H-2565.1 _______________________________________________
SUBSTITUTE HOUSE BILL 1799
_______________________________________________
State of Washington 55th Legislature 1997 Regular Session
By House Committee on Law & Justice (originally sponsored by Representatives Sheahan, Appelwick, Costa and Sullivan; by request of Washington Uniform Legislation Commission)
Read first time 03/05/97.
AN ACT Relating to letters of credit under the uniform commercial code; amending RCW 62A.5-102, 62A.5-103, 62A.5-104, 62A.5-105, 62A.5-106, 62A.5-107, 62A.5-108, 62A.5-109, 62A.5-110, 62A.5-111, 62A.5-112, 62A.5-113, 62A.5-114, 62A.5-115, 62A.5-116, 62A.5-117, 62A.1-105, 62A.2-512, 62A.9-103, 62A.9-104, 62A.9-105, 62A.9-106, 62A.9-304, and 62A.9-305; and creating new sections.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1. APPLICABILITY. This act applies to a letter of credit that is issued on or after the effective date of this act. This act does not apply to a transaction, event, obligation, or duty arising out of or associated with a letter of credit that was issued before the effective date of this act.
NEW SECTION. Sec. 2. SAVINGS CLAUSE. A transaction arising out of or associated with a letter of credit that was issued before the effective date of this act and the rights, obligations, and interests flowing from that transaction are governed by any statute or other law amended or repealed by this act as if repeal or amendment had not occurred and may be terminated, completed, consummated, or enforced under that statute or other law.
Sec. 3. RCW 62A.5-102 and 1965 ex.s. c 157 s 5-102 are each amended to read as follows:
((Scope.))
Definitions. (((1) This Article applies
(a)
to a credit issued by a bank if the credit requires a documentary draft or a
documentary demand for payment; and
(b)
to a credit issued by a person other than a bank if the credit requires that
the draft or demand for payment be accompanied by a document of title; and
(c)
to a credit issued by a bank or other person if the credit is not within
subparagraphs (a) or (b) but conspicuously states that it is a letter of credit
or is conspicuously so entitled.
(2)
Unless the engagement meets the requirements of subsection (1), this Article
does not apply to engagements to make advances or to honor drafts or demands
for payment, to authorities to pay or purchase, to guarantees or to general
agreements.
(3)
This Article deals with some but not all of the rules and concepts of letters
of credit as such rules or concepts have developed prior to this act or may
hereafter develop. The fact that this Article states a rule does not by itself
require, imply or negate application of the same or a converse rule to a situation
not provided for or to a person not specified by this Article.)) (1)
The definitions in this section apply throughout this Article unless the
context clearly requires otherwise:
(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 (i) 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 RCW 62A.5‑108(5) and (ii) 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.
(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:
(i) Upon payment;
(ii) If the letter of credit provides for acceptance, upon acceptance of a draft and, at maturity, its payment; or
(iii) 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 RCW 62A.5‑104 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 (i) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (ii) 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 Articles applying to this Article and the sections in which they appear are:
"Accept" or "Acceptance" RCW 62A.3‑409
"Value" RCW 62A.3-303, RCW 62A.4-211.
(3) Article 1 contains certain additional general definitions and principles of construction and interpretation applicable throughout this Article.
Sec. 4. RCW 62A.5-103 and 1965 ex.s. c 157 s 5-103 are each amended to read as follows:
((Definitions.))
Scope. (((1) In this Article unless the context otherwise requires
(a)
"Credit" or "letter of credit" means an engagement by a
bank or other person made at the request of a customer and of a kind within the
scope of this Article (RCW 62A.5-102) that the issuer will honor drafts or
other demands for payment upon compliance with the conditions specified in the
credit. A credit may be either revocable or irrevocable. The engagement may
be either an agreement to honor or a statement that the bank or other person is
authorized to honor.
(b)
A "documentary draft" or a "documentary demand for payment"
is one honor of which is conditioned upon the presentation of a document or
documents. "Document" means any paper including document of title,
security, invoice, certificate, notice of default and the like.
(c)
An "issuer" is a bank or other person issuing a credit.
(d)
A "beneficiary" of a credit is a person who is entitled under its
terms to draw or demand payment.
(e)
An "advising bank" is a bank which gives notification of the issuance
of a credit by another bank.
(f)
A "confirming bank" is a bank which engages either that it will
itself honor a credit already issued by another bank or that such a credit will
be honored by the issuer or a third bank.
(g)
A "customer" is a buyer or other person who causes an issuer to issue
a credit. The term also includes a bank which procures issuance or
confirmation on behalf of that bank's customer.
(2)
Other definitions applying to this Article and the sections in which they
appear are:
"Notation
of credit". RCW 62A.5-108.
"Presenter".
RCW 62A.5-112(3).
(3)
Definitions in other Articles applying to this Article and the sections in
which they appear are:
"Accept"
or "Acceptance". RCW 62A.3-410.
"Contract
for sale". RCW 62A.2-106.
"Draft".
RCW 62A.3-104.
"Holder
in due course". RCW 62A.3-302.
"Midnight
deadline". RCW 62A.4-104.
"Security".
RCW 62A.8-102.
(4)
In addition, Article 1 contains general definitions and principles of
construction and interpretation applicable throughout this Article.)) (1)
This Article 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 Article 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 Article.
