84-5-102. Definitions. (a) In this article:
(1) "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.
(2) "Applicant" means 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.
(3) "Beneficiary" means 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.
(4) "Confirmer" means 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.
(5) "Dishonor" of a letter of credit means 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.
(6) "Document" means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion (i) which is 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 K.S.A. 84-5-108(e) and (ii) which is capable of being examined for compliance with the terms and conditions of the letter of credit. A document may not be oral.
(7) "Good faith" means honesty in fact in the conduct or transaction concerned.
(8) "Honor" of a letter of credit means 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:
(i) Upon payment;
(ii) if the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment; or
(iii) if the letter of credit provides for incurring a deferred obligation, upon incurring the obligation and, at maturity, its performance.
(9) "Issuer" means 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.
(10) "Letter of credit" means a definite undertaking that satisfies the requirements of K.S.A. 84-5-104 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.
(11) "Nominated person" means a person whom the issuer (i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (ii) undertakes by agreement or custom and practice to reimburse.
(12) "Presentation" means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit.
(13) "Presenter" means a person making a presentation as or on behalf of a beneficiary or nominated person.
(14) "Record" means information that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form.
(15) "Successor of a beneficiary" means 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) Definitions in other articles applying to this article and the sections in which they appear are:
"Accept" or "Acceptance" K.S.A. 84-3-409
"Value" K.S.A. 84-3-303, 84-4-211
(c) Article 1 contains certain additional general definitions and principles of construction and interpretation applicable throughout this article.
History: L. 1996, ch. 202, § 2; July 1.
KANSAS COMMENT, 1996
This section is derived from the former 84-5-103 which has many new and changed definitions. It is identical to the 1995 Official Text. Historical citations to the former 84-5-102 and 84-5-103 definitions may be obtained from the Kansas Comment 1965 and 1983 in the former bound Volumes 7 of the Kansas Statutes Annotated.
Subsection (a). The "adviser," formerly the "advising bank," is any person (84-1-201(30)) selected by the issuer or an agent, to inform the beneficiary or another adviser or confirmer that the letter of credit has been issued, confirmed or amended. The "beneficiary" is the person who can draw on the letter of credit on proper presentation, and the term includes a transferee, discussed in 84-5-112. The "confirmer" is the "nominated person" whom is designated by, or agreed to by, the issuer and whom the issuer undertakes to reimburse for honoring a properly presented letter of credit. The confirmer is liable as the issuer. 84-5-107(a). "Document" means any record which can be examined for compliance with a letter of credit. This is an integral part of the independence principal.
"Issuer" can be a bank or other person (84-1-201(30)), but does not include consumers who make engagements. "Good faith" is defined the same as in 84-1-201(19), and does not include the requirement of "the observance of reasonable commercial standards of fair dealing" which is added to the definition of good faith for some other articles, such as that contained in 84-3-103(a)(4). "Letter of credit" means an undertaking (i) that satisfies the statute of frauds (84-5-104) requirement that it create a record, and is signed or complies with the standard practice and (ii) to honor a documentary presentation. A letter of credit is an undertaking to satisfy a documentary presentation, not some other condition such as the quality of the goods. This paragraph should be read together with 84-5-108. If the document has nondocumentary conditions which are binding, it is not a letter of credit. If it is a letter of credit, the nondocumentary conditions shall be disregarded. 84-5-108(g). The label on the document is not conclusive. In addition, because a letter of credit must be an engagement by an issuer, and the definition of "issuer" (84-5-102(a)(9)) excludes consumers, a letter of credit cannot be issued by a consumer.
The rights and duties of the confirmer, nominated person and advisor are detailed in 84-5-107.
Revisor's Note:
Former section 84-5-102 was repealed by L. 1996, ch. 202, § 91 and the number reassigned to the current text.
Law Review and Bar Journal References:
"Electronic Commerce in Kansas: Contract Formation and Formalities Under Article 2," Christopher R. Drahozal, 68 J.K.B.A. No. 5, 22 (1999).
CASE ANNOTATIONS
1. Receipt of facsimile which identifies sender by authorized authentication establishes letter of credit. Masek Distributing v. First State Bank & Trust Co., 908 F. Supp 856, 860 (1995).
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