Printable Format84-5-111. Remedies. (a) 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) 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) If an adviser or nominated person other than a confirmer breaches an obligation under this article 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) An issuer, nominated person or adviser 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) Reasonable attorney's fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this article.
(f) Damages that would otherwise be payable by a party for breach of an obligation under this article 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.
History: L. 1996, ch. 202, § 11; July 1.
KANSAS COMMENT, 1996
This section is derived from the former 84-5-115(1) and (2). Subsections (d), (e) and (f) have been added to specify the damages available under the section and resolve much of the litigation regarding those issues. This section is identical to the 1995 Official Text.
Subsection (a) provides for damages for the wrongful dishonor or repudiation of a duty to pay money or to perform a duty under a letter of credit. The damages run to the person harmed, the beneficiary, successor of the beneficiary or a nominated person presenting on its own behalf. Repudiation occurs only when the proper conforming presentation has not yet been made, but could have been made. If a conforming presentation could not have been made by the beneficiary, there are no damages for repudiation. See Official Comment 1, paragraph 2.
Damages include the amount of the payment wrongfully dishonored, or the value of the performance, and can include specific performance. The damages also include incidental damages, such as costs, travel and other expenses. They include interest (subsection (d)) and reasonable attorney's fees and expenses of litigation (subsection (e)). They do not include consequential damages or punitive damages by reason of the breach of any duties arising out of Article 5. The parties may provide for reasonable liquidated damages in their agreement, as measured by the harm anticipated at the time of the agreement.
The claimant has no duty under Article 5 to mitigate damages by disposal of any goods, but does have to account for any mitigation. The practical effect is to impose the possibility of large damages on the issuer who wrongfully dishonors, especially if the goods threaten to decline speedily in value. Even if the beneficiary does mitigate the damages, the burden is on the issuer to prove the value of the mitigation and the amount of the damages avoided.
Subsection (b) deals with the issuer's liability to an applicant for wrongful honor or wrongful dishonor of a draft or demand under a letter of credit. It also provides for actual and incidental damages, including costs, interest (subsection (d)) and attorney's fees (subsection (e)). Subsection (c) deals with the liability of an advisor or a nominated person (84-5-102) for breaching their duty (84-5-107).
Revisor's Note:
Former section 84-5-111 was repealed by L. 1996, ch. 202, § 91 and the number reassigned to the current text.