(3) With the exception of this subsection, subsections (1) and (4) of this section, RCW 62A.5-102(1) (i) and (j), 62A.5-106(4), and 62A.5-114(4), and except to the extent prohibited in RCW 62A.1-102(3) and 62A.5-117(4), the effect of this Article 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 Article.
(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.
Sec. 5. RCW 62A.5-104 and 1965 ex.s. c 157 s 5-104 are each amended to read as follows:
Formal
requirements((; signing)). (((1) Except as otherwise required in
subsection (1)(c) of RCW 62A.5-102 on scope, no particular form of phrasing is
required for a credit. A credit must be in writing and signed by the issuer
and a confirmation must be in writing and signed by the confirming bank. A
modification of the terms of a credit or confirmation must be signed by the
issuer or confirming bank.
(2)
A telegram may be a sufficient signed writing if it identifies its sender by an
authorized authentication. The authentication may be in code and the
authorized naming of the issuer in an advice of credit is a sufficient signing.)) A
letter of credit, confirmation, advice, transfer, amendment, or cancellation
may be issued in any form that is a record and is authenticated (1) by a
signature or (2) in accordance with the agreement of the parties or the
standard practice referred to in RCW 62A.5‑108(5).
Sec. 6. RCW 62A.5-105 and 1965 ex.s. c 157 s 5-105 are each amended to read as follows:
Consideration.
((No consideration is necessary to establish a credit or to enlarge or
otherwise modify its terms.)) Consideration is not required to issue,
amend, transfer, or cancel a letter of credit, advice, or confirmation.
Sec. 7. RCW 62A.5-106 and 1965 ex.s. c 157 s 5-106 are each amended to read as follows:
((Time
and effect of establishment of credit.)) Issuance, amendment,
cancellation, and duration. (((1) Unless otherwise agreed a credit is
established:
(a)
as regards the customer as soon as a letter of credit is sent to him or the
letter of credit or an authorized written advice of its issuance is sent to the
beneficiary; and
(b)
as regards the beneficiary when he receives a letter of credit or an authorized
written advice of its issuance.
(2)
Unless otherwise agreed once an irrevocable credit is established as regards
the customer it can be modified or revoked only with the consent of the
customer and once it is established as regards the beneficiary it can be
modified or revoked only with his consent.
(3)
Unless otherwise agreed after a revocable credit is established it may be
modified or revoked by the issuer without notice to or consent from the
customer or beneficiary.
(4)
Notwithstanding any modification or revocation of a revocable credit any person
authorized to honor or negotiate under the terms of the original credit is
entitled to reimbursement for or honor of any draft or demand for payment duly
honored or negotiated before receipt of notice of the modification or revocation
and the issuer in turn is entitled to reimbursement from its customer.)) (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.
Sec. 8. RCW 62A.5-107 and 1965 ex.s. c 157 s 5-107 are each amended to read as follows:
((Advice
of credit; confirmation; error in statement of terms.)) Confirmer,
nominated person, and adviser. (((1) Unless otherwise specified an
advising bank by advising a credit issued by another bank does not assume any
obligation to honor drafts drawn or demands for payment made under the credit
but it does assume obligation for the accuracy of its own statement.
(2)
A confirming bank by confirming a credit becomes directly obligated on the
credit to the extent of its confirmation as though it were its issuer and
acquires the rights of an issuer.
(3)
Even though an advising bank incorrectly advises the terms of a credit it has
been authorized to advise the credit is established as against the issuer to
the extent of its original terms.
(4)
Unless otherwise specified the customer bears as against the issuer all risks
of transmission and reasonable translation or interpretation of any message
relating to a credit.)) (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) of this section. 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.
Sec. 9. RCW 62A.5-108 and 1965 ex.s. c 157 s 5-108 are each amended to read as follows:
(("Notation
credit"; exhaustion of credit.)) Issuer's rights and obligations.
(((1) A credit which specifies that any person purchasing or paying drafts
drawn or demands for payment made under it must note the amount of the draft or
demand on the letter or advice of credit is a "notation credit".
(2)
Under a notation credit
(a)
a person paying the beneficiary or purchasing a draft or demand for payment
from him acquires a right to honor only if the appropriate notation is made and
by transferring or forwarding for honor the documents under the credit such a
person warrants to the issuer that the notation has been made; and
(b)
unless the credit or a signed statement that an appropriate notation has been
made accompanies the draft or demand for payment the issuer may delay honor
until evidence of notation has been procured which is satisfactory to it but
its obligation and that of its customer continue for a reasonable time not
exceeding thirty days to obtain such evidence.
(3)
If the credit is not a notation credit
(a)
the issuer may honor complying drafts or demands for payment presented to it in
the order in which they are presented and is discharged pro tanto by honor of
any such draft or demand;
(b)
as between competing good faith purchasers of complying drafts or demands the
person first purchasing has priority over a subsequent purchaser even though
the later purchased draft or demand has been first honored.)) (1)
Except as otherwise provided in RCW 62A.5‑109, an issuer shall honor a
presentation that, as determined by the standard practice referred to in
subsection (5) of this section, appears on its face strictly to comply with the
terms and conditions of the letter of credit. Except as otherwise provided in
RCW 62A.5‑113 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) of this section, 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) of this section 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 RCW 62A.5‑109(1) or expiration of the letter of credit before presentation.
(5) An issuer shall observe 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) of this section.
(7) If an undertaking constituting a letter of credit under RCW 62A.5‑102(1)(j) 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 Article:
(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 RCW 62A.3-414 and 62A.3-415;
(d) Except as otherwise provided in RCW 62A.5-110 and 62A.5-117, 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.
