Printable Format84-5-110. Warranties. (a) 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 K.S.A. 84-5-109(a); 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) The warranties in subsection (a) are in addition to warranties arising under article 3, 4, 7 and 8 because of the presentation or transfer of documents covered by any of those articles.
History: L. 1996, ch. 202, § 10; July 1.
KANSAS COMMENT, 1996
This section is derived from the former 84-5-111 and has been considerably modified. It is identical to the 1995 Official Text.
This section provides that the beneficiary makes two sets of warranties when a presentation is honored. The paragraph 84-5-110(a)(1) warranty is made by the beneficiary to the issuer, other person to whom presentment is made and to the applicant, if the presentment is honored, that there is no forgery of the document and the document is not "materially fraudulent" nor is there a "material fraud" by the beneficiary, as defined in 84-5-109. Note that this does not warrant total compliance. Instead, it warrants something closer to substantial compliance. The warranty normally runs to the issuer. The issuer honoring the presentation should be able to rely on the warranty if the document is forged or payment is induced by sufficiently material fraud.
Under paragraph 84-5-110(a)(2), the beneficiary of a presentation which is honored warrants to the applicant that the draw does not violate the underlying agreement. If the performance does not confirm, the applicant will have a cause of action for breach of warranty against the beneficiary, as well as any breach of contract action that may exist.
Both warranties are in addition to any warranties given on the documents under other applicable articles of the Uniform Commercial Code.
Revisor's Note:
Former section 84-5-110 was repealed by L. 1996, ch. 202, § 91 and the number reassigned to the current text.