13 Pa.C.S. Ch. 51

in effect

13 Pa.C.S. § 5101 Short title of division.

This division shall be known and may be cited as the Uniform Commercial Code, Article 5, Letters 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 5101 is referred to in section 9700 of this title.

13 Pa.C.S. § 5102 Definitions.

(a) Definitions.--The following words and phrases when used in this division shall have the meanings given to them in this subsection: "Adviser." 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. "Applicant." A person at whose request or for whose account a letter of credit is issued. The term includes a person who requests an issuer to issue a letter of credit on behalf of another if the person making the request undertakes an obligation to reimburse the issuer. "Beneficiary." A person who under the terms of a letter of credit is entitled to have its complying presentation honored. The term includes a person to whom drawing rights have been transferred under a transferable letter of credit. "Confirmer." A nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another. "Dishonor (of a letter of credit)." Failure timely to honor or to take an interim action, such as acceptance of a draft, that may be required by the letter of credit. "Document." A draft or other demand, document of title, investment security, certificate, invoice or other record, statement or representation of fact, law, right or opinion which is: (1) presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in section 5108(e) (relating to standard practice); and (2) capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral. "Good faith." Honesty in fact in the conduct or transaction concerned. "Honor (of a letter of credit)." Performance of the issuer's undertaking in the letter of credit to pay or deliver an item of value. Unless the letter of credit otherwise provides, "honor" occurs: (1) upon payment; (2) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment; or (3) if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance. "Issuer." A bank or other person that issues a letter of credit but does not include an individual who makes an engagement for personal, family or household purposes. "Letter of credit." A definite undertaking that satisfies the requirements of section 5104 (relating to formal requirements) by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value. "Nominated person." A person whom the issuer: (1) designates or authorizes to pay, accept, negotiate or otherwise give value under a letter of credit; and (2) undertakes by agreement or custom and practice to reimburse. "Presentation." Delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit. "Presenter." A person making a presentation as or on behalf of a beneficiary or nominated person. "Record." Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form. "Successor of a beneficiary." A person who succeeds to substantially all of the rights of a beneficiary by operation of law, including a corporation with or into which the beneficiary has been merged or consolidated, an administrator, executor, personal representative, trustee in bankruptcy, debtor in possession, liquidator and receiver. (b) Index of other definitions.--Definitions in other divisions applying to this division and the sections in which they appear are: "Accept" or "acceptance." Section 3409 (relating to acceptance of draft; certified check). "Value." Sections 3303 (relating to value and consideration) and 4211 (relating to when bank gives value for purposes of holder in due course). (c) Applicability of general definitions and principles.--Division 1 (relating to general provisions) contains certain additional general definitions and principles of construction and interpretation applicable throughout this division. 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 5102 is referred to in sections 5103, 5108, 9102, 9700 of this title.

13 Pa.C.S. § 5103 Scope.

(a) Applicability of division.--This division applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit. (b) Effect of statement of rule in this division.--The statement of a rule in this division does not by itself require, imply or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this division. (c) Variation by agreement or undertaking.--With the exception of this subsection, subsections (a) and (d), the definitions of "issuer" and "letter of credit" under section 5102(a) (relating to definitions) and sections 5106(d) (relating to perpetual letters of credit) and 5114(d) (relating to assignment of proceeds), and except to the extent prohibited under sections 1302 (relating to variation by agreement) and 5117(d) (relating to time at which subrogation rights arise), the effect of this division may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this division. (d) Independence of rights and obligations of issuer.--Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary. (Apr. 16, 2008, P.L.57, No.13, eff. 60 days) 2008 Amendment. Act 13 amended subsec. (c). 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 5103 is referred to in sections 5116, 9700 of this title.

13 Pa.C.S. § 5104 Formal requirements.

A letter of credit, confirmation, advice, transfer, amendment or cancellation may be issued in any form that is a signed record. (1) (Deleted by amendment). (2) (Deleted by amendment). (July 1, 2024, P.L.450, No.41, eff. 60 days) 2024 Amendment. See section 1 of Act 41 in the appendix to this title for special provisions relating to findings and declarations. 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 5104 is referred to in sections 5102, 5116, 9700 of this title.

13 Pa.C.S. § 5105 Consideration.

Consideration is not required to issue, amend, transfer or cancel a letter of credit, advice or confirmation. 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 5105 is referred to in section 9700 of this title.

