Title XIII, COMMERCE (Ch. 505 - 554I)

1. A collecting bank must exercise ordinary care in: a. presenting an item or sending it for presentment; b. sending notice of dishonor or nonpayment or returning an item other than a documentary draft to the bank’s transferor after learning that the item has not been paid or acc…

Subject to Article 3 concerning conversion of instruments ( section 554.3420 ) and restrictive endorsements ( section 554.3206 ), only a collecting bank’s transferor can give instructions that affect the bank or constitute notice to it, and a collecting bank is not liable to prio…

1. A collecting bank shall send items by a reasonably prompt method, taking into consideration relevant instructions, the nature of the item, the number of those items on hand, the cost of collection involved, and the method generally used by it or others to present those items. …

If a customer delivers an item to a depositary bank for collection: 1. The depositary bank becomes a holder of the item at the time it receives the item for collection if the customer at the time of delivery was a holder of the item, whether or not the customer endorses the item,…

Any agreed method that identifies the transferor bank is sufficient for the item’s further transfer to another bank. [C66, 71, 73, 75, 77, 79, 81, §554.4206 ] 94 Acts, ch 1167, §93, 122

1. A customer or collecting bank that transfers an item and receives a settlement or other consideration warrants to the transferee and to any subsequent collecting bank that: a. the warrantor is a person entitled to enforce the item; b. all signatures on the item are authentic a…

1. If an unaccepted draft is presented to the drawee for payment or acceptance and the drawee pays or accepts the draft, the person obtaining payment or acceptance, at the time of presentment, and a previous transferor of the draft, at the time of transfer, warrant to the drawee …

1. A person who encodes information on or with respect to an item after issue warrants to any subsequent collecting bank and to the payor bank or other payor that the information is correctly encoded. If the customer of a depositary bank encodes, that bank also makes the warranty…

1. A collecting bank has a security interest in an item and any accompanying documents or the proceeds of either: a. in case of an item deposited in an account, to the extent to which credit given for the item has been withdrawn or applied; b. in case of an item for which it has …

For purposes of determining its status as a holder in due course, a bank has given value to the extent it has a security interest in an item, if the bank otherwise complies with the requirements of section 554.3302 on what constitutes a holder in due course. [S13, §3060-a27; C24,…

1. Unless otherwise instructed, a collecting bank may present an item not payable by, through or at a bank by sending to the party to accept or pay a written notice that the bank holds the item for acceptance or payment. The notice must be sent in time to be received on or before…

1. With respect to settlement by a bank, the medium and time of settlement may be prescribed by federal reserve regulations or circulars, clearing-house rules, and the like, or agreement. In the absence of such prescription: a. the medium of settlement is cash or credit to an acc…

1. If a collecting bank has made provisional settlement with its customer for an item and fails by reason of dishonor, suspension of payments by a bank, or otherwise to receive settlement for the item which is or becomes final, the bank may revoke the settlement given by it, char…

1. An item is finally paid by a payor bank when the bank has first done any of the following: a. paid the item in cash; b. settled for the item without having a right to revoke the settlement under statute, clearing-house rule, or agreement; or c. made a provisional settlement fo…

1. If an item is in or comes into the possession of a payor or collecting bank that suspends payment and the item has not been finally paid, the item must be returned by the receiver, trustee, or agent in charge of the closed bank to the presenting bank or the closed bank’s custo…

1. If a payor settles for a demand item other than a documentary draft presented otherwise than for immediate payment over the counter before midnight of the banking day of receipt, the payor bank may revoke the settlement and recover the payment settlement if, before it has made…

1. If an item is presented to and received by a payor bank, the bank is accountable for the amount of: a. a demand item, other than a documentary draft, whether properly payable or not, if the bank, in any case in which it is not also the depositary bank, retains the item beyond …

1. Any knowledge, notice, or stop-payment order received by, legal process served upon, or setoff exercised by a payor bank comes too late to terminate, suspend, or modify the bank’s right or duty to pay an item or to charge its customer’s account for the item if the knowledge, n…

1. A bank may charge against the account of a customer an item that is properly payable from that account even though the charge creates an overdraft. An item is properly payable if it is authorized by the customer and is in accordance with any agreement between the customer and …

1. Except as otherwise provided in this Article , a payor bank wrongfully dishonors an item if it dishonors an item that is properly payable, but a bank may dishonor an item that would create an overdraft unless it has agreed to pay the overdraft. 2. A payor bank is liable to its…

1. A customer or any person authorized to draw on the account if there is more than one person may stop payment of an item drawn on the customer’s account or close the account by an order to the bank describing the item or account with reasonable certainty received at a time and …