Sec. 10. RCW 62A.5-109 and 1965 ex.s. c 157 s 5-109 are each amended to read as follows:
((Issuer's
obligation to its customer.)) Fraud and forgery. (((1) An
issuer's obligation to its customer includes good faith and observance of any
general banking usage but unless otherwise agreed does not include liability or
responsibility
(a)
for performance of the underlying contract for sale or other transaction
between the customer and the beneficiary; or
(b)
for any act or omission of any person other than itself or its own branch or
for loss or destruction of a draft, demand or document in transit or in the possession
of others; or
(c)
based on knowledge or lack of knowledge of any usage of any particular trade.
(2)
An issuer must examine documents with care so as to ascertain that on their
face they appear to comply with the terms of the credit but unless otherwise
agreed assumes no liability or responsibility for the genuineness,
falsification or effect of any document which appears on such examination to be
regular on its face.
(3)
A non-bank issuer is not bound by any banking usage of which it has no knowledge.)) (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 (i) a nominated person who has given value in good faith and without notice of forgery or material fraud, (ii) a confirmer who has honored its confirmation in good faith, (iii) 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 (iv) 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 may temporarily or permanently enjoin the issuer from honoring a presentation or 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 subsection (1)(a) of this section.
Sec. 11. RCW 62A.5-110 and 1965 ex.s. c 157 s 5-110 are each amended to read as follows:
((Availability
of credit in portions; presenter's reservation of lien or claim.)) Warranties.
(((1) Unless otherwise specified a credit may be used in portions in the
discretion of the beneficiary.
(2)
Unless otherwise specified a person by presenting a documentary draft or demand
for payment under a credit relinquishes upon its honor all claims to the
documents and a person by transferring such draft or demand or causing such
presentment authorizes such relinquishment. An explicit reservation of claim
makes the draft or demand non-complying.)) (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 RCW 62A.5-109(1); 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) of this section are in addition to warranties arising under Articles 3, 4, 7, and 8 because of the presentation or transfer of documents covered by any of those Articles.
Sec. 12. RCW 62A.5-111 and 1965 ex.s. c 157 s 5-111 are each amended to read as follows:
((Warranties
on transfer and presentment.)) Remedies. (((1) Unless otherwise
agreed the beneficiary by transferring or presenting a documentary draft or
demand for payment warrants to all interested parties that the necessary
conditions of the credit have been complied with. This is in addition to any
warranties arising under Articles 3, 4, 7 and 8.
(2)
Unless otherwise agreed a negotiating, advising, confirming, collecting or
issuing bank presenting or transferring a draft or demand for payment under a
credit warrants only the matters warranted by a collecting bank under Article 4
and any such bank transferring a document warrants only the matters warranted
by an intermediary under Articles 7 and 8.)) (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 Article or an issuer breaches an obligation not covered in subsection (1) or (2) of this section, 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) of this section.
(4) An issuer, nominated person, or adviser who is found liable under subsection (1), (2), or (3) of this section 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 Article.
(6) 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.
Sec. 13. RCW 62A.5-112 and 1965 ex.s. c 157 s 5-112 are each amended to read as follows:
((Time
allowed for honor or rejection; withholding honor or rejection by consent;
"presenter".)) Transfer of letter of credit. (((1) A
bank to which a documentary draft or demand for payment is presented under a
credit may without dishonor of the draft, demand or credit
(a)
defer honor until the close of the third banking day following receipt of the
documents; and
(b)
further defer honor if the presenter has expressly or impliedly consented
thereto.
Failure
to honor within the time here specified constitutes dishonor of the draft or
demand and of the credit except as otherwise provided in subsection (4) of RCW
62A.5-114 on conditional payment.
(2)
Upon dishonor the bank may unless otherwise instructed fulfill its duty to
return the draft or demand and the documents by holding them at the disposal of
the presenter and sending him an advice to that effect.
(3)
"Presenter" means any person presenting a draft or demand for payment
for honor under a credit even though that person is a confirming bank or other
correspondent which is acting under an issuer's authorization.)) (1)
Except as otherwise provided in RCW 62A.5‑113, 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 RCW 62A.5‑108(5) or is otherwise reasonable under the circumstances.
Sec. 14. RCW 62A.5-113 and 1965 ex.s. c 157 s 5-113 are each amended to read as follows:
((Indemnities.))
Transfer by operation of law. (((1) A bank seeking to obtain
(whether for itself or another) honor, negotiation or reimbursement under a
credit may give an indemnity to induce such honor, negotiation or
reimbursement.
(2)
An indemnity agreement inducing honor, negotiation or reimbursement
(a)
unless otherwise explicitly agreed applies to defects in the documents but not
in the goods; and
(b)
unless a longer time is explicitly agreed expires at the end of ten business
days following receipt of the documents by the ultimate customer unless notice
of objection is sent before such expiration date. The ultimate customer may
send notice of objection to the person from whom he received the documents and
any bank receiving such notice is under a duty to send notice to its transferor
before its midnight deadline.)) (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) of this section, 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 RCW 62A.5‑108(5) 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) of this section has the consequences specified in RCW 62A.5‑108(9) 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 RCW 62A.5‑109.
(5) An issuer whose rights of reimbursement are not covered by subsection (4) of this section or substantially similar law and any confirmer or nominated person may decline to recognize a presentation under subsection (2) of this section.
