By Smith                                               H.B. No. 366
         76R2236 LJR-D                           
                                A BILL TO BE ENTITLED
 1-1                                   AN ACT
 1-2     relating to letters of credit.
 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
 1-4           SECTION 1.  Chapter 5, Business & Commerce Code, is amended
 1-5     to read as follows:
 1-6                        CHAPTER 5.  LETTERS OF CREDIT
 1-7           Sec. 5.101.  SHORT TITLE. This chapter may be cited as
 1-8     Uniform Commercial Code--Letters of Credit.
 1-9           Sec. 5.102.  DEFINITIONS.  (a)  In this chapter:
1-10                 (1)  "Adviser" means a person who, at the request of
1-11     the issuer, a confirmer, or another adviser, notifies or requests
1-12     another adviser to notify the beneficiary that a letter of credit
1-13     has been issued, confirmed, or amended.
1-14                 (2)  "Applicant" means a person at whose request or for
1-15     whose account a letter of credit is issued.  The term includes a
1-16     person who requests an issuer to issue a letter of credit on behalf
1-17     of another if the person making the request undertakes an
1-18     obligation to reimburse the issuer.
1-19                 (3)  "Beneficiary" means a person who under the terms
1-20     of a letter of credit is entitled to have its complying
1-21     presentation honored.  The term includes a person to whom drawing
1-22     rights have been transferred under a transferable letter of credit.
1-23                 (4)  "Confirmer" means a nominated person who
1-24     undertakes, at the request or with the consent of the issuer, to
 2-1     honor a presentation under a letter of credit issued by another.
 2-2                 (5)  "Dishonor" of a letter of credit means failure
 2-3     timely to honor or to take an interim action, such as acceptance of
 2-4     a draft, that may be required by the letter of credit.
 2-5                 (6)  "Document" means a draft or other demand, document
 2-6     of title, investment security, certificate, invoice, or other
 2-7     record, statement, or representation of fact, law, right, or
 2-8     opinion (i) that is presented in a written or other medium
 2-9     permitted by the letter of credit or, unless prohibited by the
2-10     letter of credit, by the standard practice referred to in Section
2-11     5.108(e); and (ii) that is capable of being examined for compliance
2-12     with the terms and conditions of the letter of credit.  A document
2-13     may not be oral.
2-14                 (7)  "Good faith" means honesty in fact in the conduct
2-15     or transaction concerned.
2-16                 (8)  "Honor" of a letter of credit means performance of
2-17     the issuer's undertaking in the letter of credit to pay or deliver
2-18     an item of value.  Unless the letter of credit otherwise provides,
2-19     "honor" occurs:
2-20                       (A)  upon payment;
2-21                       (B)  if the letter of credit provides for
2-22     acceptance, upon acceptance of a draft and, at maturity, its
2-23     payment; or
2-24                       (C)  if the letter of credit provides for
2-25     incurring a deferred obligation, upon incurring the obligation and,
2-26     at maturity, its performance.
2-27                 (9)  "Issuer" means a bank or other person that issues
 3-1     a letter of credit, but does not include an individual who makes an
 3-2     engagement for personal, family, or household purposes.
 3-3                 (10)  "Letter of credit" means a definite undertaking
 3-4     that satisfies the requirements of Section 5.104 by an issuer to a
 3-5     beneficiary at the request or for the account of an applicant or,
 3-6     in the case of a financial institution, to itself or for its own
 3-7     account, to honor a documentary presentation by payment or delivery
 3-8     of an item of value.
 3-9                 (11)  "Nominated person" means a person whom the
3-10     issuer:
3-11                       (A)  designates or authorizes to pay, accept,
3-12     negotiate, or otherwise give value under a letter of credit; and
3-13                       (B)  undertakes by agreement or custom and
3-14     practice to reimburse.
3-15                 (12)  "Presentation" means delivery of a document to an
3-16     issuer or nominated person for honor or giving of value under a
3-17     letter of credit.
3-18                 (13)  "Presenter" means a person making a presentation
3-19     as or on behalf of a beneficiary or nominated person.
3-20                 (14)  "Record" means information that is inscribed on a
3-21     tangible medium or that is stored in an electronic or other medium
3-22     and is retrievable in perceivable form.
3-23                 (15)  "Successor of a beneficiary" means a person who
3-24     succeeds to substantially all of the rights of a beneficiary by
3-25     operation of law, including a corporation with or into which the
3-26     beneficiary has been merged or consolidated, an administrator, an
3-27     executor, a personal representative, a trustee in bankruptcy, a
 4-1     debtor in possession, a liquidator, and a receiver.
 4-2           (b)  Definitions in other chapters of this code applying to
 4-3     this chapter and the sections in which they appear are:
 4-4           "Accept" or "Acceptance".                     Section 3.409. 
 4-5           "Value".                           Sections 3.303 and 4.211. 
 4-6           (c)  Chapter 1 contains certain additional general
 4-7     definitions and principles of construction and interpretation
 4-8     applicable throughout this chapter.
 4-9           Sec. 5.103.  SCOPE.  (a)  This chapter applies to letters of
4-10     credit and to certain rights and obligations arising out of
4-11     transactions involving letters of credit.
4-12           (b)  The statement of a rule in this chapter does not by
4-13     itself require, imply, or negate application of the same or a
4-14     different rule to a situation not provided for, or to a person not
4-15     specified, in this chapter.
4-16           (c)  With the exception of this subsection, Subsections (a)
4-17     and (d), Sections 5.102(a)(9) and (10), Section 5.106(d), Section
4-18     5.110(c), and Section 5.114(d) and except to the extent prohibited
4-19     in Sections 1.102(c) and 5.117(d), the effect of this chapter may
4-20     be varied by agreement or by a provision stated or incorporated by
4-21     reference in an undertaking.  A term in an agreement or undertaking
4-22     generally excusing liability or generally limiting remedies for
4-23     failure to perform obligations is not sufficient to vary
4-24     obligations prescribed by this chapter.
4-25           (d)  Rights and obligations of an issuer to a beneficiary or
4-26     a nominated person under a letter of credit are independent of the
4-27     existence, performance, or nonperformance of a contract or
 5-1     arrangement out of which the letter of credit arises or which
 5-2     underlies it, including contracts or arrangements between the
 5-3     issuer and the applicant and between the applicant and the
 5-4     beneficiary.  [SCOPE.  (a) This chapter applies]
 5-5                 [(1)  to a credit issued by a bank if the credit
 5-6     requires a documentary draft or a documentary demand for payment;
 5-7     and]
 5-8                 [(2)  to a credit issued by a person other than a bank
 5-9     if the credit requires that the draft or demand for payment be
5-10     accompanied by a document of title; and]
5-11                 [(3)  to a credit issued by a bank or other person if
5-12     the credit is not within Subdivision (1) or (2) but conspicuously
5-13     states that it is a letter of credit or is conspicuously so
5-14     entitled.]
5-15           [(b)  Unless the engagement meets the requirements of
5-16     Subsection (a), this chapter does not apply to engagements to make
5-17     advances or to honor drafts or demands for payment, to authorities
5-18     to pay or purchase, to guarantees or to general agreements.]
5-19           [(c)  This chapter deals with some but not all of the rules
5-20     and concepts of letters of credit as such rules or concepts have
5-21     developed prior to this title or may hereafter develop.  The fact
5-22     that this chapter states a rule does not by itself require, imply
5-23     or negate application of the same or a converse rule to a situation
5-24     not provided for or to a person not specified by this chapter.]
