N.D. Cent. Code § 41-05-01 (5-101) Short title
41-05-01. (5-101) Short title
This chapter may be cited as the Uniform Commercial Code - Letters of Credit.
N.D. Cent. Code ch. 41-05
N.D. Cent. Code ch. 41-05
in effectN.D. Cent. Code § 41-05-02 (5-102) Definitions
41-05-02. (5-102) Definitions
1. In this chapter:
a. "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.
b. "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.
c. "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.
d. "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.
e. "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.
f. "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:
(1) 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 subsection 1 of section 41-05-08; and
(2) Which is capable of being examined for compliance with the terms and
conditions of the letter of credit. A document may not be oral.
g. "Good faith" means honesty in fact in the conduct or transaction concerned. The
definition of "good faith" in section 41-01-09 does not apply to this chapter.
h. "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:
(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.
i. "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.
j. "Letter of credit" means a definite undertaking that satisfies the requirements of
section 41-05-04 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.
k. "Nominated person" means 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.
l. "Presentation" means delivery of a document to an issuer or nominated person
for honor or giving of value under a letter of credit.
m. "Presenter" means a person making a presentation as or on behalf of a
beneficiary or nominated person.
n. "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.
o. "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.
2. Definitions in other chapters applying to this chapter and the sections in which they
appear are:
a. "Accept" or "acceptance". Section 41-03-46.
b. "Value". Sections 41-03-29 and 41-04-23.
3. Chapter 41-01 contains certain additional general definitions and principles of
construction and interpretation applicable throughout this chapter.
N.D. Cent. Code § 41-05-03 (5-103) Scope
41-05-03. (5-103) Scope
1. This chapter applies to letters of credit and to certain rights and obligations arising out
of transactions involving letters of credit.
2. The statement of a rule in this chapter 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 chapter.
3. With the exception of this subsection, subsections 1 and 4 of this section,
subdivisions i and j of subsection 1 of section 41-05-02, subsection 4 of section
41-05-06, and subsection 4 of section 41-05-14, and except to the extent prohibited
under section 41-01-16 and subsection 4 of section 41-05-17, the effect of this chapter
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 chapter.
4. 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.
N.D. Cent. Code § 41-05-04 (5-104) Formal requirements
41-05-04. (5-104) Formal requirements
A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued
in any form that is a signed record.
N.D. Cent. Code § 41-05-05 (5-105) Consideration
41-05-05. (5-105) Consideration
Consideration is not required to issue, amend, transfer, or cancel a letter of credit, advice, or
confirmation.
N.D. Cent. Code § 41-05-06 (5-106) Issuance - Amendment - Cancellation - Duration
41-05-06. (5-106) Issuance - Amendment - Cancellation - Duration
1. 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.
2. 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.
3. 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.
4. 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.
N.D. Cent. Code § 41-05-07 (5-107) Confirmer - Nominated person - Adviser
41-05-07. (5-107) Confirmer - Nominated person - Adviser
1. 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.
2. A nominated person who is not a confirmer is not obligated to honor or otherwise give
value for a presentation.
3. 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.
4. 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 3. 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.
N.D. Cent. Code § 41-05-08 (5-108) Issuer's rights and obligations
41-05-08. (5-108) Issuer's rights and obligations
1. Except as otherwise provided in section 41-05-09, an issuer shall honor a presentation
that, as determined by the standard practice referred to in subsection 5, appears on its
face strictly to comply with the terms and conditions of the letter of credit. Except as
otherwise provided in section 41-05-13 and unless otherwise agreed with the
applicant, an issuer shall dishonor a presentation that does not appear so to comply.
2. 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:
a. To honor;
b. 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
c. To give notice to the presenter of discrepancies in the presentation.
3. Except as otherwise provided in subsection 4, 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.
4. Failure to give the notice specified in subsection 2 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 subsection 1 of section 41-05-09 or
expiration of the letter of credit before presentation.
5. An issuer shall observe the standard practice of financial institutions that regularly
issue letters of credit. Determination of the issuer's observance of the standard
practice is a matter of interpretation for the court. The court shall offer the parties a
reasonable opportunity to present evidence of the standard practice.
6. An issuer is not responsible for:
a. The performance or nonperformance of the underlying contract, arrangement, or
transaction;
b. An act or omission of others; or
c. Observance or knowledge of the usage of a particular trade other than the
standard practice referred to in subsection 5.
7. If an undertaking constituting a letter of credit under subdivision j of subsection 1 of
section 41-05-02 contains nondocumentary conditions, an issuer shall disregard the
nondocumentary conditions and treat them as if they were not stated.
8. 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.
9. An issuer that has honored a presentation as permitted or required by this chapter:
a. Is entitled to be reimbursed by the applicant in immediately available funds not
later than the date of its payment of funds;
b. Takes the documents free of claims of the beneficiary or presenter;
c. Is precluded from asserting a right of recourse on a draft under sections 41-03-51
and 41-03-52;
d. Except as otherwise provided in sections 41-05-10 and 41-05-17, 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
e. Is discharged to the extent of its performance under the letter of credit unless the
issuer honored a presentation in which a required signature of a beneficiary was
forged.
N.D. Cent. Code § 41-05-09 (5-109) Fraud - Forgery
41-05-09. (5-109) Fraud - Forgery
1. 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:
a. The issuer shall honor the presentation, if honor is demanded by:
(1) A nominated person who has given value in good faith and without notice of
forgery or material fraud;
(2) A confirmer who has honored its confirmation in good faith;
(3) 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
(4) 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
b. The issuer, acting in good faith, may honor or dishonor the presentation in any
other case.