(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.
Sec. 15. RCW 62A.5-114 and 1995 c 48 s 57 are each amended to read as follows:
((Issuer's
duty and privilege to honor; right to reimbursement.)) Assignment of
proceeds. (((1) An issuer must honor a draft or demand for payment
which complies with the terms of the relevant credit regardless of whether the
goods or documents conform to the underlying contract for sale or other
contract between the customer and the beneficiary. The issuer is not excused
from honor of such a draft or demand by reason of an additional general term
that all documents must be satisfactory to the issuer, but an issuer may
require that specified documents must be satisfactory to it.
(2)
Unless otherwise agreed when documents appear on their face to comply with the
terms of a credit but a required document does not in fact conform to the
warranties made on negotiation or transfer of a document of title (RCW
62A.7-507) or of a certificated security (RCW 62A.8-108) or is forged or
fraudulent or there is fraud in the transaction:
(a)
the issuer must honor the draft or demand for payment if honor is demanded by a
negotiating bank or other holder of the draft or demand which has taken the
draft or demand under the credit and under circumstances which would make it a
holder in due course (RCW 62A.3-302) and in an appropriate case would make it a
person to whom a document of title has been duly negotiated (RCW 62A.7-502) or
a bona fide purchaser of a certificated security (RCW 62A.8-302); and
(b)
in all other cases as against its customer, an issuer acting in good faith may
honor the draft or demand for payment despite notification from the customer of
fraud, forgery or other defect not apparent on the face of the documents but a
court of appropriate jurisdiction may enjoin such honor.
(3)
Unless otherwise agreed an issuer which has duly honored a draft or demand for
payment is entitled to immediate reimbursement of any payment made under the
credit and to be put in effectively available funds not later than the day
before maturity of any acceptance made under the credit.
(4)
When a credit provides for payment by the issuer on receipt of notice that the
required documents are in the possession of a correspondent or other agent of
the issuer
(a)
any payment made on receipt of such notice is conditional; and
(b)
the issuer may reject documents which do not comply with the credit if it does
so within three banking days following its receipt of the documents; and
(c)
in the event of such rejection, the issuer is entitled by charge back or
otherwise to return of the payment made.
(5)
In the case covered by subsection (4) failure to reject documents within the
time specified in sub-paragraph (b) constitutes acceptance of the documents and
makes the payment final in favor of the beneficiary.)) (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 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.
Sec. 16. RCW 62A.5-115 and 1965 ex.s. c 157 s 5-115 are each amended to read as follows:
((Remedy
for improper dishonor or anticipatory repudiation.)) Statute of
Limitations. (((1) When an issuer wrongfully dishonors a draft or
demand for payment presented under a credit the person entitled to honor has
with respect to any documents the rights of a person in the position of a
seller (RCW 62A.2-707) and may recover from the issuer the face amount of the
draft or demand together with incidental damages under RCW 62A.2-710 on
seller's incidental damages and interest but less any amount realized by resale
or other use or disposition of the subject matter of the transaction. In the
event no resale or other utilization is made the documents, goods or other
subject matter involved in the transaction must be turned over to the issuer on
payment of judgment.
(2)
When an issuer wrongfully cancels or otherwise repudiates a credit before
presentment of a draft or demand for payment drawn under it the beneficiary has
the rights of a seller after anticipatory repudiation by the buyer under RCW
62A.2-610 if he learns of the repudiation in time reasonably to avoid
procurement of the required documents. Otherwise the beneficiary has an
immediate right of action for wrongful dishonor.)) An
action to enforce a right or obligation arising under this Article must be
commenced within one year after the expiration date of the relevant letter of
credit or one year after the cause of action accrues, whichever occurs later.
A cause of action accrues when the breach occurs, regardless of the aggrieved
party's lack of knowledge of the breach.
Sec. 17. RCW 62A.5-116 and 1981 c 41 s 5 are each amended to read as follows:
((Transfer
and assignment.)) Choice of law and forum. (((1) The right to
draw under a credit can be transferred or assigned only when the credit is
expressly designated as transferable or assignable.
(2)
Even though the credit specifically states that it is nontransferable or
nonassignable the beneficiary may before performance of the conditions of the
credit assign his right to proceeds. Such an assignment is an assignment of an
account under Article 9 on Secured Transactions and is governed by that Article
except that
(a)
the assignment is ineffective until the letter of credit or advice of credit is
delivered to the assignee which delivery constitutes perfection of the security
interest under Article 9; and
(b)
the issuer may honor drafts or demands for payment drawn under the credit until
it receives a notification of the assignment signed by the beneficiary which
reasonably identifies the credit involved in the assignment and contains a
request to pay the assignee; and
(c)
after what reasonably appears to be such a notification has been received the
issuer may without dishonor refuse to accept or pay even to a person otherwise
entitled to honor until the letter of credit or advice of credit is exhibited
to the issuer.
(3)
Except where the beneficiary has effectively assigned his right to draw or his
right to proceeds, nothing in this section limits his right to transfer or
negotiate drafts or demands drawn under the credit.)) (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 or otherwise authenticated by the affected parties in the
manner provided in RCW 62A.5-104 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) of this section 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. 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 this subsection.
(3) 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 Article would govern the liability of an issuer, nominated person, or adviser under subsection (1) or (2) of this section, (b) the relevant undertaking incorporates rules of custom or practice, and (c) there is conflict between this Article and those rules as applied to that undertaking, those rules govern except to the extent of any conflict with the nonvariable provisions specified in RCW 62A.5‑103(3).