5-25           [Sec. 5.103.  DEFINITIONS.  (a)  In this chapter unless the
5-26     context otherwise requires]
5-27                 [(1)  "Credit" or "letter of credit" means an
 6-1     engagement by a bank or other person made at the request of a
 6-2     customer and of a kind within the scope of this chapter (Section
 6-3     5.102) that the issuer will honor drafts or other demands for
 6-4     payment upon compliance with the conditions specified in the
 6-5     credit.  A credit may be either revocable or irrevocable.  The
 6-6     engagement may be either an agreement to honor or a statement that
 6-7     the bank or other person is authorized to honor.]
 6-8                 [(2)  A "documentary draft" or a "documentary demand
 6-9     for payment" is one honor of which is conditioned upon the
6-10     presentation of a document or documents.  "Document" means any
6-11     paper including document of title, security, invoice, certificate,
6-12     notice of default and the like.]
6-13                 [(3)  An "issuer" is a bank or other person issuing a
6-14     credit.]
6-15                 [(4)  A "beneficiary" of a credit is a person who is
6-16     entitled under its terms to draw or demand payment.]
6-17                 [(5)  An "advising bank" is a bank which gives
6-18     notification of the issuance of a credit by another bank.]
6-19                 [(6)  A "confirming bank" is a bank which engages
6-20     either that it will itself honor a credit already issued by another
6-21     bank or that such a credit will be honored by the issuer or a third
6-22     bank.]
6-23                 [(7)  A "customer" is a buyer or other person who
6-24     causes an issuer to issue a credit.  The term also includes a bank
6-25     which procures issuance or confirmation on behalf of that bank's
6-26     customer.]
6-27           [(b)  Other definitions applying to this chapter and the
 7-1     sections in which they appear are:]
 7-2           ["Notation Credit".]                           [Section 5.1a8.] 
 7-3           ["Presenter".]                              [Section 5.112(c).] 
 7-4           [(c)  Definitions in other chapters applying to this chapter
 7-5     and the sections in which they appear are:]
 7-6           ["Accept" or "Acceptance".]                    [Section 3.409.] 
 7-7           ["Contract for sale".]                         [Section 2.106.] 
 7-8           ["Draft".]                                     [Section 3.104.] 
 7-9           ["Holder in due course".]                      [Section 3.302.] 
7-10           ["Midnight deadline".]                         [Section 4.104.] 
7-11           ["Security".]                                  [Section 8.102.] 
7-12           [(d)  In addition, Chapter 1 contains general definitions and
7-13     principles of construction and interpretation applicable throughout
7-14     this chapter.]
7-15           Sec. 5.104.  FORMAL REQUIREMENTS[; SIGNING].  A letter of
7-16     credit, confirmation, advice, transfer, amendment, or  cancellation
7-17     may be issued in any form that is a record and is authenticated:
7-18                 (1)  by a signature; or
7-19                 (2)  in accordance with the agreement of the parties or
7-20     the standard practice referred to in Section 5.108(e).
7-21     [(a)  Except as otherwise required in Subsection (a)(3) of Section
7-22     5.102 on scope, no particular form of phrasing is required for a
7-23     credit.  A credit must be in writing and signed by the issuer and a
7-24     confirmation must be in writing and signed by the confirming bank.
7-25     A modification of the terms of a credit or confirmation must be
7-26     signed by the issuer or confirming bank.]
7-27           [(b)  A telegram may be a sufficient signed writing if it
 8-1     identifies its sender by an authorized authentication.  The
 8-2     authentication may be in code and the authorized naming of the
 8-3     issuer in an advice of credit is a sufficient signing.]
 8-4           Sec. 5.105.  CONSIDERATION.  Consideration is not required to
 8-5     issue, amend, transfer, or cancel a letter of credit, advice, or
 8-6     confirmation. [No consideration is necessary to establish a credit
 8-7     or to enlarge or otherwise modify its terms.]
 8-8           Sec. 5.106.  ISSUANCE, AMENDMENT, CANCELLATION, AND DURATION.
 8-9     (a)  A letter of credit is issued and becomes enforceable according
8-10     to its terms against the issuer when the issuer sends or otherwise
8-11     transmits it to the person requested to advise or to the
8-12     beneficiary.  A letter of credit is revocable only if it so
8-13     provides.
8-14           (b)  After a letter of credit is issued, rights and
8-15     obligations of a beneficiary, applicant, confirmer, and issuer are
8-16     not affected by an amendment or cancellation to which that person
8-17     has not consented except to the extent the letter of credit
8-18     provides that it is revocable or that the issuer may amend or
8-19     cancel the letter of credit without that consent.
8-20           (c)  If there is no stated expiration date or other provision
8-21     that determines its duration, a letter of credit expires one year
8-22     after its stated date of issuance or, if no date is stated, after
8-23     the date on which it is issued.
8-24           (d)  A letter of credit that states that it is perpetual
8-25     expires five years after its stated date of issuance or, if no date
8-26     is stated, after the date on which it is issued. [TIME AND EFFECT
8-27     OF ESTABLISHMENT OF CREDIT.  (a)  Unless otherwise agreed a credit
 9-1     is  established]
 9-2                 [(1)  as regards the customer as soon as a letter of
 9-3     credit is sent to him or the letter of credit or an authorized
 9-4     written advice of its issuance is sent to the beneficiary; and]
 9-5                 [(2)  as regards the beneficiary when he receives a
 9-6     letter of credit or an authorized written advice of its issuance.]
 9-7           [(b)  Unless otherwise agreed once an irrevocable credit is
 9-8     established as regards the customer it can be modified or revoked
 9-9     only with the consent of the customer and once it is established as
9-10     regards the beneficiary it can be modified or revoked only with his
9-11     consent.]
9-12           [(c)  Unless otherwise agreed after a revocable credit is
9-13     established it may be modified or revoked by the issuer without
9-14     notice to or consent from the customer or beneficiary.]
9-15           [(d)  Notwithstanding any modification or revocation of a
9-16     revocable credit any person authorized to honor or negotiate under
9-17     the terms of the original credit is entitled to reimbursement for
9-18     or honor of any draft or demand for payment duly honored or
9-19     negotiated before receipt of notice of the modification or
9-20     revocation and the issuer in turn is entitled to reimbursement from
9-21     its customer.]
9-22           Sec. 5.107.  CONFIRMER, NOMINATED PERSON, AND ADVISER.
9-23     (a)  A confirmer is directly obligated on a letter of credit and
9-24     has the rights and obligations of an issuer to the extent of its
9-25     confirmation.   The confirmer also has rights against and
9-26     obligations to the issuer as if the issuer were an applicant and
9-27     the confirmer had issued the letter of credit at the request and
 10-1    for the account of the issuer.
 10-2          (b)  A nominated person who is not a confirmer is not
 10-3    obligated to honor or otherwise give value for a presentation.
 10-4          (c)  A person requested to advise may decline to act as an
 10-5    adviser.  An adviser that is not a confirmer is not obligated to
 10-6    honor or give value for a presentation.  An adviser undertakes to
 10-7    the issuer and to the beneficiary accurately to advise the terms of
 10-8    the letter of credit, confirmation, amendment, or advice received
 10-9    by that person and undertakes to the beneficiary to check the
10-10    apparent authenticity of the request to advise.  Even if the advice
10-11    is inaccurate, the letter of credit, confirmation, or amendment is
10-12    enforceable as issued.
10-13          (d)  A person who notifies a transferee beneficiary of the
10-14    terms of a letter of credit, confirmation, amendment, or advice has
10-15    the rights and obligations of an adviser under Subsection (c).  The
10-16    terms in the notice to the transferee beneficiary may differ from
10-17    the terms in any notice to the transferor beneficiary to the extent
10-18    permitted by the letter of credit, confirmation, amendment, or
10-19    advice received by the person who so notifies. [ADVICE OF CREDIT;
10-20    CONFIRMATION; ERROR IN STATEMENT OF TERMS.  (a)  Unless otherwise
10-21    specified an advising bank by advising a credit issued by another
10-22    bank does not assume any obligation to honor drafts drawn or
10-23    demands for payment made under the credit but it does assume
10-24    obligation for the accuracy of its own statement.]