13 Pa.C.S. § 5106 Issuance, amendment, cancellation and duration.

(a) Issuance; revocability.--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. (b) Effect of amendment or cancellation in certain circumstances.--After a letter of credit is issued, rights and obligations of a beneficiary, applicant, confirmer and issuer are not affected by an amendment or cancellation to which that person has not consented except to the extent the letter of credit provides that it is revocable or that the issuer may amend or cancel the letter of credit without that consent. (c) No stated expiration date.--If there is no stated expiration date or other provision that determines its duration, a letter of credit expires one year after its stated date of issuance or, if none is stated, after the date on which it is issued. (d) Perpetual letters of credit.--A letter of credit that states that it is perpetual expires five years after its stated date of issuance or, if none is stated, after the date on which it is issued. 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 5106 is referred to in sections 5103, 9700 of this title.

13 Pa.C.S. § 5107 Confirmer, nominated person and adviser.

(a) Rights and obligations of a confirmer.--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) Nominated person.--A nominated person who is not a confirmer is not obligated to honor or otherwise give value for a presentation. (c) Advisers.--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) Notice to transferee beneficiary.--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). 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. 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 5107 is referred to in section 9700 of this title.

13 Pa.C.S. § 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.

13 Pa.C.S. § 5109 Fraud and forgery.

(a) Fraud and forgery generally.--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 issuer or applicant: (1) the issuer shall honor the presentation if honor is demanded by: (i) a nominated person who has given value in good faith and without notice of forgery or material fraud; (ii) a confirmer who has honored its confirmation in good faith; (iii) a holder in due course of a draft drawn under the letter of credit which was taken after acceptance by the issuer or nominated person; or (iv) an assignee of the issuer's or nominated person's deferred obligation that was taken for value and without notice of forgery or material fraud after the obligation was incurred by the issuer or nominated person; and (2) the issuer, acting in good faith, may honor or dishonor the presentation in any other case. (b) Conditions for injunction.--If an applicant claims that a required document is forged or materially fraudulent or that honor of the presentation would facilitate a material fraud by the beneficiary on the issuer or applicant, a court of competent jurisdiction may temporarily or permanently enjoin the issuer from honoring a presentation or grant similar relief against the issuer or other persons only if the court finds that: (1) the relief is not prohibited under the law applicable to an accepted draft or deferred obligation incurred by the issuer; (2) a beneficiary, issuer or nominated person who may be adversely affected is adequately protected against loss that it may suffer because the relief is granted; (3) all of the conditions to entitle a person to the relief under the law of this Commonwealth have been met; and (4) on the basis of the information submitted to the court, the applicant is more likely than not to succeed under its claim of forgery or material fraud and the person demanding honor does not qualify for protection under subsection (a)(1). 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 5109 is referred to in sections 2512, 5108, 5110, 5113, 9700 of this title.

13 Pa.C.S. § 5110 Warranties.

(a) Warranties generally.--If its presentation is honored, the beneficiary warrants: (1) 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 5109(a) (relating to fraud and forgery generally); and (2) to the applicant that the drawing does not violate any agreement between the applicant and beneficiary or any other agreement intended by them to be augmented by the letter of credit. (b) Warranties arising under other divisions.--The warranties in subsection (a) are in addition to warranties arising under Divisions 3 (relating to negotiable instruments), 4 (relating to bank deposits and collections), 7 (relating to warehouse receipts, bills of lading and other documents of title) and 8 (relating to investment securities) because of the presentation or transfer of documents covered by any of those divisions. 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 5110 is referred to in sections 5108, 9700 of this title.

13 Pa.C.S. § 5111 Remedies.

(a) Wrongful dishonor or repudiation before presentation.--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 repudiation. If the issuer's obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant's election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant's recovery from the issuer must be reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation the claimant need not present any document. (b) Wrongful dishonor upon presentation; wrongful honor.--If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. (c) Certain other breaches.--If an adviser or nominated person other than a confirmer breaches an obligation under this division or an issuer breaches an obligation not covered in subsection (a) or (b), a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and subsections (a) and (b). (d) Interest.--An issuer, nominated person or advisor who is found liable under subsection (a), (b) or (c) shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date. (e) Attorney fees.--Reasonable attorney fees and other expenses of litigation may be awarded to the prevailing party in an action in which a remedy is sought under this division. (f) Liquidated damages.--Damages that would otherwise be payable by a party for breach of an obligation under this division may be liquidated by agreement or undertaking but only in an amount or by a formula that is reasonable in light of the harm anticipated. 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 5111 is referred to in section 9700 of this title.

