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HB 79: "An Act relating to letters of credit under the Uniform Commercial Code; and providing for an effective date."

00HOUSE BILL NO. 79 01 "An Act relating to letters of credit under the Uniform Commercial Code; and 02 providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 09.30.070(b) is amended to read: 05 (b) Except when the court finds that the parties have agreed otherwise and 06 except as provided by AS 45.05.111(d) , prejudgment interest accrues from the day 07 process is served on the defendant or the day the defendant received written 08 notification that an injury has occurred and that a claim may be brought against the 09 defendant for that injury, whichever is earlier. The written notification must be of a 10 nature that would lead a prudent person to believe that a claim will be made against 11 the person receiving the notification, for personal injury, death, or damage to property. 12 * Sec. 2. AS 45.01.105(b) is amended to read: 13 (b) Where one of the following provisions of the code specifies the applicable 14 law, that provision governs and a contrary agreement is effective only to the extent

01 permitted by the law, including the conflict of laws rules, so specified: 02 (1) AS 45.02.402 (rights of creditors against sold goods); 03 (2) AS 45.04.102 (applicability of the chapter on bank deposits and 04 collections); 05 (3) AS 45.05.116 (applicability of the chapter on letters of credit); 06 (4) AS 45.08.110 (applicability of the chapter on investment securities); 07 (5) [(4)] AS 45.09.103 (perfection provisions of the chapter on secured 08 transactions); 09 (6) [(5)] AS 45.12.105 and 45.12.106 (applicability of the chapter on 10 leases); 11 (7) [(6)] AS 45.14 (funds transfers). 12 * Sec. 3. AS 45.02.512(a) is amended to read: 13 (a) If the contract requires payment before inspection, nonconformity of the 14 goods does not excuse the buyer from so making payment unless 15 (1) the nonconformity appears without inspection; or 16 (2) despite tender of the required documents, the circumstances would 17 justify injunction against honor under AS 45.05.109(b) [THE PROVISIONS OF 18 AS 45.05.114]. 19 * Sec. 4. AS 45.05.102 is repealed and reenacted to read: 20 Sec. 45.05.102. Definitions. (a) In this chapter, 21 (1) "adviser" means a person who, at the request of the issuer, a 22 confirmer, or another adviser, notifies or requests another adviser to notify the 23 beneficiary that a letter of credit has been issued, confirmed, or amended; 24 (2) "applicant" means a person at whose request or for whose account 25 a letter of credit is issued; "applicant" includes a person who requests an issuer to issue 26 a letter of credit on behalf of another if the person making the request undertakes an 27 obligation to reimburse the issuer; 28 (3) "beneficiary" means a person who under the terms of a letter of 29 credit is entitled to have the letter of credit's complying presentation honored; 30 "beneficiary" includes a person to whom drawing rights have been transferred under 31 a transferable letter of credit;

01 (4) "confirmer" means a nominated person who undertakes, at the 02 request or with the consent of the issuer, to honor a presentation under a letter of 03 credit issued by another; 04 (5) "dishonor" of a letter of credit means the failure timely to honor or 05 to take an interim action, such as acceptance of a draft, that may be required by the 06 letter of credit; 07 (6) "document" means a draft or other demand, document of title, 08 investment security, certificate, invoice, or other record, statement, or representation 09 of fact, law, right, or opinion that is 10 (A) presented in a written or other medium permitted by the 11 letter of credit or, unless prohibited by the letter of credit, by the standard 12 practice referred to in AS 45.05.108(e); 13 (B) capable of being examined for compliance with the terms 14 and conditions of the letter of credit; and 15 (C) not oral; 16 (7) "good faith" means honesty in fact in the conduct or transaction 17 concerned; 18 (8) "honor" of a letter of credit means performance of the issuer's 19 undertaking in the letter of credit to pay or deliver an item of value; unless the letter 20 of credit provides otherwise, "honor" occurs 21 (A) upon payment; 22 (B) if the letter of credit provides for acceptance, upon 23 acceptance of a draft and, at maturity, its payment; or 24 (C) if the letter of credit provides for incurring a deferred 25 obligation, upon incurring the obligation and, at maturity, its performance; 26 (9) "issuer" means a bank or other person that issues a letter of credit, 27 but does not include an individual who makes an engagement for personal, family, or 28 household purposes; 29 (10) "letter of credit" means a definite undertaking that satisfies the 30 requirements of AS 45.05.104 by an issuer to a beneficiary at the request or for the 31 account of an applicant, or, in the case of a financial institution, to itself or for its own