10-25          [(b)  A confirming bank by confirming a credit becomes
10-26    directly obligated on the credit to the extent of its confirmation
10-27    as though it were its issuer and acquires the rights of an issuer.]
 11-1          [(c)  Even though an advising bank incorrectly advises the
 11-2    terms of a credit it has been authorized to advise the credit is
 11-3    established as against the issuer to the extent of its original
 11-4    terms.]
 11-5          [(d)  Unless otherwise specified the customer bears as
 11-6    against the issuer all risks of transmission and reasonable
 11-7    translation or interpretation of any message relating to a credit.]
 11-8          Sec. 5.108.  ISSUER'S RIGHTS AND OBLIGATIONS.  (a)  Except as
 11-9    otherwise provided in Section 5.109, an issuer shall honor a
11-10    presentation that, as determined by the standard practice referred
11-11    to in Subsection (e), appears on its face strictly to comply with
11-12    the terms and conditions of the letter of credit.  Except as
11-13    otherwise provided in Section 5.113 and unless otherwise agreed
11-14    with the applicant, an issuer shall dishonor a presentation that
11-15    does not appear so to comply.
11-16          (b)  An issuer has a reasonable time after presentation, but
11-17    not beyond the end of the seventh business day of the issuer after
11-18    the date of its receipt of documents:
11-19                (1)  to honor;
11-20                (2)  if the letter of credit provides for honor to be
11-21    completed more than seven business days after presentation, to
11-22    accept a draft or incur a deferred obligation; or
11-23                (3)  to give notice to the presenter of discrepancies
11-24    in the presentation.
11-25          (c)  Except as otherwise provided in Subsection (d), an
11-26    issuer is precluded from asserting as a basis for dishonor any
11-27    discrepancy if timely notice is not given or any discrepancy not
 12-1    stated in the notice if timely notice is given.
 12-2          (d)  Failure to give the notice specified in Subsection (b)
 12-3    or to mention fraud, forgery, or expiration in the notice does not
 12-4    preclude the issuer from asserting as a basis for dishonor fraud or
 12-5    forgery as described in Section 5.109(a) or expiration of the
 12-6    letter of credit before presentation.
 12-7          (e)  An issuer shall observe standard practice of financial
 12-8    institutions that regularly issue letters of credit.  Determination
 12-9    of the issuer's observance of the standard practice is a matter of
12-10    interpretation for the court.  The court shall offer the parties a
12-11    reasonable opportunity to present evidence of the standard
12-12    practice.
12-13          (f)  An issuer is not responsible for:
12-14                (1)  the performance or nonperformance of the
12-15    underlying contract, arrangement, or transaction;
12-16                (2)  an act or omission of others; or
12-17                (3)  observance or knowledge of the usage of a
12-18    particular trade other than the standard practice referred to in
12-19    Subsection (e).
12-20          (g)  If an undertaking constituting a letter of credit under
12-21    Section 5.102(a)(10) contains nondocumentary conditions, an issuer
12-22    shall disregard the nondocumentary conditions and treat them as if
12-23    they were not stated.
12-24          (h)  An issuer that has dishonored a presentation shall
12-25    return the documents or hold them at the disposal of, and send
12-26    advice to that effect to, the presenter.
12-27          (i)  An issuer that has honored a presentation as permitted
 13-1    or required by this chapter:
 13-2                (1)  is entitled to be reimbursed by the applicant in
 13-3    immediately available funds not later than the date of its payment
 13-4    of funds;
 13-5                (2)  takes the documents free of claims of the
 13-6    beneficiary or presenter;
 13-7                (3)  is precluded from asserting a right of recourse on
 13-8    a draft under Sections 3.414 and 3.415;
 13-9                (4)  except as otherwise provided in Sections 5.110 and
13-10    5.117, is precluded from restitution of money paid or other value
13-11    given by mistake to the extent the mistake concerns discrepancies
13-12    in the documents or tender that are apparent on the face of the
13-13    presentation; and
13-14                (5)  is discharged to the extent of its performance
13-15    under the letter of credit unless the issuer honored a presentation
13-16    in which a required signature of a beneficiary was forged.
13-17          Sec. 5.109.  FRAUD AND FORGERY.  (a)  If a presentation is
13-18    made that appears on its face strictly to comply with the terms and
13-19    conditions of the letter of credit, but a required document is
13-20    forged or materially fraudulent, or honor of the presentation would
13-21    facilitate a material fraud by the beneficiary on the issuer or
13-22    applicant:
13-23                (1)  the issuer shall honor the presentation if honor
13-24    is demanded by:
13-25                      (A)  a nominated person who has given value in
13-26    good faith and without notice of forgery or material fraud;
13-27                      (B)  a confirmer who has honored its confirmation
 14-1    in good faith;
 14-2                      (C)  a holder in due course of a draft drawn
 14-3    under the letter of credit that was taken after acceptance by the
 14-4    issuer or nominated person; or
 14-5                      (D)  an assignee of the issuer's or nominated
 14-6    person's deferred obligation that was taken for value and without
 14-7    notice of forgery or material fraud after the obligation was
 14-8    incurred by the issuer or nominated person; and
 14-9                (2)  the issuer, acting in good faith, may honor or
14-10    dishonor the presentation in any other case.
14-11          (b)  If an applicant claims that a required document is
14-12    forged or materially fraudulent or that honor of the presentation
14-13    would facilitate a material fraud by the beneficiary on the issuer
14-14    or applicant, a court of competent jurisdiction may temporarily or
14-15    permanently enjoin the issuer from honoring a presentation or grant
14-16    similar relief against the issuer or other persons only if the
14-17    court finds that:
14-18                (1)  the relief is not prohibited under the law
14-19    applicable to an accepted draft or deferred obligation incurred by
14-20    the issuer;
14-21                (2)  a beneficiary, issuer, or nominated person who may
14-22    be adversely affected is adequately protected against loss that it
14-23    may suffer because the relief is granted;
14-24                (3)  all of the conditions to entitle a person to the
14-25    relief under the law of this state have been met; and
14-26                (4)  on the basis of the information submitted to the
14-27    court, the applicant is more likely than not to succeed under its
 15-1    claim of forgery or material fraud and the person demanding honor
 15-2    does not qualify for protection under Subsection (a)(1).
 15-3    ["NOTATION CREDIT"; EXHAUSTION OF CREDIT.  (a)  A credit which
 15-4    specifies  that any person purchasing or paying drafts drawn or
 15-5    demands for payment made under it must note the amount of the draft
 15-6    or demand on the letter or advice of credit is a "notation credit".]
 15-7          [(b)  Under a notation credit]
 15-8                [(1)  a person paying the beneficiary or purchasing a
 15-9    draft or demand for payment from him acquires a right to honor only
15-10    if the appropriate notation is made and by transferring or
15-11    forwarding for honor the documents under the credit such a person
15-12    warrants to the issuer that the notation has been made; and]
15-13                [(2)  unless the credit or a signed statement that an
15-14    appropriate notation has been made accompanies the draft or demand
15-15    for payment the issuer may delay honor until evidence of notation
15-16    has been procured which is satisfactory to it but its obligation
15-17    and that of its customer continue for a reasonable time not
15-18    exceeding thirty days to obtain such evidence.]