13 Pa.C.S. § 5112 Transfer of letter of credit.

(a) Transfer generally.--Except as otherwise provided in section 5113 (relating to transfer by operation of law), 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) Limitations on duty to recognize or carry out a transfer.--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 section 5108(e) (relating to standard practice and role of court) or is otherwise reasonable under the circumstances. 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 5112 is referred to in section 9700 of this title.

13 Pa.C.S. § 5113 Transfer by operation of law.

(a) Undisclosed successor.--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. (b) Disclosed successor.--A successor of a beneficiary may consent to amendments, sign and present documents and receive payment or other items of value in its own name as the disclosed successor of the beneficiary. Except as otherwise provided in subsection (e), an issuer shall recognize a disclosed successor of a beneficiary as beneficiary in full substitution for its predecessor upon compliance with the requirements for recognition by the issuer of a transfer of drawing rights by operation of law under the standard practice referred to in section 5108(e) (relating to standard practice) or, in the absence of such a practice, compliance with other reasonable procedures sufficient to protect the issuer. (c) Determination of successor status, signature.--An issuer is not obliged to determine whether a purported successor is a successor of a beneficiary or whether the signature of a purported successor is genuine or authorized. (d) Effect of honor of presentation by purported successor.--Honor of a purported successor's apparently complying presentation under subsection (a) or (b) has the consequences specified in section 5108(i) (relating to certain consequences of honor) even if the purported successor is not the successor of a beneficiary. Documents signed in the name of the beneficiary or of a disclosed successor by a person who is neither the beneficiary nor the successor of the beneficiary are forged documents for the purposes of section 5109 (relating to fraud and forgery). (e) Right to decline to recognize presentation.--An issuer whose rights of reimbursement are not covered by subsection (d) or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection (b). (f) Change of name.--A beneficiary whose name is changed after the issuance of a letter of credit has the same rights and obligations as a successor of a beneficiary under this section. 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 5113 is referred to in sections 5108, 5112, 9700 of this title.

13 Pa.C.S. § 5114 Assignment of proceeds.

(a) Definition.--As used in this section, the term "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 rights or documents presented by the beneficiary. (b) Beneficiary's right to assign proceeds.--A beneficiary may assign its right to part or all of the proceeds of a letter of credit. The beneficiary may do so before presentation as a present assignment of its right to receive proceeds contingent upon its compliance with the terms and conditions of the letter of credit. (c) Recognition of assignment of proceeds.--An issuer or nominated person need not recognize an assignment of proceeds of a letter of credit until it consents to the assignment. (d) Consent to assignment of proceeds.--An issuer or nominated person has no obligation to give or withhold its consent to an assignment of proceeds of a letter of credit, but consent may not be unreasonably withheld if the assignee possesses and exhibits the letter of credit and presentation of the letter of credit is a condition to honor. (e) Rights of transferee beneficiary or nominated person.--Rights of a transferee beneficiary or nominated person are independent of the beneficiary's assignment of the proceeds of a letter of credit and are superior to the assignee's right to the proceeds. (f) Certain rights not affected; relationship to Division 9.--Neither the rights recognized by this section between an assignee and an issuer, transferee beneficiary or nominated person nor the issuer's or nominated person's payment of proceeds to an assignee or a third person affect the rights between the assignee and any person other than the issuer, transferee beneficiary or nominated person. The mode of creating and perfecting a security interest in or granting an assignment of a beneficiary's right to proceeds is governed by Division 9 (relating to secured transactions) or other law. Against persons other than the issuer, transferee beneficiary or nominated person, the rights and obligations arising upon the creation of a security interest or other assignment of a beneficiary's right to proceeds and its perfection are governed by Division 9 or other law. 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 5114 is referred to in sections 5103, 9102, 9107, 9109, 9700 of this title.

13 Pa.C.S. § 5115 Statute of limitations.

An action to enforce a right or obligation arising under this division 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 occurs, regardless of the aggrieved party's lack of knowledge of the breach, except that, in the event of a fraud or forgery adversely affecting the aggrieved party, a cause of action accrues on the earlier of the date on which the fraud or forgery was discovered by the aggrieved party or the date on which the fraud or forgery could have been discovered by the aggrieved party by the exercise of reasonable diligence. 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 5115 is referred to in section 9700 of this title.