(4) If there is conflict between this Article and Article 3, 4, 4A, or 9, this Article governs.
(5) The forum for settling disputes arising out of an undertaking within this Article may be chosen in the manner and with the binding effect that governing law may be chosen in accordance with subsection (1) of this section.
Sec. 18. RCW 62A.5-117 and 1965 ex.s. c 157 s 5-117 are each amended to read as follows:
((Insolvency
of bank holding funds for documentary credit.)) Subrogation of issuer,
applicant, and nominated person. (((1) Where an issuer or an advising
or confirming bank or a bank which has for a customer procured issuance of a
credit by another bank becomes insolvent before final payment under the credit
and the credit is one to which this Article is made applicable by paragraphs
(a) or (b) of RCW 62A.5-102(1) on scope, the receipt or allocation of funds or
collateral to secure or meet obligations under the credit shall have the
following results:
(a)
to the extent of any funds or collateral turned over after or before the
insolvency as indemnity against or specifically for the purpose of payment of
drafts or demands for payment drawn under the designated credit, the drafts or
demands are entitled to payment in preference over depositors or other general
creditors of the issuer or bank; and
(b)
on expiration of the credit or surrender of the beneficiary's rights under it
unused any person who has given such funds or collateral is similarly entitled
to return thereof; and
(c)
a charge to a general or current account with a bank if specifically consented
to for the purpose of indemnity against or payment of drafts or demands for
payment drawn under the designated credit falls under the same rules as if the
funds had been drawn out in cash and then turned over with specific
instructions.
(2)
After honor or reimbursement under this section the customer or other person
for whose account the insolvent bank has acted is entitled to receive the
documents involved.)) (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) of this section.
(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) of this section do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection (3) of this section 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.
Sec. 19. RCW 62A.1-105 and 1995 c 48 s 54 are each amended to read as follows:
Territorial application of the title; parties' power to choose applicable law. (1) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement this Title applies to transactions bearing an appropriate relation to this state.
(2) Where one of the following provisions of this Title specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:
Rights of creditors against sold goods. RCW 62A.2-402.
Applicability of the Article on Leases. RCW 62A.2A-105 and 62A.2A-106.
Applicability of the Article on Bank Deposits and Collections. RCW 62A.4-102.
Applicability of the Article on Letters of Credit. RCW 62A.5-116.
Applicability of the Article on Investment Securities. RCW 62A.8-110.
Perfection provisions of the Article on Secured Transactions. RCW 62A.9-103.
Sec. 20. RCW 62A.2-512 and 1965 ex.s. c 157 s 2-512 are each amended to read as follows:
Payment by buyer before inspection. (1) Where the contract requires payment before inspection non-conformity of the goods does not excuse the buyer from so making payment unless
(a) the non-conformity appears without inspection; or
(b)
despite tender of the required documents the circumstances would justify
injunction against honor under the provisions of this Title (RCW ((62A.5-114))
62A.5-109(2)).
(2) Payment pursuant to subsection (1) does not constitute an acceptance of goods or impair the buyer's right to inspect or any of his or her remedies.
Sec. 21. RCW 62A.9-103 and 1995 c 48 s 58 are each amended to read as follows:
Perfection of security interest in multiple state transactions. (1) Documents, instruments, letters of credit, and ordinary goods.
(a)
This subsection applies to documents ((and)), instruments,
rights to proceed of written letters of credit, and ((to)) goods
other than those covered by a certificate of title described in subsection (2),
mobile goods described in subsection (3), and minerals described in subsection
(5).
(b) Except as otherwise provided in this subsection, perfection and the effect of perfection or nonperfection of a security interest in collateral are governed by the law of the jurisdiction where the collateral is when the last event occurs on which is based the assertion that the security interest is perfected or unperfected.
(c) If the parties to a transaction creating a purchase money security interest in goods in one jurisdiction understand at the time that the security interest attaches that the goods will be kept in another jurisdiction, then the law of the other jurisdiction governs the perfection and the effect of perfection or nonperfection of the security interest from the time it attaches until thirty days after the debtor receives possession of the goods and thereafter if the goods are taken to the other jurisdiction before the end of the thirty-day period.
(d) When collateral is brought into and kept in this state while subject to a security interest perfected under the law of the jurisdiction from which the collateral was removed, the security interest remains perfected, but if action is required by Part 3 of this Article to perfect the security interest,
(i) if the action is not taken before the expiration of the period of perfection in the other jurisdiction or the end of four months after the collateral is brought into this state, whichever period first expires, the security interest becomes unperfected at the end of that period and is thereafter deemed to have been unperfected as against a person who became a purchaser after removal;
(ii) if the action is taken before the expiration of the period specified in subparagraph (i), the security interest continues perfected thereafter;
(iii) for the purpose of priority over a buyer of consumer goods (subsection (2) of RCW 62A.9-307), the period of the effectiveness of a filing in the jurisdiction from which the collateral is removed is governed by the rules with respect to perfection in subparagraphs (i) and (ii).
(e) For purposes of this subsection, rights to proceeds of a written letter of credit are deemed located where the letter of credit is located.
(2) Certificate of title.
(a) This subsection applies to goods covered by a certificate of title issued under a statute of this state or of another jurisdiction under the law of which indication of a security interest on the certificate is required as a condition of perfection.