2. 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, temporarily or permanently, may
enjoin the issuer from honoring a presentation or may grant similar relief against the
issuer or other persons only if the court finds that:
a. The relief is not prohibited under the law applicable to an accepted draft or
deferred obligation incurred by the issuer;
b. 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;
c. All of the conditions to entitle a person to the relief under the law of this state
have been met; and
d. 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 subdivision a of
subsection 1.
N.D. Cent. Code § 41-05-10 (5-110) Warranties
41-05-10. (5-110) Warranties
1. If its presentation is honored, the beneficiary warrants:
a. 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 subsection 1 of section
41-05-09; and
b. 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.
2. The warranties in subsection 1 are in addition to warranties arising under chapters
41-03, 41-04, 41-07, and 41-08 because of the presentation or transfer of documents
covered by any of those chapters.
N.D. Cent. Code § 41-05-11 (5-111) Remedies
41-05-11. (5-111) Remedies
1. 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.
2. 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.
3. If an adviser or nominated person other than a confirmer breaches an obligation under
this chapter or an issuer breaches an obligation not covered in subsection 1 or 2, 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 1 and 2.
4. An issuer, nominated person, or adviser who is found liable under subsection 1, 2, or 3
shall pay interest on the amount owed thereunder from the date of wrongful dishonor
or other appropriate date.
5. 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 chapter.
6. Damages that would otherwise be payable by a party for breach of an obligation under
this chapter 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.
N.D. Cent. Code § 41-05-12 (5-112) Transfer of letter of credit
41-05-12. (5-112) Transfer of letter of credit
1. Except as otherwise provided in section 41-05-13, 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.
2. Even if a letter of credit provides that it is transferable, the issuer may refuse to
recognize or carry out a transfer if:
a. The transfer would violate applicable law; or
b. 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 subsection 5 of section
41-05-08 or is otherwise reasonable under the circumstances.
N.D. Cent. Code § 41-05-13 (5-113) Transfer by operation of law
41-05-13. (5-113) Transfer by operation of law
1. 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.
2. 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 5,
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 subsection 5 of section 41-05-08 or, in the absence of such a
practice, compliance with other reasonable procedures sufficient to protect the issuer.
3. 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.
4. Honor of a purported successor's apparently complying presentation under
subsection 1 or 2 has the consequences specified in subsection 9 of section 41-05-08
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 41-05-09.
5. An issuer whose rights of reimbursement are not covered by subsection 4 or
substantially similar law and any confirmer or nominated person may decline to
recognize a presentation under subsection 2.
6. 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.
N.D. Cent. Code § 41-05-14 (5-114) Assignment of proceeds
41-05-14. (5-114) Assignment of proceeds
1. In this section, "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.
2. 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.
3. An issuer or nominated person need not recognize an assignment of proceeds of a
letter of credit until it consents to the assignment.
4. 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.
5. 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.
6. 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 rights to proceeds is governed by chapter 41-09 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 chapter 41-09 or other law.
N.D. Cent. Code § 41-05-15 (5-115) Statute of limitations
41-05-15. (5-115) Statute of limitations
An action to enforce a right or obligation arising under this chapter must be commenced
within one year after the expiration date of the relevant letter of credit or one year after the claim
for relief accrues, whichever occurs later. A claim for relief accrues when the breach occurs,
regardless of the aggrieved party's lack of knowledge of the breach.
N.D. Cent. Code § 41-05-16 (5-116) Choice of law and forum
41-05-16. (5-116) Choice of law and forum
1. The liability of an issuer, nominated person, or adviser 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.
2. Unless subsection 1 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.
3. 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 4.
4. 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.
5. 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:
a. This chapter would govern the liability of an issuer, nominated person, or adviser
under subsection 1 or 2;
b. The relevant undertaking incorporates rules of custom or practice; and
c. There is conflict between this chapter and those rules as applied to that
undertaking, those rules govern except to the extent of any conflict with the
nonvariable provisions specified in subsection 3 of section 41-05-03.
6. If there is conflict between this chapter and chapter 41-03, 41-04, 41-04.1, or 41-09,
this chapter governs.
7. The forum for settling disputes arising out of an undertaking within this chapter may be
chosen in the manner and with the binding effect that governing law may be chosen in
accordance with subsection 1.
N.D. Cent. Code § 41-05-17 (5-117) Subrogation of issuer, applicant, and nominated person
41-05-17. (5-117) Subrogation of issuer, applicant, and nominated person
1. 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.
2. 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 1.
3. 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:
a. 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;
b. The beneficiary to the same extent as if the nominated person were a secondary
obligor of the underlying obligation owed to the beneficiary; and
c. The applicant to the same extent as if the nominated person were a secondary
obligor of the underlying obligation owed to the applicant.
4. Notwithstanding any agreement or term to the contrary, the rights of subrogation stated
in subsections 1 and 2 do not arise until the issuer honors the letter of credit or
otherwise pays and the rights in subsection 3 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.
N.D. Cent. Code § 41-05-18 (5-118) Security interest of issuer or nominated person
41-05-18. (5-118) Security interest of issuer or nominated person
1. 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.
2. 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 1, the security interest continues and is
subject to chapter 41-09, but:
a. A security agreement is not necessary to make the security interest enforceable
under subdivision c of subsection 2 of section 41-09-13;
b. If the document is presented in a medium other than a written or other tangible
medium, the security interest is perfected; and
c. 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.
Source: Open US Law by Vaquill AI (CC BY 4.0)URL: https://ndlegis.gov/cencode/t41c05.pdfFetched: 10/16/2026