Letters of Credit

There are many proposed changes relating to letters of credit, both in the US and abroad. The 2 agencies that drafted the Uniform Commercial Code (UCC) have decided that UCC article 5 should be revised. In cases of wrongful dishonor, the beneficiary's presented papers must strictly comply with what the letter requires. The rule of strict compliance also applies to the letter's expiry deadline. The 1990 cases involving the UCC Article 5-114(2) fraud exception focused on the definition of fraud. Other cases addressed poorly timed injunctions to block honor. Because reimbursement agreements between an issuer and an applicant are written to secure the issuer's reimbursement chances and to favor the issuer, applicants seldom win wrongful dishonor disputes. Several cases delt with a "wrongful draw" claim by the applicant against the beneficiary.