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Arkansas Code Annotated

Ark. Code Ann. § 4-5-114 (2020)

Assignment of proceeds

✓ Arkansas Code release r76: Acts through about 2020 (2021-2025 sessions missing)
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  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 9 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 9 or other law.

History. Acts 1997, No. 1070, § 1.

Case Notes

Assignment.

In light of the evidence that the partial assignment preserved the original terms of the letter of credit, and that the letter of credit was in fact called under the terms specified in the original agreement, there was no error in finding that the right to call the letter of credit remained with bank which financed construction project, and that the assignment of an interest in the letter of credit to another bank did not release a third bank which participated in the letter of credit from its duty to honor the letter of credit. City Nat'l Bank v. First Nat'l Bank & Trust Co., 22 Ark. App. 5, 732 S.W.2d 489 (1987) (decision under prior law).

Cited: Unifirst Fed. Sav. Bank v. American Ins. Co., 905 F.2d 208 (8th Cir. 1990) (decision under prior law).

Notes of Decisions
Cited in 3 cases, 1990–1992 · leading case: Sugarloaf Mining Co. v. Arkansas Dep't of Pollution Control & Ecology, 840 S.W.2d 172 (Ark. 1992).
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Sugarloaf Mining Co. v. Arkansas Dep't of Pollution Control & Ecology, 840 S.W.2d 172 (Ark. 1992). · cites it 4× “Section 4-5-114(1) provides that an issuer must honor a draft which complies with the terms of the relevant *176 credit regardless of whether the goods or documents conform to the underlying contract between the customer and the beneficiary.”
Rose Developments, Inc. v. Pearson Props., Inc., 832 S.W.2d 286 (Ark. Ct. App. 1992). · cites it 9× “Rose Developments appeals from the order of the circuit court which permanently enjoined the drawing on, or honor of, a letter of credit, pursuant to Ark. Code Ann. § 4-5-114 (2)(b) (Repl. 1991), on the finding that appellant had committed fraud.”
Unifirst Fed. Sav. Bank v. Am. Ins., 905 F.2d 208 (8th Cir. 1990). “Finally, Unifirst argues that the documents presented to it were fraudulent under the Uniform Commercial Code, citing Ark.Code Ann. § 4-5-114. The letter sent from the president of Jamco to Unifirst on November 10, 1986, stated that it was not in default on the construction…”
Ark. Code Ann. § 4-5-114(1): 2 cases
Sugarloaf Mining Co. v. Arkansas Dep't of Pollution Control & Ecology, 840 S.W.2d 172 (Ark. 1992). “Section 4-5-114(1) provides that an issuer must honor a draft which complies with the terms of the relevant *176 credit regardless of whether the goods or documents conform to the underlying contract between the customer and the beneficiary.”
Rose Developments, Inc. v. Pearson Props., Inc., 832 S.W.2d 286 (Ark. Ct. App. 1992). “Rose Developments appeals from the order of the circuit court which permanently enjoined the drawing on, or honor of, a letter of credit, pursuant to Ark. Code Ann. § 4-5-114 (2)(b) (Repl. 1991), on the finding that appellant had committed fraud.”
Ark. Code Ann. § 4-5-114(2): 1 case
Rose Developments, Inc. v. Pearson Props., Inc., 832 S.W.2d 286 (Ark. Ct. App. 1992). “Rose Developments appeals from the order of the circuit court which permanently enjoined the drawing on, or honor of, a letter of credit, pursuant to Ark. Code Ann. § 4-5-114 (2)(b) (Repl. 1991), on the finding that appellant had committed fraud.”
Ark. Code Ann. § 4-5-114(2)(b): 1 case
Rose Developments, Inc. v. Pearson Props., Inc., 832 S.W.2d 286 (Ark. Ct. App. 1992). “Rose Developments appeals from the order of the circuit court which permanently enjoined the drawing on, or honor of, a letter of credit, pursuant to Ark. Code Ann. § 4-5-114 (2)(b) (Repl. 1991), on the finding that appellant had committed fraud.”
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