(b) Except as otherwise provided in this subsection, perfection and the effect of perfection or nonperfection of the security interest are governed by the law (including the conflict of laws rules) of the jurisdiction issuing the certificate until four months after the goods are removed from that jurisdiction and thereafter until the goods are registered in another jurisdiction, but in any event not beyond surrender of the certificate. After the expiration of that period, the goods are not covered by the certificate of title within the meaning of this section.
(c) Except with respect to the rights of a buyer described in the next paragraph, a security interest, perfected in another jurisdiction otherwise than by notation on a certificate of title, in goods brought into this state and thereafter covered by a certificate of title issued by this state is subject to the rules stated in paragraph (d) of subsection (1).
(d) If goods are brought into this state while a security interest therein is perfected in any manner under the law of the jurisdiction from which the goods are removed and a certificate of title is issued by this state and the certificate does not show that the goods are subject to the security interest or that they may be subject to security interests not shown on the certificate, the security interest is subordinate to the rights of a buyer of the goods who is not in the business of selling goods of that kind to the extent that he gives value and receives delivery of the goods after issuance of the certificate and without knowledge of the security interest.
(3) Accounts, general intangibles and mobile goods.
(a) This subsection applies to accounts (other than an account described in subsection (5) on minerals) and general intangibles (other than uncertificated securities) and to goods which are mobile and which are of a type normally used in more than one jurisdiction, such as motor vehicles, trailers, rolling stock, airplanes, shipping containers, road building and construction machinery and commercial harvesting machinery and the like, if the goods are equipment or are inventory leased or held for lease by the debtor to others, and are not covered by a certificate of title described in subsection (2).
(b) The law (including the conflict of laws rules) of the jurisdiction in which the debtor is located governs the perfection and the effect of perfection or nonperfection of the security interest.
(c) If, however, the debtor is located in a jurisdiction which is not a part of the United States, and which does not provide for perfection of the security interest by filing or recording in that jurisdiction, the law of the jurisdiction in the United States in which the debtor has its major executive office in the United States governs the perfection and the effect of perfection or nonperfection of the security interest through filing. In the alternative, if the debtor is located in a jurisdiction which is not a part of the United States or Canada and the collateral is accounts or general intangibles for money due or to become due, the security interest may be perfected by notification to the account debtor. As used in this paragraph, "United States" includes its territories and possessions and the Commonwealth of Puerto Rico.
(d) A debtor shall be deemed located at his place of business if he has one, at his chief executive office if he has more than one place of business, otherwise at his residence. If, however, the debtor is a foreign air carrier under the Federal Aviation Act of 1958, as amended, it shall be deemed located at the designated office of the agent upon whom service of process may be made on behalf of the foreign air carrier.
(e) A security interest perfected under the law of the jurisdiction of the location of the debtor is perfected until the expiration of four months after a change of the debtor's location to another jurisdiction, or until perfection would have ceased by the law of the first jurisdiction, whichever period first expires. Unless perfected in the new jurisdiction before the end of that period, it becomes unperfected thereafter and is deemed to have been unperfected as against a person who became a purchaser after the change.
(4) Chattel paper.
The rules stated for goods in subsection (1) apply to a possessory security interest in chattel paper. The rules stated for accounts in subsection (3) apply to a nonpossessory security interest in chattel paper, but the security interest may not be perfected by notification to the account debtor.
(5) Minerals.
Perfection and the effect of perfection or nonperfection of a security interest which is created by a debtor who has an interest in minerals or the like (including oil and gas) before extraction and which attaches thereto as extracted, or which attaches to an account resulting from the sale thereof at the wellhead or minehead are governed by the law (including the conflict of laws rules) of the jurisdiction wherein the wellhead or minehead is located.
(6) Investment property.
(a) This subsection applies to investment property.
(b) Except as otherwise provided in paragraph (f), during the time that a security certificate is located in a jurisdiction, perfection of a security interest, the effect of perfection or non-perfection, and the priority of a security interest in the certificated security represented thereby are governed by the local law of that jurisdiction.
(c) Except as otherwise provided in paragraph (f), perfection of a security interest, the effect of perfection or non-perfection, and the priority of a security interest in an uncertificated security are governed by the local law of the issuer's jurisdiction as specified in RCW 62A.8-110(4).
(d) Except as otherwise provided in paragraph (f), perfection of a security interest, the effect of perfection or non-perfection, and the priority of a security interest in a security entitlement or securities account are governed by the local law of the securities intermediary's jurisdiction as specified in RCW 62A.8-110(5).
(e) Except as otherwise provided in paragraph (f), perfection of a security interest, the effect of perfection or non-perfection, and the priority of a security interest in a commodity contract or commodity account are governed by the local law of the commodity intermediary's jurisdiction. The following rules determine a "commodity intermediary's jurisdiction" for purposes of this paragraph:
(i) if an agreement between the commodity intermediary and commodity customer specifies that it is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
(ii) if an agreement between the commodity intermediary and commodity customer does not specify the governing law as provided in subparagraph (i), but expressly specifies that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
(iii) if an agreement between the commodity intermediary and commodity customer does not specify a jurisdiction as provided in subparagraph (i) or (ii), the commodity intermediary's jurisdiction is the jurisdiction in which is located the office identified in an account statement as the office serving the commodity customer's account.
(iv) if an agreement between the commodity intermediary and commodity customer does not specify a jurisdiction as provided in subparagraph (i) or (ii) and an account statement does not identify an office serving the commodity customer's account as provided in subparagraph (iii), the commodity intermediary's jurisdiction is the jurisdiction in which is located the chief executive office of the commodity intermediary.
