Transfer of letter of credit

84-5-112. Transfer of letter of credit. (a) Except as otherwise provided in K.S.A. 84-5-113, 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. (b) Even if a letter of credit provides that it is transferable, the issuer may refuse to recognize or carry out a transfer if: (1) The transfer would violate applicable law; or (2) the transferor or transferee has failed to comply with any requirement stated in the letter of credit or any other requirement relating to transfer imposed by the issuer which is within the standard practice referred to in K.S.A. 84-5-108(e) or is otherwise reasonable under the circumstances. History: L. 1996, ch. 202, § 12; July 1. KANSAS COMMENT, 1996 This section is derived from the former 84-5-116. It is identical the 1995 Official Text. This section should be read in conjunction with 84-5-113 and 84-5-114. This section deals with the beneficiary's transfer of the letter of credit, 84-5-113 deals with the rights of the legal successor of the beneficiary, and 84-5-114 deals with an assignment of the proceeds of a letter of credit by the beneficiary who remains the beneficiary of the letter of credit. Subsection (a) states the general rule that a letter of credit is not transferable unless the letter states that it is transferable. This rule is supported by the policy allowing the applicant to choose those with whom the applicant contracts. In addition, issuers may not want to undertake the additional security procedures necessary to determine whether its obligation has validly been transferred to another, other than transfers by operation of law, covered in 84-5-113, for which court papers will have been issued. Subsection (b) deals with the rights of issuers of letters of credit which are transferable. A transfer may not violate applicable law. In addition, an issuer has the right to impose additional reasonable requirements consistent with the standards in 84-5-108(e), that is the "standard of practice of financial institutions that regularly issue letters of credit." Revisor's Note: Former section 84-5-112 was repealed by L. 1996, ch. 202, § 91 and the number reassigned to the current text.