13 Pa.C.S. § 5116 Choice of law and forum.

(a) Express choice of law.--The liability of an issuer, nominated person or advisor 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 undertaking. The jurisdiction whose law is chosen need not bear any relation to the transaction. (b) Governing law otherwise.--Unless subsection (a) applies, the liability of an issuer, nominated person or adviser for action or omission is governed by the law of the jurisdiction in which the person is located. The person is considered to be located at the address indicated in the person's undertaking. If more than one address is indicated, the person is considered to be located at the address from which the person's undertaking was issued. (c) Bank branches.--For the purpose of jurisdiction, choice of law and recognition of interbranch letters of credit, but not enforcement of a judgment, all branches of a bank are considered separate juridical entities, and a bank is considered to be located at the place where its relevant branch is considered to be located under subsection (d). (d) Bank branch locations.--A branch of a bank is considered to be located at the address indicated in the branch's undertaking. If more than one address is indicated, the branch is considered to be located at the address from which the undertaking was issued. (e) Role of custom or practice.--Except as otherwise provided in this subsection, the liability of an issuer, nominated person or adviser is governed by any rules of custom or practice, such as the Uniform Customs and Practice for Documentary Credits, to which the letter of credit, confirmation or other undertaking is expressly made subject. If: (1) this division would govern the liability of an issuer, nominated person or adviser under subsection (a) or (b); (2) the relevant undertaking incorporates rules of custom or practice; and (3) there is conflict between this division and those rules as applied to that undertaking; those rules govern except to the extent of any conflict with the nonvariable provisions specified in section 5103(c) (relating to variation by agreement or undertaking). (f) Conflict with certain other divisions.--If there is conflict between this division and Division 3 (relating to negotiable instruments), 4 (relating to bank deposits and collections), 4A (relating to funds transfers) or 9 (relating to secured transactions), this division governs. (g) Forum.--The forum for settling disputes arising out of an undertaking within this division may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (a). (July 1, 2024, P.L.450, No.41, eff. 60 days) 2024 Amendment. See section 1 of Act 41 in the appendix to this title for special provisions relating to findings and declarations. 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 5116 is referred to in sections 1301, 9306 of this title.

13 Pa.C.S. § 5117 Subrogation of issuer, applicant and nominated person.

(a) Subrogation rights of issuer.--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 secondary obligor of the underlying obligation owed to the applicant. (b) Subrogation rights of applicant.--An applicant that reimburses an issuer is subrogated to the rights of the issuer against any beneficiary, presenter or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the issuer to the rights of the beneficiary stated in subsection (a). (c) Subrogation rights of nominated person.--A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of: (1) the issuer against the applicant to the same extent as if the nominated person were a secondary obligor of the obligation owed to the issuer by the applicant; (2) the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and (3) the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant. (d) Time at which subrogation rights arise.--Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections (a) and (b) do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection (c) do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense or excuse. 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 5117 is referred to in sections 5103, 5108, 9700 of this title.

13 Pa.C.S. § 5118 Security interest of issuer or nominated person.

(a) General rule.--An issuer or nominated person has a security interest in a document presented under a letter of credit to the extent that the issuer or nominated person honors or gives value for the presentation. (b) Duration.--So long as and to the extent that an issuer or nominated person has not been reimbursed or has not otherwise recovered the value given with respect to a security interest in a document under subsection (a), the security interest continues and is subject to Division 9 (relating to secured transactions), but: (1) a security agreement is not necessary to make the security interest enforceable under section 9203(b)(3) (relating to attachment and enforceability of security interest; proceeds; supporting obligations; formal requisites); (2) if the document is presented in a medium other than a written or other tangible medium, the security interest is perfected; and (3) if the document is presented in a written or other tangible medium and is not a certificated security, chattel paper, a document of title, an instrument or a letter of credit, the security interest is perfected and has priority over a conflicting security interest in the document so long as the debtor does not have possession of the document. Cross References. Section 5118 is referred to in sections 9102, 9109, 9203, 9309, 9322 of this title. DIVISION 6 BULK TRANSFERS (Repealed) 1992 Repeal Note. Division 6 (Chapter 61) was added November 1, 1979, P.L.255, No.86, and repealed July 9, 1992, P.L.507, No.97, effective in one year. Section 30 of Act 97 provided that rights and obligations that arose under Division 6 before its repeal remain valid and may be enforced as though those provisions had not been repealed.

Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://www.palegis.us/statutes/consolidated/view-statute?txtType=HTM&ttl=13Fetched: 10/16/2026