(f) Perfection of a security interest by filing, automatic perfection of a security interest in investment property granted by a broker or securities intermediary, and automatic perfection of a security interest in a commodity contract or commodity account granted by a commodity intermediary are governed by the local law of the jurisdiction in which the debtor is located.
Sec. 22. RCW 62A.9-104 and 1985 c 412 s 11 are each amended to read as follows:
Transactions excluded from Article. This Article does not apply
(a) to a security interest subject to any statute of the United States to the extent that such statute governs the rights of parties to and third parties affected by transactions in particular types of property; or
(b) to a landlord's lien; or
(c) to a lien given by statute or other rule of law for services or materials or to a lien created under chapter 60.13 or 22.09 RCW except as provided in RCW 62A.9-310 on priority of such liens; or
(d) to a transfer of a claim for wages, salary or other compensation of an employee; or
(e) to a transfer by a government or governmental subdivision or agency; or
(f) to a sale of accounts or chattel paper as part of a sale of the business out of which they arose, or an assignment of accounts or chattel paper which is for the purpose of collection only, or a transfer of a right to payment under a contract to an assignee who is also to do the performance under the contract or a transfer of a single account to an assignee in whole or partial satisfaction of a preexisting indebtedness; or
(g) to a transfer of an interest or claim in or under any policy of insurance, except as provided with respect to proceeds (RCW 62A.9-306) and priorities in proceeds (RCW 62A.9-312); or
(h) to a right represented by a judgment (other than a judgment taken on a right to payment which was collateral); or
(i) to any right of set-off; or
(j) except to the extent that provision is made for fixtures in RCW 62A.9-313, to the creation or transfer of an interest in or lien on real estate, including a lease or rents thereunder; or
(k) to a transfer in whole or in part of any claim arising out of tort; or
(l) to a transfer of an interest in any deposit account (subsection (1) of RCW 62A.9-105), except as provided with respect to proceeds (RCW 62A.9-306) and priorities in proceeds (RCW 62A.9-312); or
(m) to a transfer of an interest in a letter of credit other than the rights to proceeds of a written letter of credit.
Sec. 23. RCW 62A.9-105 and 1995 c 48 s 59 are each amended to read as follows:
Definitions and index of definitions. (1) In this Article unless the context otherwise requires:
(a) "Account debtor" means the person who is obligated on an account, chattel paper or general intangible;
(b) "Chattel paper" means a writing or writings which evidence both a monetary obligation and a security interest in or a lease of specific goods, but a charter or other contract involving the use or hire of a vessel is not chattel paper. When a transaction is evidenced both by such a security agreement or a lease and by an instrument or a series of instruments, the group of writings taken together constitutes chattel paper;
(c) "Collateral" means the property subject to a security interest, and includes accounts and chattel paper which have been sold;
(d) "Debtor" means the person who owes payment or other performance of the obligation secured, whether or not he owns or has rights in the collateral, and includes the seller of accounts or chattel paper. Where the debtor and the owner of the collateral are not the same person, the term "debtor" means the owner of the collateral in any provision of the Article dealing with the collateral, the obligor in any provision dealing with the obligation, and may include both where the context so requires;
(e) "Deposit account" means a demand, time, savings, passbook or like account maintained with a bank, savings and loan association, credit union or like organization, other than an account evidenced by a certificate of deposit;
(f) "Document" means document of title as defined in the general definitions of Article 1 (RCW 62A.1-201), and a receipt of the kind described in subsection (2) of RCW 62A.7-201;
(g) "Encumbrance" includes real estate mortgages and other liens on real estate and all other rights in real estate that are not ownership interests;
(h) "Goods" includes all things which are movable at the time the security interest attaches or which are fixtures (RCW 62A.9-313), but does not include money, documents, instruments, investment property, commodity contracts, accounts, chattel paper, general intangibles, or minerals or the like (including oil and gas) before extraction. "Goods" also includes standing timber which is to be cut and removed under a conveyance or contract for sale, the unborn young of animals and growing crops;
(i) "Instrument" means a negotiable instrument (defined in RCW 62A.3-104), or any other writing which evidences a right to the payment of money and is not itself a security agreement or lease and is of a type which is in ordinary course of business transferred by delivery with any necessary indorsement or assignment. The term does not include investment property;
(j) "Mortgage" means a consensual interest created by a real estate mortgage, a trust deed on real estate, or the like;
(k) An advance is made "pursuant to commitment" if the secured party has bound himself to make it, whether or not a subsequent event of default or other event not within his control has relieved or may relieve him from his obligation;
(l) "Security agreement" means an agreement which creates or provides for a security interest;
(m) "Secured party" means a lender, seller or other person in whose favor there is a security interest, including a person to whom accounts or chattel paper have been sold. When the holders of obligations issued under an indenture of trust, equipment trust agreement or the like are represented by a trustee or other person, the representative is the secured party;
(n) "Transmitting utility" means any person primarily engaged in the railroad, street railway or trolley bus business, the electric or electronics communications transmission business, the transmission of goods by pipeline, or the transmission or the production and transmission of electricity, steam, gas or water, or the provision of sewer service.
(2) Other definitions applying to this Article and the sections in which they appear are:
"Account". RCW 62A.9-106.
"Attach". RCW 62A.9-203.
