UNIFORM COMMERCIAL CODE
Act 174 of 1962
440.5114 Proceeds of letter of credit.
Sec. 5114.
(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) The rights recognized by this section between an assignee and an issuer, transferee beneficiary, or nominated person or the issuer's or nominated person's payment of proceeds to an assignee or a third person do not 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 article 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 article 9 or other law.
History: 1962, Act 174, Eff. Jan. 1, 1964 ;-- Am. 1987, Act 16, Imd. Eff. Apr. 24, 1987 ;-- Am. 1998, Act 278, Imd. Eff. July 27, 1998 ;-- Am. 1998, Act 488, Imd. Eff. Jan. 4, 1999
Notes of Decisions
Michigan Nat'l Bank v. Metro Institutional Food Serv., Inc, 497 N.W.2d 225 (Mich. Ct. App. 1993).
· cites it 6× “Under MCL 440.5114(1); MSA 19.5114(1), the issuer of a letter of credit must honor a draft or demand for payment that complies with the terms of the letter of credit regardless of whether the documents are fraudulent or the goods do not conform to the contract between the…”
Mid-States Mtge. Corp. v. Nat'l Bank of Southfield, 259 N.W.2d 175 (Mich. Ct. App. 1977).
· cites it 2× “2 Grounds. The motion for summary judgment shall state that the moving party is entitled to judgment in his favor because of any 1 of the following grounds: (2) the opposing party has failed to state a valid defense to the claim asserted against him.”
Boyd v. Sachs (In re Auto Specialties Mfg. Co.), 153 B.R. 510 (W.D. Mich. 1993).
· cites it 3× “§ 440.5114(1)) further clarifies that the independence principle holds true even where the underlying contract between the account party and beneficiary is breached: An issuer must honor a draft or demand for payment which complies with the terms of the relevant credit…”
City Nat'l Bank of Detroit v. Westland Towers Apts., 393 N.W.2d 554 (Mich. Ct. App. 1986).
“See also MCL 440.5114; MSA 19.5114. The parties have failed to separately consider the separate agreements and thus confused their analysis of the facts in this case.”
— Mich. Comp. Laws § 440.5114(1) — 2 cases
Michigan Nat'l Bank v. Metro Institutional Food Serv., Inc, 497 N.W.2d 225 (Mich. Ct. App. 1993).
“Under MCL 440.5114(1); MSA 19.5114(1), the issuer of a letter of credit must honor a draft or demand for payment that complies with the terms of the letter of credit regardless of whether the documents are fraudulent or the goods do not conform to the contract between the…”
Boyd v. Sachs (In re Auto Specialties Mfg. Co.), 153 B.R. 510 (W.D. Mich. 1993).
“§ 440.5114(1)) further clarifies that the independence principle holds true even where the underlying contract between the account party and beneficiary is breached: An issuer must honor a draft or demand for payment which complies with the terms of the relevant credit…”
— Mich. Comp. Laws § 440.5114(2) — 3 cases
Michigan Nat'l Bank v. Metro Institutional Food Serv., Inc, 497 N.W.2d 225 (Mich. Ct. App. 1993).
“Under MCL 440.5114(1); MSA 19.5114(1), the issuer of a letter of credit must honor a draft or demand for payment that complies with the terms of the letter of credit regardless of whether the documents are fraudulent or the goods do not conform to the contract between the…”
Boyd v. Sachs (In re Auto Specialties Mfg. Co.), 153 B.R. 510 (W.D. Mich. 1993).
“§ 440.5114(1)) further clarifies that the independence principle holds true even where the underlying contract between the account party and beneficiary is breached: An issuer must honor a draft or demand for payment which complies with the terms of the relevant credit…”
Mid-States Mtge. Corp. v. Nat'l Bank of Southfield, 259 N.W.2d 175 (Mich. Ct. App. 1977).
“2 Grounds. The motion for summary judgment shall state that the moving party is entitled to judgment in his favor because of any 1 of the following grounds: (2) the opposing party has failed to state a valid defense to the claim asserted against him.”
— Mich. Comp. Laws § 440.5114(2)(b) — 1 case
Michigan Nat'l Bank v. Metro Institutional Food Serv., Inc, 497 N.W.2d 225 (Mich. Ct. App. 1993).
“Under MCL 440.5114(1); MSA 19.5114(1), the issuer of a letter of credit must honor a draft or demand for payment that complies with the terms of the letter of credit regardless of whether the documents are fraudulent or the goods do not conform to the contract between the…”
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