15-19          [(c)  If the credit is not a notation credit]
15-20                [(1)  the issuer may honor complying drafts or demands
15-21    for payment presented to it in the order in which they are
15-22    presented and is discharged pro tanto by honor of any such draft or
15-23    demand;]
15-24                [(2)  as between competing good faith purchasers of
15-25    complying drafts or demands the person first purchasing has
15-26    priority over a subsequent purchaser even though the later
15-27    purchased draft or demand has been first honored.]
 16-1          [Sec. 5.109.  ISSUER'S OBLIGATION TO ITS CUSTOMER.  (a)  An
 16-2    issuer's obligation to its customer includes good faith and
 16-3    observance of any general banking usage but unless otherwise agreed
 16-4    does not include liability or responsibility]
 16-5                [(1)  for performance of the underlying contract for
 16-6    sale or other transaction between the customer and the beneficiary;
 16-7    or]
 16-8                [(2)  for any act or omission of any person other than
 16-9    itself or its own branch or for loss or destruction of a draft,
16-10    demand or document in transit or in the possession of others; or]
16-11                [(3)  based on knowledge or lack of knowledge of any
16-12    usage of any particular trade.]
16-13          [(b)  An issuer must examine documents with care so as to
16-14    ascertain that on their face they appear to comply with the terms
16-15    of the credit but unless otherwise agreed assumes no liability or
16-16    responsibility for the genuineness, falsification or effect of any
16-17    document which appears on such examination to be regular on its
16-18    face.]
16-19          [(c)  A non-bank issuer is not bound by any banking usage of
16-20    which it has no knowledge.]
16-21          [Sec. 5.110.  AVAILABILITY OF CREDIT IN PORTIONS; PRESENTER'S
16-22    RESERVATION OF LIEN OR CLAIM.  (a)  Unless otherwise specified a
16-23    credit may be used in portions in the discretion of the
16-24    beneficiary.]
16-25          [(b)  Unless otherwise specified a person by presenting a
16-26    documentary draft or demand for payment under a credit relinquishes
16-27    upon its honor all claims to the documents and a person by
 17-1    transferring such draft or demand or causing such presentment
 17-2    authorizes such relinquishment.  An explicit reservation of claim
 17-3    makes the draft or demand non-complying.]
 17-4          Sec. 5.110 [5.111].  WARRANTIES [ON TRANSFER AND
 17-5    PRESENTMENT].  (a)  If its presentation is  honored, the
 17-6    beneficiary warrants:
 17-7                (1)  to the issuer, any other person to whom
 17-8    presentation is made, and the applicant that there is no fraud or
 17-9    forgery of the kind described in Section 5.109(a); and
17-10                (2)  to the applicant that the drawing does not violate
17-11    any agreement between the applicant and beneficiary or any other
17-12    agreement intended by them to be augmented by the letter of credit.
17-13          (b)  The warranties in Subsection (a) are in addition to
17-14    warranties arising under Chapters 3, 4, 7, and 8 because of the
17-15    presentation or transfer of documents covered by any of those
17-16    chapters.
17-17          (c)  Notwithstanding any agreement or term to the contrary,
17-18    the warranties in Subsection (a) do not arise until the issuer
17-19    honors the letter of credit.
17-20          Sec. 5.111.  REMEDIES.  (a)  If an issuer wrongfully
17-21    dishonors or repudiates its obligation to pay money under a letter
17-22    of credit before presentation, the beneficiary, successor, or
17-23    nominated person presenting on its own behalf may recover from the
17-24    issuer the amount that is the subject of the dishonor or
17-25    repudiation.  If the issuer's obligation under the letter of credit
17-26    is not for the payment of money, the claimant may obtain specific
17-27    performance or, at the claimant's election, recover an amount equal
 18-1    to the value of performance from the issuer.  In either case, the
 18-2    claimant may also recover incidental but not consequential damages.
 18-3    The claimant is not obligated to take action to avoid damages that
 18-4    might be due from the issuer under this subsection.  If, although
 18-5    not obligated to do so, the claimant avoids damages, the claimant's
 18-6    recovery from the issuer must be reduced by the amount of damages
 18-7    avoided.  The issuer has the burden of proving the amount of
 18-8    damages avoided.  In the case of repudiation the claimant need not
 18-9    present any document.
18-10          (b)  If an issuer wrongfully dishonors a draft or demand
18-11    presented under a letter of credit or honors a draft or demand in
18-12    breach of its obligation to the applicant, the applicant may
18-13    recover damages resulting from the breach, including incidental but
18-14    not consequential damages, less any amount saved as a result of the
18-15    breach.
18-16          (c)  If an adviser or nominated person other than a confirmer
18-17    breaches an obligation under this chapter or an issuer breaches an
18-18    obligation not covered in Subsection (a) or (b), a person to whom
18-19    the obligation is owed may recover damages resulting from the
18-20    breach, including incidental but not consequential damages, less
18-21    any amount saved as a result of the breach.  To the extent of the
18-22    confirmation, a confirmer has the liability of an issuer specified
18-23    in this subsection and Subsections (a) and (b).
18-24          (d)  An issuer, nominated person, or adviser who is found
18-25    liable under Subsection (a), (b), or (c) shall pay interest on the
18-26    amount owed thereunder from the date of wrongful dishonor or other
18-27    appropriate date.
 19-1          (e)  Reasonable attorney's fees and other expenses of
 19-2    litigation may be awarded to the prevailing party in an action in
 19-3    which a remedy is sought under this chapter.
 19-4          (f)  Damages that would otherwise be payable by a party for
 19-5    breach of an obligation under this chapter may be liquidated by
 19-6    agreement or undertaking, but only in an amount or by a formula
 19-7    that is reasonable in light of the harm anticipated.  [(a)  Unless
 19-8    otherwise agreed the beneficiary by transferring or presenting a
 19-9    documentary draft or demand for payment warrants to all interested
19-10    parties that the necessary conditions of the credit have been
19-11    complied with.  This is in addition to any warranties arising under
19-12    Chapters 3, 4, 7 and 8.]
19-13          [(b)  Unless otherwise agreed a negotiating, advising,
19-14    confirming, collecting or issuing bank presenting or transferring a
19-15    draft or demand for payment under a credit warrants only the
19-16    matters warranted by a collecting bank under Chapter 4 and any such
19-17    bank transferring a document warrants only the matters warranted by
19-18    an intermediary under Chapters 7 and 8.]
19-19          [Sec. 5.112.  TIME ALLOWED FOR HONOR OR REJECTION;
19-20    WITHHOLDING HONOR OR REJECTION BY CONSENT; "PRESENTER".  (a)  A
19-21    bank to which a documentary draft or demand for payment is
19-22    presented under a credit may without dishonor of the draft, demand
19-23    or credit]
19-24                [(1)  defer honor until the close of the third banking
19-25    day following receipt of the documents; and]
19-26                [(2)  further defer honor if the presenter has
19-27    expressly or impliedly consented thereto.]
 20-1          [Failure to honor within the time here specified constitutes
 20-2    dishonor of the draft or demand and of the credit except as
 20-3    otherwise provided in Subsection (d) of Section 5.114 on
 20-4    conditional payment.]
 20-5          [(b)  Upon dishonor the bank may unless otherwise instructed
 20-6    fulfill its duty to return the draft or demand and the documents by
 20-7    holding them at the disposal of the presenter and sending him an
 20-8    advice to that effect.]
 20-9          [(c)  "Presenter" means any person presenting a draft or
20-10    demand for payment for honor under a credit even though that person
20-11    is a confirming bank or other correspondent which is acting under
20-12    an issuer's authorization.]
20-13          [Sec. 5.113.  INDEMNITIES.  (a)  A bank seeking to obtain
20-14    (whether for itself or another) honor, negotiation or reimbursement
20-15    under a credit may give an indemnity to induce such honor,
20-16    negotiation or reimbursement.]
