provisions of this code (s. 675.109(2) 675.114).

31

                                  19

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         Section 4.  Paragraph (a) of subsection (1) of section

  2  679.103, Florida Statutes, 1998 Supplement, is amended to

  3  read:

  4         679.103  Perfection of security interests in multiple

  5  state transactions.--

  6         (1)  DOCUMENTS, INSTRUMENTS, LETTERS OF CREDIT, AND

  7  ORDINARY GOODS.--

  8         (a)  This subsection applies to documents, and

  9  instruments, rights to proceeds of written letters of credit,

10  and to goods other than those covered by a certificate of

11  title described in subsection (2), mobile goods described in

12  subsection (3), and minerals described in subsection (5).

13         Section 5.  Subsections (11) and (12) of section

14  679.104, Florida Statutes, are amended, and subsection (13) is

15  added to said section, to read:

16         679.104  Transactions excluded from chapter.--This

17  chapter does not apply:

18         (11)  To a transfer in whole or in part of any claim

19  arising out of tort; or

20         (12)  To a transfer of any interest in any deposit

21  account (s. 679.105(1)), except as provided with respect to

22  proceeds (s. 679.306) and priorities on proceeds (s. 679.312);

23  or.

24         (13)  To a transfer of an interest in a letter of

25  credit other than the rights to proceeds of a written letter

26  of credit.

27         Section 6.  Subsection (3) of section 679.105, Florida

28  Statutes, 1998 Supplement, is amended to read:

29         679.105  Definitions and index of definitions.--

30         (3)  The following definitions in other chapters apply

31  to this chapter:

                                  20

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1         "Broker," s. 678.1021.

  2         "Certificated security," s. 678.1021.

  3         "Check," s. 673.1041.

  4         "Clearing corporation," s. 678.1021.

  5         "Contract for sale," s. 672.106.

  6         "Control," s. 678.1061.

  7         "Delivery," s. 678.3011.

  8         "Entitlement holder," s. 678.1021.

  9         "Financial asset," s. 678.1021.

10         "Holder in due course," s. 673.3021.

11         "Letter of credit," s. 675.103.

12         "Note," s. 673.1041.

13         "Proceeds of a letter of credit," s. 675.114(1).

14         "Sale," s. 672.106.

15         "Securities intermediary," s. 678.1021.

16         "Security," s. 678.1021.

17         "Security certificate," s. 678.1021.

18         "Security entitlement," s. 678.1021.

19         "Uncertified security," s. 678.1021.

20         Section 7.  Section 679.106, Florida Statutes, 1998

21  Supplement, is amended to read:

22         679.106  Definitions: "account"; "general

23  intangibles."--"Account" means any right to payment for goods

24  sold or leased or for services rendered which is not evidenced

25  by an instrument or chattel paper whether or not it has been

26  earned by performance. "General intangibles" means any

27  personal property (including things in action) other than

28  goods, accounts, chattel paper, documents, instruments,

29  investment property, rights to proceeds of written letters of

30  credit, and money.  All rights to payment earned or unearned

31  under a charter or other contract involving the use or hire of

                                  21

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  a vessel and all rights incident to the charter or contract

  2  are accounts.

  3         Section 8.  Subsection (1) of section 679.304, Florida

  4  Statutes, 1998 Supplement, is amended to read:

  5         679.304  Perfection of security interest in

  6  instruments, documents, proceeds of a written letter of

  7  credit, and goods covered by documents; perfection by

  8  permissive filing; temporary perfection without filing or

  9  transfer of possession.--

10         (1)  A security interest in chattel paper or negotiable

11  documents may be perfected by filing. A security interest in

12  the rights to proceeds of a written letter of credit may be

13  perfected only by the secured party's taking possession of the

14  letter of credit. A security interest in money or instruments

15  (other than instruments which constitute part of chattel

16  paper) can be perfected only by the secured party's taking

17  possession, except as provided in subsections (4) and (5) of

18  this section and subsections (2) and (3) of s. 679.306 on

19  proceeds.

20         Section 9.  Section 679.305, Florida Statutes, 1998

21  Supplement, is amended to read:

22         679.305  When possession by secured party perfects

23  security interest without filing.--A security interest in

24  letters of credit and advices of credit (s. 675.116(2)(a)),

25  goods, instruments, money, negotiable documents, or chattel

26  paper may be perfected by the secured party's taking

27  possession of the collateral. A security interest in the right

28  to proceeds of a written letter of credit may be perfected by

29  the secured party's taking possession of the letter of credit.

30  If such collateral other than goods covered by a negotiable

31  document is held by a bailee, the secured party is deemed to

                                  22

CODING: Words stricken are deletions; words underlined are additions.






    Florida House of Representatives - 1999                 HB 515

    705-100A-99






  1  have possession from the time the bailee receives notification

  2  of the secured party's interest.  A security interest is

  3  perfected by possession from the time possession is taken

  4  without relation back and continues only so long as possession

  5  is retained, unless otherwise specified in this chapter.  The

  6  security interest may be otherwise perfected as provided in

  7  this chapter before or after the period of possession by the

  8  secured party.

  9         Section 10.  This act applies to any letter of credit

10  that is issued on or after July 1, 1999.  This act does not

11  apply to any transaction, event, obligation, or duty arising

12  out of or associated with a letter of credit issued before

13  July 1, 1999, including any amendment to the letter of credit

14  that was made after such date, unless the amendment provides

15  otherwise.

16         Section 11.  A transaction arising out of or associated

17  with a letter of credit issued before July 1, 1999, and the

18  rights, obligations, and interests created by that transaction

19  are governed by any law amended or repealed by this act to the

20  same extent as if such amendment or repeal had not occurred

21  and such transaction may be terminated, completed,

22  consummated, or enforced under such law prior to its amendment

23  or repeal.

24         Section 12.  This act shall take effect July 1, 1999.

25

26            *****************************************

27                          HOUSE SUMMARY

28
      Revises article 5 of the Uniform Commercial Code relating
29    to letters of credit to conform the provisions to
      revisions to the model code adopted at the federal level.
30    See bill for details.

31

                                  23