"Commodity contract". RCW 62A.9-115.
"Commodity customer". RCW 62A.9-115.
"Commodity intermediary". RCW 62A.9-115.
"Construction mortgage". RCW 62A.9-313(1).
"Consumer goods". RCW 62A.9-109(1).
"Control". RCW 62A.9-115.
"Equipment". RCW 62A.9-109(2).
"Farm products". RCW 62A.9-109(3).
"Fixture". RCW 62A.9-313.
"Fixture filing". RCW 62A.9-313.
"General intangibles". RCW 62A.9-106.
"Inventory". RCW 62A.9-109(4).
"Investment property". RCW 62A.9-115.
"Lien creditor". RCW 62A.9-301(3).
"Proceeds". RCW 62A.9-306(1).
"Purchase money security
interest". RCW 62A.9-107.
"United States". RCW 62A.9-103.
(3) The following definitions in other Articles apply to this Article:
"Broker". RCW 62A.8-102.
"Certificated security". RCW 62A.8-102.
"Check". RCW 62A.3-104.
"Clearing corporation". RCW 62A.8-102.
"Contract for sale". RCW 62A.2-106.
"Control". RCW 62A.8-106.
"Delivery". RCW 62A.8-301.
"Entitlement holder". RCW 62A.8-102.
"Financial asset". RCW 62A.8-102.
"Holder in due course". RCW 62A.3-302.
"Letter of credit". RCW 62A.5-102.
"Note". RCW 62A.3-104.
"Proceeds of a letter of
credit". RCW 62A.5-114(1).
"Sale". RCW 62A.2-106.
"Securities intermediary". RCW 62A.8-102.
"Security". RCW 62A.8-102.
"Security certificate". RCW 62A.8-102.
"Security entitlement". RCW 62A.8-102.
"Uncertificated security". RCW 62A.8-102.
(4) In addition Article 1 contains general definitions and principles of construction and interpretation applicable throughout this Article.
Sec. 24. RCW 62A.9-106 and 1995 c 48 s 60 are each amended to read as follows:
Definitions: "Account"; "general intangibles". "Account" means any right to payment for goods sold or leased or for services rendered which is not evidenced by an instrument or chattel paper, whether or not it has been earned by performance. "General intangibles" means any personal property (including things in action) other than goods, accounts, chattel paper, documents, instruments, investment property, rights to proceeds of written letters of credit, and money. All rights to payment earned or unearned under a charter or other contract involving the use or hire of a vessel and all rights incident to the charter or contract are accounts.
Sec. 25. RCW 62A.9-304 and 1995 c 48 s 66 are each amended to read as follows:
Perfection of security interest in instruments, documents, and goods covered by documents; perfection by permissive filing; temporary perfection without filing or transfer of possession. (1) A security interest in chattel paper or negotiable documents may be perfected by filing. A security interest in the rights to proceeds of a written letter of credit can be perfected only by the secured party's taking possession of the letter of credit. A security interest in money or instruments (other than instruments which constitute part of chattel paper) can be perfected only by the secured party's taking possession, except as provided in subsections (4) and (5) of this section and subsections (2) and (3) of RCW 62A.9-306 on proceeds.
(2) During the period that goods are in the possession of the issuer of a negotiable document therefor, a security interest in the goods is perfected by perfecting a security interest in the document, and any security interest in the goods otherwise perfected during such period is subject thereto.
(3) A security interest in goods in the possession of a bailee other than one who has issued a negotiable document therefor is perfected by issuance of a document in the name of the secured party or by the bailee's receipt of notification of the secured party's interest or by filing as to the goods.
(4) A security interest in instruments, certificated securities, or negotiable documents is perfected without filing or the taking of possession for a period of twenty-one days from the time it attaches to the extent that it arises for new value given under a written security agreement.
(5) A security interest remains perfected for a period of twenty-one days without filing where a secured party having a perfected security interest in an instrument, a certificated security, a negotiable document or goods in possession of a bailee other than one who has issued a negotiable document therefor
(a) makes available to the debtor the goods or documents representing the goods for the purpose of ultimate sale or exchange or for the purpose of loading, unloading, storing, shipping, transshipping, manufacturing, processing or otherwise dealing with them in a manner preliminary to their sale or exchange but priority between conflicting security interests in the goods is subject to subsection (3) of RCW 62A.9-312; or
(b) delivers the instrument or certificated security to the debtor for the purpose of ultimate sale or exchange or of presentation, collection, renewal, or registration of transfer.
(6) After the twenty-one day period in subsections (4) and (5) perfection depends upon compliance with applicable provisions of this Article.
Sec. 26. RCW 62A.9-305 and 1995 c 48 s 67 are each amended to read as follows:
When possession by secured party perfects security interest
without filing. A security interest in ((letters of credit and advices of
credit (subsection (2)(a) of RCW 62A.5-116),)) goods, instruments, money,
negotiable documents, or chattel paper may be perfected by the secured party's
taking possession of the collateral. A security interest in the right to
proceeds of a written letter of credit may be perfected by the secured party's
taking possession of the letter of credit. If such collateral other than
goods covered by a negotiable document is held by a bailee, the secured party
is deemed to have possession from the time the bailee receives notification of
the secured party's interest. A security interest is perfected by possession
from the time possession is taken without relation back and continues only so
long as possession is retained, unless otherwise specified in this Article.
The security interest may be otherwise perfected as provided in this Article
before or after the period of possession by the secured party.
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