20-17          [(b)  An indemnity agreement inducing honor, negotiation or
20-18    reimbursement]
20-19                [(1)  unless otherwise explicitly agreed applies to
20-20    defects in the documents but not in the goods; and]
20-21                [(2)  unless a longer time is explicitly agreed expires
20-22    at the end of ten business days following receipt of the documents
20-23    by the ultimate customer unless notice of objection is sent before
20-24    such expiration date.  The ultimate customer may send notice of
20-25    objection to the person from whom he received the documents and any
20-26    bank receiving such notice is under a duty to send notice to its
20-27    transferor before its midnight deadline.]
 21-1          [Sec. 5.114.  ISSUER'S DUTY AND PRIVILEGE TO HONOR; RIGHT TO
 21-2    REIMBURSEMENT.  (a)  An issuer must honor a draft or demand for
 21-3    payment which complies with the terms of the relevant credit
 21-4    regardless of whether the goods or documents conform to the
 21-5    underlying contract for sale or other contract between the customer
 21-6    and the beneficiary.  The issuer is not excused from honor of such
 21-7    a draft or demand by reason of an additional general term that all
 21-8    documents must be satisfactory to the issuer, but an issuer may
 21-9    require that specified documents must be satisfactory to it.]
21-10          [(b)  Unless otherwise agreed when documents appear on their
21-11    face to comply with the terms of a credit but a required document
21-12    does not in fact conform to the warranties made on negotiation or
21-13    transfer of a document of title (Section 7.507) or of a
21-14    certificated security (Section 8.108) or is forged or fraudulent or
21-15    there is fraud in the transaction:]
21-16                [(1)  the issuer must honor the draft or demand for
21-17    payment if honor is demanded by a negotiating bank or other holder
21-18    of the draft or demand which has taken the draft or demand under
21-19    the credit and under circumstances which would make it a holder in
21-20    due course (Section 3.302) and in an appropriate case would make it
21-21    a person to whom a document of title has been duly negotiated
21-22    (Section 7.502) or a bona fide purchaser of a certificated security
21-23    (Section 8.302); and]
21-24                [(2)  in all other cases as against its customer, an
21-25    issuer acting in good faith may honor the draft or demand for
21-26    payment despite notification from the customer of fraud, forgery or
21-27    other defect not apparent on the face of the documents but a court
 22-1    of appropriate jurisdiction may enjoin such honor.]
 22-2          [(c)  Unless otherwise agreed an issuer which has duly
 22-3    honored a draft or demand for payment is entitled to immediate
 22-4    reimbursement of any payment made under the credit and to be put in
 22-5    effectively available funds not later than the day before maturity
 22-6    of any acceptance made under the credit.]
 22-7          [(d)  When a credit provides for payment by the issuer on
 22-8    receipt of notice that the required documents are in the possession
 22-9    of a correspondent or other agent of the issuer]
22-10                [(1)  any payment made on receipt of such notice is
22-11    conditional; and]
22-12                [(2)  the issuer may reject documents which do not
22-13    comply with the credit if it does so within three banking days
22-14    following its receipt of the documents; and]
22-15                [(3)  in the event of such rejection, the issuer is
22-16    entitled by charge back or otherwise to return of the payment made.]
22-17          [(e)  In the case covered by Subsection (d) failure to reject
22-18    documents within the time specified in Subdivision (2), constitutes
22-19    acceptance of the documents and makes the payment final in favor of
22-20    the beneficiary.]
22-21          [Sec. 5.115.  REMEDY FOR IMPROPER DISHONOR OR ANTICIPATORY
22-22    REPUDIATION.  (a)  When an issuer wrongfully dishonors a draft or
22-23    demand for payment presented under a credit the person entitled to
22-24    honor has with respect to any documents the rights of a person in
22-25    the position of a seller (Section 2.707) and may recover from the
22-26    issuer the face amount of the draft or demand together with
22-27    incidental damages under Section 2.710 on seller's incidental
 23-1    damages and interest but less any amount realized by resale or
 23-2    other use or disposition of the subject matter of the transaction.
 23-3    In the event no resale or other utilization is made the documents,
 23-4    goods or other subject matter involved in the transaction must be
 23-5    turned over to the issuer on payment of judgment.]
 23-6          [(b)  When an issuer wrongfully cancels or otherwise
 23-7    repudiates a credit before presentment of a draft or demand for
 23-8    payment drawn under it the beneficiary has the rights of a seller
 23-9    after anticipatory repudiation by the buyer under Section 2.610 if
23-10    he learns of the repudiation in time reasonably to avoid
23-11    procurement of the required documents.  Otherwise the beneficiary
23-12    has an immediate right of action for wrongful dishonor.]
23-13          Sec. 5.112 [5.116].  TRANSFER OF LETTER OF CREDIT [AND
23-14    ASSIGNMENT].  (a)  Except as otherwise provided in Section 5.113,
23-15    unless a letter of credit provides that it is transferable, the
23-16    right of a beneficiary to draw or otherwise demand performance
23-17    under a letter of credit may not be transferred [The right to draw
23-18    under a credit can be transferred or assigned only when the credit
23-19    is expressly designated as transferable or assignable].
23-20          (b)  Even if a letter of credit provides that it is
23-21    transferable, the issuer may refuse to recognize or carry out a
23-22    transfer if:
23-23                (1)  the transfer would violate applicable law; or
23-24                (2)  the transferor or transferee has failed to comply
23-25    with any requirement stated in the letter of credit or any other
23-26    requirement relating to transfer imposed by the issuer which is
23-27    within the standard practice referred to in Section 5.108(e) or is
 24-1    otherwise reasonable under the circumstances.
 24-2          Sec. 5.113.  TRANSFER BY OPERATION OF LAW.  (a)  A successor
 24-3    of a beneficiary may consent to amendments, sign and present
 24-4    documents, and receive payment or other items of value in the name
 24-5    of the beneficiary without disclosing its status as a successor.
 24-6          (b)  A successor of a beneficiary may consent to amendments,
 24-7    sign and present documents, and receive payment or other items of
 24-8    value in its own name as the disclosed successor of the
 24-9    beneficiary.  Except as otherwise provided in Subsection (e), an
24-10    issuer shall recognize a disclosed successor of a beneficiary as
24-11    beneficiary in full substitution for its predecessor upon
24-12    compliance with the requirements for recognition by the issuer of a
24-13    transfer of drawing rights by operation of law under the standard
24-14    practice referred to in Section 5.108(e) or, in the absence of such
24-15    a practice, compliance with other reasonable procedures sufficient
24-16    to protect the issuer.
24-17          (c)  An issuer is not obliged to determine whether a
24-18    purported successor is a successor of a beneficiary or whether the
24-19    signature of a purported successor is genuine or authorized.
24-20          (d)  Honor of a purported successor's apparently complying
24-21    presentation under Subsection (a) or (b) has the consequences
24-22    specified in Section 5.108(i) even if the purported successor is
24-23    not the successor of a beneficiary.  Documents signed in the name
24-24    of the beneficiary or of a disclosed successor by a person who is
24-25    neither the beneficiary nor the successor of the beneficiary are
24-26    forged documents for the purposes of Section 5.109.
24-27          (e)  An issuer whose rights of reimbursement are not covered
 25-1    by Subsection (d) or substantially similar law and any confirmer or
 25-2    nominated person may decline to recognize a presentation under
 25-3    Subsection (b).
 25-4          (f)  A beneficiary whose name is changed after the issuance
 25-5    of a letter of credit has the same rights and obligations as a
 25-6    successor of a beneficiary under this section.
