§ 336.5-118 — Security Interest of Issuer or Nominated Person
Plain-Language Summary
An issuer or nominated person that honors or gives value for a presentation under a letter of credit gets a security interest in the documents presented. That security interest lasts until the issuer or nominated person is reimbursed or otherwise recovers the value it gave, and it is governed by article 9. No separate security agreement is needed for it to be enforceable, and the statute sets out when the interest is automatically perfected and when it has priority over a conflicting security interest in the document, including the rule that priority holds so long as the debtor does not have possession.
336.5-118 SECURITY INTEREST OF ISSUER OR NOMINATED PERSON.
(a) 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.
(b) 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 (a), the security interest continues and is subject to article 9, but:
(1) a security agreement is not necessary to make the security interest enforceable under section 336.9-203(b)(3);
(2) if the document is presented in a medium other than a written or other tangible medium, the security interest is perfected; and
(3) 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.
History:
History: History:
2000 c 399 art 2 s 13