A bank is under no obligation to a customer having a checking account to pay a check, other than a certified check, which is presented more than six months after its date, but it may charge its customer’s account for a payment made thereafter in good faith. [C66, 71, 73, 75, 77, …

1. A payor or collecting bank’s authority to accept, pay, or collect an item or to account for proceeds of its collection, if otherwise effective, is not rendered ineffective by incompetence of a customer of either bank existing at the time the item is issued or its collection is…

1. A bank that sends or makes available to a customer a statement of account showing payment of items for the account shall either return or make available to the customer the items paid or provide information in the statement of account sufficient to allow the customer reasonabl…

If a payor bank has paid an item over the order of the drawer or maker to stop payment, or after an account has been closed, or otherwise under circumstances giving a basis for objection by the drawer or maker, to prevent unjust enrichment and only to the extent necessary to prev…

A bank that takes a documentary draft for collection shall present or send the draft and accompanying documents for presentment and, upon learning that the draft has not been paid or accepted in due course, shall seasonably notify its customer of the fact even though it may have …

If a draft or the relevant instructions require presentment “on arrival”, “when goods arrive” or the like, the collecting bank need not present until in its judgment a reasonable time for arrival of the goods has expired. Refusal to pay or accept because the goods have not arrive…

1. Unless otherwise instructed and except as provided in Article 5 , a bank presenting a documentary draft: a. must deliver the documents to the drawee on acceptance of the draft if it is payable more than three days after presentment; otherwise, only on payment; and b. upon dish…

1. A presenting bank that, following the dishonor of a documentary draft, has seasonably requested instructions but does not receive them within a reasonable time may store, sell, or otherwise deal with the goods in any reasonable manner. 2. For its reasonable expenses incurred b…

This Article shall be known and may be cited as Uniform Commercial Code — Letters of Credit. [C66, 71, 73, 75, 77, 79, 81, §554.5101 ]

1. In this Article unless the context otherwise requires: a. “Adviser” means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been issued, confirmed, or amended.…

1. This Article applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit. 2. The statement of a rule in this Article does not by itself require, imply, or negate application of the same or a different rule to a sit…

A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a signed record. [C66, 71, 73, 75, 77, 79, 81, §554.5104 ] 96 Acts, ch 1026, §3, 28 ; 2012 Acts, ch 1023, §146 ; 2024 Acts, ch 1023, §26 Referred to in §554.5102

Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or confirmation. [C66, 71, 73, 75, 77, 79, 81, §554.5105 ] 96 Acts, ch 1026, §4, 28

1. A letter of credit is issued and becomes enforceable according to its terms against the issuer when the issuer sends or otherwise transmits it to the person requested to advise or to the beneficiary. A letter of credit is revocable only if it so provides. 2. After a letter of …

1. A confirmer is directly obligated on a letter of credit and has the rights and obligations of an issuer to the extent of its confirmation. The confirmer also has rights against and obligations to the issuer as if the issuer were an applicant and the confirmer had issued the le…

1. Except as otherwise provided in section 554.5109 , an issuer shall honor a presentation that, as determined by the standard practice referred to in subsection 5 , appears on its face strictly to comply with the terms and conditions of the letter of credit. Except as otherwise …

1. 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 iss…

1. If its presentation is honored, the beneficiary warrants: a. to the issuer, any other person to whom presentation is made, and the applicant that there is no fraud or forgery of the kind described in section 554.5109, subsection 1 ; and b. to the applicant that the drawing doe…

1. If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or …

1. Except as otherwise provided in section 554.5113 , unless a letter of credit provides that it is transferable, the right of a beneficiary to draw or otherwise demand performance under a letter of credit may not be transferred. 2. Even if a letter of credit provides that it is …

1. A successor of a beneficiary may consent to amendments, sign and present documents, and receive payment or other items of value in the name of the beneficiary without disclosing its status as a successor. 2. A successor of a beneficiary may consent to amendments, sign and pres…

1. In this section , “proceeds of a letter of credit” means the cash, check, accepted draft, or other item of value paid or delivered upon honor or giving of value by the issuer or any nominated person under the letter of credit. The term does not include a beneficiary’s drawing …

An action to enforce a right or obligation arising under this Article must be commenced within one year after the expiration date of the relevant letter of credit or one year after the cause of action accrues, whichever occurs later. A cause of action accrues when the breach occu…

1. The liability of an issuer, nominated person, or adviser for action or omission is governed by the law of the jurisdiction chosen by an agreement in the form of a record signed by the affected parties or by a provision in the person’s letter of credit, confirmation, or other u…

1. An issuer that honors a beneficiary’s presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary and of the applicant to the same extent as if the issuer were the…