 25-7          Sec. 5.114.  ASSIGNMENT OF PROCEEDS.  (a)  In this section,
 25-8    "proceeds of a letter of credit" means the cash, check, accepted
 25-9    draft, or other item of value paid or delivered upon honor or
25-10    giving of value by the issuer or any nominated person under the
25-11    letter of credit.  The term does not include a beneficiary's
25-12    drawing rights or documents presented by the beneficiary.
25-13          (b)  A beneficiary may assign its right to part or all of the
25-14    proceeds of a letter of credit.  The beneficiary may do so before
25-15    presentation as a present assignment of its right to receive
25-16    proceeds contingent upon its compliance with the terms and
25-17    conditions of the letter of credit.
25-18          (c)  An issuer or nominated person need not recognize an
25-19    assignment of proceeds of a letter of credit until it consents to
25-20    the assignment.
25-21          (d)  An issuer or nominated person has no obligation to give
25-22    or withhold its consent to an assignment of proceeds of a letter of
25-23    credit, but consent may not be unreasonably withheld if the
25-24    assignee possesses and exhibits the letter of credit and
25-25    presentation of the letter of credit is a condition to honor.
25-26          (e)  Rights of a transferee beneficiary or nominated person
25-27    are independent of the beneficiary's assignment of the proceeds of
 26-1    a letter of credit and are superior to the assignee's right to the
 26-2    proceeds.
 26-3          (f)  Neither the rights recognized by this section between an
 26-4    assignee and an issuer, transferee beneficiary, or nominated person
 26-5    nor the issuer's or nominated person's payment of proceeds to an
 26-6    assignee or a third person affect the rights between the assignee
 26-7    and any person other than the issuer, transferee beneficiary, or
 26-8    nominated person.  The mode of creating and perfecting a security
 26-9    interest in or granting an assignment of a beneficiary's rights to
26-10    proceeds is governed by Chapter 9 or other law.  Against persons
26-11    other than the issuer, transferee beneficiary, or nominated person,
26-12    the rights and obligations arising upon the creation of a security
26-13    interest or other assignment of a beneficiary's right to proceeds
26-14    and its perfection are governed by Chapter 9 or other law.
26-15          Sec. 5.115.  STATUTE OF LIMITATIONS.  An action to enforce a
26-16    right or obligation arising under this chapter must be commenced
26-17    within one year after the expiration date of the relevant letter of
26-18    credit or one year after the cause of action accrues, whichever
26-19    occurs later.  A cause of action accrues when the breach occurs,
26-20    regardless of the aggrieved party's lack of knowledge of the
26-21    breach.
26-22          Sec. 5.116.  CHOICE OF LAW AND FORUM.  (a)  The liability of
26-23    an issuer, nominated person, or adviser for action or omission is
26-24    governed by the law of the jurisdiction chosen by an agreement in
26-25    the form of a record signed or otherwise authenticated by the
26-26    affected parties in the manner provided in Section 5.104 or by a
26-27    provision in the person's letter of credit, confirmation, or other
 27-1    undertaking.  The jurisdiction whose law is chosen need not bear
 27-2    any relation to the transaction.
 27-3          (b)  Unless Subsection (a) applies, the liability of an
 27-4    issuer, nominated person, or adviser for action or omission is
 27-5    governed by the law of the jurisdiction in which the person is
 27-6    located.  The person is considered to be located at the address
 27-7    indicated in the person's undertaking.  If more than one address is
 27-8    indicated, the person is considered to be located at the address
 27-9    from which the person's undertaking was issued.  For the purpose of
27-10    jurisdiction, choice of law, and recognition of interbranch letters
27-11    of credit, but not enforcement of a judgment, all branches of a
27-12    bank are considered separate juridical entities, and a bank is
27-13    considered to be located at the place where its relevant branch is
27-14    considered to be located under this subsection.
27-15          (c)  Except as otherwise provided in this subsection, the
27-16    liability of an issuer, nominated person, or adviser is governed by
27-17    any rules of custom or practice, such as the Uniform Customs and
27-18    Practice for Documentary Credits, to which the letter of credit,
27-19    confirmation, or other undertaking is expressly made subject.  If
27-20    (i) this chapter would govern the liability of an issuer, nominated
27-21    person, or adviser under Subsection (a) or (b), (ii) the relevant
27-22    undertaking incorporates rules of custom or practice, and (iii)
27-23    there is conflict between this chapter and those rules as applied
27-24    to that undertaking, those rules govern except to the extent of any
27-25    conflict with the nonvariable provisions specified in Section
27-26    5.103(c).
27-27          (d)  If there is conflict between this chapter and Chapter 3,
 28-1    4, 4A, or 9, this chapter governs.
 28-2          (e)  The forum for settling disputes arising out of an
 28-3    undertaking within this chapter may be chosen in the manner and
 28-4    with the binding effect that governing law may be chosen in
 28-5    accordance with Subsection (a).
 28-6          [(b)  Even though the credit specifically states that it is
 28-7    nontransferable or nonassignable the beneficiary may before
 28-8    performance of the conditions of the credit assign his right to
 28-9    proceeds.  Such an assignment is an assignment of an account under
28-10    Chapter 9 on Secured Transactions and is governed by that chapter
28-11    except that]
28-12                [(1)  the assignment is ineffective until the letter of
28-13    credit or advice of credit is delivered to the assignee which
28-14    delivery constitutes perfection of the security interest under
28-15    Chapter 9; and]
28-16                [(2)  the issuer may honor drafts or demands for
28-17    payment drawn under the credit until it receives a notification of
28-18    the assignment signed by the beneficiary which reasonably
28-19    identifies the credit involved in the assignment and contains a
28-20    request to pay the assignee; and]
28-21                [(3)  after what reasonably appears to be such a
28-22    notification has been received the issuer may without dishonor
28-23    refuse to accept or pay even to a person otherwise entitled to
28-24    honor until the letter of credit or advice of credit is exhibited
28-25    to the issuer.]
28-26          [(c)  Except where the beneficiary has effectively assigned
28-27    his right to draw or his right to proceeds, nothing in this section
 29-1    limits his right to transfer or negotiate drafts or demands drawn
 29-2    under the credit.]
 29-3          Sec. 5.117.  SUBROGATION OF ISSUER, APPLICANT, AND NOMINATED
 29-4    PERSON.  (a)  An issuer that honors a beneficiary's presentation is
 29-5    subrogated to the rights of the beneficiary to the same extent as
 29-6    if the issuer were a secondary obligor of the underlying obligation
 29-7    owed to the beneficiary and of the applicant to the same extent as
 29-8    if the issuer were the secondary obligor of the underlying
 29-9    obligation owed to the applicant.
29-10          (b)  An applicant that reimburses an issuer is subrogated to
29-11    the rights of the issuer against any beneficiary, presenter, or
29-12    nominated person to the same extent as if the applicant were the
29-13    secondary obligor of the obligations owed to the issuer and has the
29-14    rights of subrogation of the issuer to the rights of the
29-15    beneficiary stated in Subsection (a).
29-16          (c)  A nominated person who pays or gives value against a
29-17    draft or demand presented under a letter of credit is subrogated to
29-18    the rights of:
29-19                (1)  the issuer against the applicant to the same
29-20    extent as if the nominated person were a secondary obligor of the
29-21    obligation owed to the issuer by the applicant;
29-22                (2)  the beneficiary to the same extent as if the
29-23    nominated person were a secondary obligor of the underlying
29-24    obligation owed to the beneficiary; and
29-25                (3)  the applicant to the same extent as if the
29-26    nominated person were a secondary obligor of the underlying
29-27    obligation owed to the applicant.
