Okla. Stat. tit. 12A § 5-107

Current through Laws 2024, c. 453.

Section 5-107 - Confirmer, Nominated Person, and Adviser

(a) 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 letter of credit at the request and for the account of the issuer.

(b) A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation.

(c) A person requested to advise may decline to act as an adviser. An adviser that is not a confirmer is not obligated to honor or give value for a presentation. An adviser undertakes to the issuer and to the beneficiary accurately to advise the terms of the letter of credit, confirmation, amendment, or advice received by that person and undertakes to the beneficiary to check the apparent authenticity of the request to advise. Even if the advice is inaccurate, the letter of credit, confirmation, or amendment is enforceable as issued.

(d) A person who notifies a transferee beneficiary of the terms of a letter of credit, confirmation, amendment, or advice has the rights and obligations of an adviser under subsection (c) of this section. The terms in the notice to the transferee beneficiary may differ from the terms in any notice to the transferor beneficiary to the extent permitted by the letter of credit, confirmation, amendment, or advice received by the person who so notifies.

Okla. Stat. tit. 12A, § 5-107

Added by Laws 1961, p. 133, § 5-107. Amended by Laws 1996, SB 1034, c. 56, §6, eff. 1/1/1997.

Oklahoma Code Comment

"Adviser" is a new term, defined in sub section 5-102(a)(1) , that replaces the term "advising bank" and allows the advising function to be performed by persons other than banks. The new term also expands the scope of the advising function from "notification of the issuance of a credit" to notice "that a letter of credit has been issued, confirmed, or amended."

Revised Article 5 retains the obligation of an adviser to provide accurate advice and adds an obligation "to check the apparent authenticity of the request to advise." Likewise, the revision retains the rule that an adviser is not obligated to honor presentations under the credit and adds a rule that a person is not obligated to honor a request to become an adviser. The revision also continues the rule that inaccurate advice does not preclude enforcement of the credit as issued.

The term "nominated person" is new, and is defined in sub section 5-102(a)(11) . A person designated or authorized by an issuer "to pay, accept, negotiate, or otherwise give value under a letter of credit" is a nominated person. An example would be any bank where the LC is "freely negotiable." See Official Comment 7. The beneficiary is authorized to make a presentation to the nominated person, and the nominated person is authorized to pay or give value. Unless the nominated person is a confirmer, the nominated person has no obligation to honor the presentation. If the nominated person pays or gives value, the nominated person is entitled to reimbursement from the issuer.

"Confirmer" also is a new term, defined in sub section 5-102(a)(4) , replacing the term "confirming bank." This new term does not limit confirmations to banks, but does restrict confirmations to nominated persons. Therefore, to qualify as a confirmer, a person must confirm pursuant to a request by, or with the consent of, the issuer.

A confirmer agrees to honor a letter of credit issued by another person. Thus, the confirmer incurs direct liability on the credit and has the same rights and obligations as an issuer. If the confirmer honors the letter of credit in accordance with the terms of the credit, then the confirmer is entitled to reimbursement from the issuer upon presentation of conforming documents to the issuer. When a person agrees to confirm a letter of credit without proper authority, that person is not a confirmer but, nevertheless, may be liable as an issuer or guarantor, or may incur other contractual liability. See Official Comments 1 and 7.