§ 5108. Issuer's rights and obligations.
(a) Duty to honor, dishonor.--Except as otherwise provided in section 5109 (relating to fraud and forgery), 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 5113 (relating to transfer by operation of law) and unless otherwise agreed with the applicant, an issuer shall dishonor a presentation that does not appear so to comply.
(b) Time for honor, etc.--An issuer has a reasonable time after presentation, but not beyond the end of the seventh business day of the issuer after the day 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) Preclusion generally.--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) Preclusion for fraud, forgery or expiration.--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 5109(a) or expiration of the letter of credit before presentation.
(e) Standard practice.--An issuer shall observe standard practice of financial institutions that regularly issue letters of credit.
(f) Issuer not responsible for certain matters.--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 standard practice referred to in subsection
(e).
(g) Nondocumentary conditions.--If an undertaking constituting a letter of credit under the definition of "letter of credit" under section 5102(a) (relating to definitions) contains nondocumentary conditions, an issuer shall disregard the nondocumentary conditions and treat them as if they were not stated.
(h) Disposition of documents following dishonor.--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) Certain consequences of honor.--An issuer that has honored a presentation as permitted or required by this division:
(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 3414 (relating to obligation of drawer) and 3415 (relating to obligation of indorser);
(4) except as otherwise provided in sections 5110
(relating to warranties) and 5117 (relating to subrogation of issuer, applicant and nominated person), 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 which are apparent on the face of the presentation; and
(5) is discharged to the extent of its performance under the letter of credit.
Special Provisions in Appendix. See section 28 of Act 18 of 2001 in the appendix to this title for special provisions relating to applicability of transitional provisions.
Cross References. Section 5108 is referred to in sections 5102, 5104, 5112, 5113, 9700 of this title.
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