 30-1          (d)  Notwithstanding any agreement or term to the contrary,
 30-2    the rights of subrogation stated in Subsections (a) and (b) do not
 30-3    arise until the issuer honors the letter of credit or otherwise
 30-4    pays, and the rights in Subsection (c) do not arise until the
 30-5    nominated person pays or otherwise gives value.  Until then, the
 30-6    issuer, the nominated person, and the applicant do not derive under
 30-7    this section present or prospective rights forming the basis of a
 30-8    claim, defense, or excuse.  [INSOLVENCY OF BANK HOLDING FUNDS FOR
 30-9    DOCUMENTARY CREDIT.  (a)  Where an issuer or an advising or
30-10    confirming bank or a bank which has for a customer procured
30-11    issuance of a credit by another bank becomes insolvent before final
30-12    payment under the credit and the credit is one to which this
30-13    chapter is made applicable by Subdivision (1) or (2) of Section
30-14    5.102(a) on scope, the receipt or allocation of funds or collateral
30-15    to secure or meet obligations under the credit shall have the
30-16    following results:]
30-17                [(1)  to the extent of any funds or collateral turned
30-18    over after or before the insolvency as indemnity against or
30-19    specifically for the purpose of payment of drafts or demands for
30-20    payment drawn under the designated credit, the drafts or demands
30-21    are entitled to payment in preference over depositors or other
30-22    general creditors of the issuer or bank; and]
30-23                [(2)  on expiration of the credit or surrender of the
30-24    beneficiary's rights under it unused any person who has given such
30-25    funds or collateral is similarly entitled to return thereof; and]
30-26                [(3)  a charge to a general or current account with a
30-27    bank if specifically consented to for the purpose of indemnity
 31-1    against or payment of drafts or demands for payment drawn under the
 31-2    designated credit falls under the same rules as if the funds had
 31-3    been drawn out in cash and then turned over with specific
 31-4    instructions.]
 31-5          [(b)  After honor or reimbursement under this section the
 31-6    customer or other person for whose account the insolvent bank has
 31-7    acted is entitled to receive the documents involved.]
 31-8          SECTION 2.  Section 1.105(b), Business & Commerce Code, is
 31-9    amended to read as follows:
31-10          (b)  Where one of the following provisions of this title
31-11    specifies the applicable law, that provision governs and a contrary
31-12    agreement is effective only to the extent permitted by the law
31-13    (including the conflict of laws rules) so specified:
31-14          Rights of creditors against sold goods.       Section 2.402. 
31-15          Applicability of the chapter on Leases.  Sections 2A.105 and
31-16    2A.106.
31-17          Applicability of the chapter on Bank Deposits and
31-18    Collections.  Section 4.102.
31-19          Governing law in the chapter on Funds Transfers.  Section
31-20    4A.507.
31-21          Letters of Credit.                            Section 5.116. 
31-22          Applicability of the chapter on Investment Securities.
31-23    Section 8.110.
31-24          Perfection provisions of the chapter on Secured Transactions.
31-25    Section 9.103.
31-26          SECTION 3.  Section 2.512(a), Business & Commerce Code, is
31-27    amended to read as follows:
 32-1          (a)  Where the contract requires payment before inspection
 32-2    non-conformity of the goods does not excuse the buyer from so
 32-3    making payment unless
 32-4                (1)  the non-conformity appears without inspection; or
 32-5                (2)  despite tender of the required documents
 32-6    circumstances would justify injunction against honor under [the
 32-7    provisions of] this title (Section 5.109(b) [5.114]).
 32-8          SECTION 4.  Section 9.103(a), Business & Commerce Code, is
 32-9    amended to read as follows:
32-10          (a)  Documents, instruments, letters of credit, and ordinary
32-11    goods.
32-12                (1)  This subsection applies to documents, [and]
32-13    instruments, and rights to proceeds of written letters of credit
32-14    and to goods other than those covered by a certificate of title
32-15    described in Subsection (b), mobile goods described in Subsection
32-16    (c), and minerals described in Subsection (e).
32-17                (2)  Except as otherwise provided in this subsection,
32-18    perfection and the effect of perfection or non-perfection of a
32-19    security interest in collateral are governed by the law of the
32-20    jurisdiction where the collateral is when the last event occurs on
32-21    which is based the assertion that the security interest is
32-22    perfected or unperfected.
32-23                (3)  If the parties to a transaction creating a
32-24    purchase money security interest in goods in one jurisdiction
32-25    understand at the time that the security interest attaches that the
32-26    goods will be kept in another jurisdiction, then the law of the
32-27    other jurisdiction governs the perfection and the effect of
 33-1    perfection or non-perfection of the security interest from the time
 33-2    it attaches until 30 days after the debtor receives possession of
 33-3    the goods and thereafter if the goods are taken to the other
 33-4    jurisdiction before the end of the 30-day period.
 33-5                (4)  When collateral is brought into and kept in this
 33-6    state while subject to a security interest perfected under the law
 33-7    of the jurisdiction from which the collateral was removed, the
 33-8    security interest remains perfected, but if action is required by
 33-9    Subchapter C of this chapter  to perfect the security interest,
33-10                      (A)  if the action is not taken before the
33-11    expiration of the period of perfection in the other jurisdiction or
33-12    the end of four months after the collateral is brought into this
33-13    state, whichever period first expires, the security interest
33-14    becomes unperfected at the end of that period and is thereafter
33-15    deemed to have been unperfected as against a person who became a
33-16    purchaser after removal;
33-17                      (B)  if the action is taken before the expiration
33-18    of the period specified in paragraph (A), the security interest
33-19    continues perfected thereafter;
33-20                      (C)  for the purpose of priority over a buyer of
33-21    consumer goods (Subsection (b) of Section 9.307), the period of the
33-22    effectiveness of a filing in the jurisdiction from which the
33-23    collateral is removed is governed by the rules with respect to
33-24    perfection in paragraphs (A) and (B).
33-25          SECTION 5.  Section 9.104, Business & Commerce Code, is
33-26    amended to read as follows:
33-27          Sec. 9.104.  TRANSACTIONS EXCLUDED FROM CHAPTER.  This
 34-1    chapter does not apply
 34-2                (1)  to a security interest subject to any statute of
 34-3    the United States such as the Ship Mortgage Act, 1920, to the
 34-4    extent that such statute governs the rights of parties to and third
 34-5    parties affected by transactions in particular types of property;
 34-6    or
 34-7                (2)  to a landlord's lien; or
 34-8                (3)  to a lien given by statute or other rule of law
 34-9    for services or materials except as provided in Section 9.310 on
34-10    priority of such liens; or
34-11                (4)  to a transfer of a claim for wages, salary or
34-12    other compensation of an employee; or
34-13                (5)  to a transfer by a government or governmental
34-14    subdivision or agency; or
34-15                (6)  to a sale of accounts or chattel paper as part of
34-16    a sale of the business out of which they arose, or an assignment of
34-17    accounts or chattel paper which is for the purpose of collection
34-18    only, or a transfer of a right to payment under a contract to an
34-19    assignee who is also to do the performance under the contract or a
34-20    transfer of a single account to an assignee in whole or partial
34-21    satisfaction of a preexisting indebtedness; or
34-22                (7)  to a transfer of an interest or claim in or under
34-23    any policy of insurance, except as provided with respect to
34-24    proceeds (Section 9.306) and priorities in proceeds (Section
34-25    9.312); or
34-26                (8)  to a right represented by a judgment (other than a
34-27    judgment taken on a right to payment which was collateral); or
 35-1                (9)  to any right of set-off; or
 35-2                (10)  except to the extent that provision is made for
 35-3    fixtures in Section 9.313, to the creation or transfer of an
 35-4    interest in or lien on real estate, including a lease or rents
 35-5    thereunder; or
 35-6                (11)  to a transfer in whole or in part of any claim
 35-7    arising out of tort; or
 35-8                (12)  to a transfer of an interest in any deposit
 35-9    account (Subsection (a)(5) of Section 9.105), except as provided
35-10    with respect to proceeds (Section 9.306) and priorities in proceeds
35-11    (Section 9.312); or
35-12                (13)  to a transfer of an interest in a letter of
35-13    credit other than the rights to proceeds of a written letter of
35-14    credit.
