"Letter of credit" term; "confirmed credit"

84-2-325. "Letter of credit" term; "confirmed credit". (1) Failure of the buyer seasonably to furnish an agreed letter of credit is a breach of the contract for sale. (2) The delivery to the seller of a proper letter of credit suspends the buyer's obligation to pay. If the letter of credit is dishonored, the seller may on seasonable notification to the buyer require payment directly from him. (3) Unless otherwise agreed the term "letter of credit" or "banker's credit" in a contract for sale means an irrevocable credit issued by a financing agency of good repute and, where the shipment is overseas, of good international repute. The term "confirmed credit" means that the credit must also carry the direct obligation of such an agency which does business in the seller's financial market. History: L. 1965, ch. 564, § 59; January 1, 1966. KANSAS COMMENT, 1996 This section states the effect of a contract term that calls for payment by letter of credit. Under subsection (1), a buyer breaches the contract if it fails to furnish an agreed letter of credit. Subsection (2) provides that furnishing a letter of credit suspends the buyer's obligation to pay. If the letter of credit is dishonored, the seller may require the buyer to make payment directly to the seller. Thus, the effect of a letter of credit on the buyer's payment obligation, like that of a check (see 84-2-511(3)), is conditional. All other aspects of a letter of credit transaction are governed by revised Article 5, which was enacted by the Kansas legislature in 1996.