KRS 355.5-108: Issuer's rights and obligations.

(1) Except as otherwise provided in KRS 355.5 -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 lett er of credit. Except as otherwise provided in KRS 355.5 -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 th e 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 (7)

business days after presentation, to accept a draft or incur a defer red

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 KRS 355.5 -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 KRS 355.5 -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 dishon ored 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 d raft under KRS 355.3 -

414 and 355.3-415;

(d) Except as otherwise provided in KRS 355.5 -110 and 355.5 -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.