35-15          SECTION 6.  Section 9.105(c), Business & Commerce Code, is
35-16    amended to read as follows:
35-17          (c)  The following definitions in other chapters apply to
35-18    this chapter:
35-19          "Broker".                                     Section 8.102. 
35-20          "Certificated security".                      Section 8.102. 
35-21          "Check".                                      Section 3.104. 
35-22          "Clearing corporation".                       Section 8.102. 
35-23          "Contract for sale".                          Section 2.106. 
35-24          "Control".                                    Section 8.106. 
35-25          "Delivery".                                   Section 8.301. 
35-26          "Entitlement holder".                         Section 8.102. 
35-27          "Financial asset".                            Section 8.102. 
 36-1          "Holder in due course".                       Section 3.302. 
 36-2          "Letter of credit".                           Section 5.102. 
 36-3          "Note".                                       Section 3.104. 
 36-4          "Proceeds of a letter of credit".             Section 5.114. 
 36-5          "Sale".                                       Section 2.106. 
 36-6          "Securities intermediary".                    Section 8.102. 
 36-7          "Security".                                   Section 8.102. 
 36-8          "Security certificate".                       Section 8.102. 
 36-9          "Security entitlement".                       Section 8.102. 
36-10          "Uncertificated security".                    Section 8.102. 
36-11          SECTION 7.  Section 9.106, Business & Commerce Code, is
36-12    amended to read as follows:
36-13          Sec. 9.106.  DEFINITIONS:  "ACCOUNT"; "GENERAL INTANGIBLES".
36-14    "Account" means any right to payment for goods sold or leased or
36-15    for services rendered which is not evidenced by an instrument or
36-16    chattel paper, whether or not it has been earned by performance.
36-17    "General intangibles" means any personal property (including things
36-18    in action) other than goods, accounts, chattel paper, documents,
36-19    instruments, investment property, rights to proceeds of written
36-20    letters of credit, and money.  All rights to payment earned or
36-21    unearned under a charter or other contract involving the use or
36-22    hire of a vessel and all rights incident to the charter or contract
36-23    are accounts.
36-24          SECTION 8.  Sections 9.304 and 9.305, Business & Commerce
36-25    Code, are amended to read as follows:
36-26          Sec. 9.304.  PERFECTION OF SECURITY INTEREST IN INSTRUMENTS,
36-27    DOCUMENTS, PROCEEDS OF A WRITTEN LETTER OF CREDIT, AND GOODS
 37-1    COVERED BY DOCUMENTS; PERFECTION BY PERMISSIVE FILING; TEMPORARY
 37-2    PERFECTION WITHOUT FILING OR TRANSFER OF POSSESSION.  (a)  A
 37-3    security interest in chattel paper or negotiable documents may be
 37-4    perfected by filing.  A security interest in the rights to proceeds
 37-5    of  a written letter of credit can be perfected only by the secured
 37-6    party's taking possession of the letter  of  credit.  A security
 37-7    interest in money or instruments (other than instruments which
 37-8    constitute part of chattel paper) can be perfected only by the
 37-9    secured party's taking possession, except as provided in
37-10    Subsections (d) and (e) of this section and Subsections (b) and (c)
37-11    of Section 9.306 on proceeds.  Possession of a nonnegotiable
37-12    certificate of deposit in which the secured party is the issuer of
37-13    the document is established when the issuer places a restriction on
37-14    withdrawals from the account on its records that evidences the
37-15    document.  Possession established by the restriction of withdrawals
37-16    from an account evidenced by a nonnegotiable certificate of deposit
37-17    takes priority over any other possession established under this
37-18    chapter of which the secured party does not have prior knowledge.
37-19          (b)  During the period that goods are in the possession of
37-20    the issuer of a negotiable document therefor, a security interest
37-21    in the goods is perfected by perfecting a security interest in the
37-22    document, and any security interest in the goods otherwise
37-23    perfected during such period is subject thereto.
37-24          (c)  A security interest in goods in the possession of a
37-25    bailee other than one who has issued a negotiable document therefor
37-26    is perfected by issuance of a document in the name of the secured
37-27    party or by the bailee's receipt of notification of the secured
 38-1    party's interest or by filing as to the goods.
 38-2          (d)  A security interest in instruments, certificated
 38-3    securities, or negotiable documents is perfected without filing or
 38-4    the taking of possession for a period of 21 days from the time it
 38-5    attaches to the extent that it arises for new value given under a
 38-6    written security agreement.
 38-7          (e)  A security interest remains perfected for a period of 21
 38-8    days without filing where a secured party having a perfected
 38-9    security interest in an instrument, a certificated security, a
38-10    negotiable document, or goods in possession of a bailee other than
38-11    one who has issued a negotiable document therefor:
38-12                (1)  makes available to the debtor the goods or
38-13    documents representing the goods for the purpose of ultimate sale
38-14    or exchange or for the purpose of loading, unloading, storing,
38-15    shipping, transshipping, manufacturing, processing or otherwise
38-16    dealing with them in a manner preliminary to their sale or
38-17    exchange, but priority between conflicting security interests in
38-18    the goods is subject to Subsection (c) of Section 9.312; or
38-19                (2)  delivers the instrument or certificated security
38-20    to the debtor for the purpose of ultimate sale or exchange or of
38-21    presentation, collection, renewal or registration of transfer.
38-22          (f)  After the 21 day period in Subsections (d) and (e)
38-23    perfection depends upon compliance with applicable provisions of
38-24    this chapter.
38-25          Sec. 9.305.  WHEN POSSESSION BY SECURED PARTY PERFECTS
38-26    SECURITY INTEREST WITHOUT FILING.  A security interest in [letters
38-27    of credit and advices of credit (Subsection (b)(1) of Section
 39-1    5.116),] goods, instruments, money, negotiable documents or chattel
 39-2    paper may be perfected by the secured party's taking possession of
 39-3    the collateral.  A security interest in the right to proceeds of a
 39-4    written letter of credit may be perfected by the secured party's
 39-5    taking possession of the letter of credit.   If such collateral
 39-6    other than goods covered by a negotiable document is held by a
 39-7    bailee, the secured party is deemed to have possession from the
 39-8    time the bailee receives notification of the secured party's
 39-9    interest.  A security interest is perfected by possession from the
39-10    time possession is taken without relation back and continues only
39-11    so long as possession is retained, unless otherwise specified in
39-12    this chapter.  The security interest may be otherwise perfected as
39-13    provided in this chapter before or after the period of possession
39-14    by the secured party.
39-15          SECTION 9.  This Act takes effect September 1, 1999.
39-16          SECTION 10.  (a)  This Act applies only to a letter of credit
39-17    that is issued on or after the effective date of this Act.
39-18          (b)  A transaction arising out of or associated with a letter
39-19    of credit that was issued before the effective date of this Act and
39-20    the rights, obligations, and interests flowing from that
39-21    transaction are governed by the law as it existed immediately
39-22    before this Act took effect, and that law is continued in effect
39-23    for that purpose.
39-24          SECTION 11.  The importance of this legislation and the
39-25    crowded condition of the calendars in both houses create an
39-26    emergency and an imperative public necessity that the
39-27    constitutional rule requiring bills to be read on three several
 40-1    days in each house be suspended, and this rule is hereby suspended.