01 account, to honor a documentary presentation by payment or delivery of an item of 02 value; 03 (11) "nominated person" means a person whom the issuer 04 (A) designates or authorizes to pay, accept, negotiate, or 05 otherwise give value under a letter of credit; and 06 (B) undertakes by agreement or custom and practice to 07 reimburse; 08 (12) "presentation" means delivery of a document to an issuer or 09 nominated person for honor or giving of value under a letter of credit; 10 (13) "presenter" means a person making a presentation as or on behalf 11 of a beneficiary or nominated person; 12 (14) "record" means information that is inscribed on a tangible medium, 13 or that is stored in an electronic or other medium and is retrievable in perceivable 14 form; 15 (15) "successor of a beneficiary" means a person who succeeds to 16 substantially all of the rights of a beneficiary by operation of law, including a 17 corporation with or into which the beneficiary has been merged or consolidated, an 18 administrator, an executor, a personal representative, a trustee in bankruptcy, a debtor 19 in possession, a liquidator, and a receiver. 20 (b) The following definitions that apply to this chapter and the sections in 21 which they appear are 22 (1) "accept" or "acceptance" (AS 45.03.409); 23 (2) "value" (AS 45.03.303 and AS 45.04.211). 24 (c) AS 45.01 contains certain additional general definitions and principles of 25 construction and interpretation applicable throughout this chapter. 26 * Sec. 5. AS 45.05.103 is repealed and reenacted to read: 27 Sec. 45.05.103. Scope. (a) This chapter applies to letters of credit and to 28 certain rights and obligations arising out of transactions involving letters of credit. 29 (b) The statement of a rule in this chapter does not by itself require, imply, or 30 negate application of the same or a different rule to a situation not provided for, or to 31 a person not specified, in this chapter.

01 (c) With the exception of this subsection, (a) and (d) of this section, 02 AS 45.05.102(a)(9) and (10), 45.05.106(d), and 45.05.114(d), and except to the extent 03 prohibited in AS 45.01.102(c) and AS 45.05.117(d), the effect of this chapter may be 04 varied by agreement or by a provision stated or incorporated by reference in an 05 undertaking. A term in an agreement or undertaking generally excusing liability or 06 generally limiting remedies for failure to perform obligations is not sufficient to vary 07 obligations prescribed by this chapter. 08 (d) Rights and obligations of an issuer to a beneficiary or a nominated person 09 under a letter of credit are independent of the existence, performance, or 10 nonperformance of a contract or arrangement out of which the letter of credit arises 11 or that underlies it, including contracts or arrangements between the issuer and the 12 applicant and between the applicant and the beneficiary. 13 * Sec. 6. AS 45.05.104 is repealed and reenacted to read: 14 Sec. 45.05.104. Formal requirements. A letter of credit, confirmation, 15 advice, transfer, amendment, or cancellation may be issued in any form that is a record 16 and is authenticated 17 (1) by a signature; or 18 (2) under the agreement of the parties or the standard practice referred 19 to in AS 45.05.108(e). 20 * Sec. 7. AS 45.05.105 is repealed and reenacted to read: 21 Sec. 45.05.105. Consideration. Consideration is not required to issue, amend, 22 transfer, or cancel a letter of credit, advice, or confirmation. 23 * Sec. 8. AS 45.05.106 is repealed and reenacted to read: 24 Sec. 45.05.106. Issuance, amendment, cancellation, and duration. (a) A 25 letter of credit is issued and becomes enforceable according to its terms against the 26 issuer when the issuer sends or otherwise transmits it to the person requested to advise 27 or to the beneficiary. A letter of credit is revocable only if it provides that it is 28 revocable. 29 (b) After a letter of credit is issued, rights and obligations of a beneficiary, 30 applicant, confirmer, and issuer are not affected by an amendment or cancellation to 31 which the beneficiary, applicant, confirmer, or issuer has not consented, except to the

01 extent the letter of credit provides that the letter of credit is revocable or that the issuer 02 may amend or cancel the letter of credit without the consent. 03 (c) If there is no stated expiration date or other provision that determines the 04 letter of credit's duration, a letter of credit expires one year after its stated date of 05 issuance or, if a date of issuance is not stated, after the date on which the letter of 06 credit is issued. 07 (d) A letter of credit that states that it is perpetual expires five years after its 08 stated date of issuance or, if a date of issuance is not stated, after the date on which 09 the letter of credit is issued. 10 * Sec. 9. AS 45.05.107 is repealed and reenacted to read: 11 Sec. 45.05.107. Confirmer, nominated person, and adviser. (a) A 12 confirmer is directly obligated on a letter of credit and has the rights and obligations 13 of an issuer to the extent of the confirmer's confirmation. The confirmer also has 14 rights against and obligations to the issuer as if the issuer were an applicant and the 15 confirmer had issued the letter of credit at the request and for the account of the issuer. 16 (b) A nominated person who is not a confirmer is not obligated to honor or 17 otherwise give value for a presentation. 18 (c) A person requested to advise may decline to act as an adviser. An adviser 19 that is not a confirmer is not obligated to honor or give value for a presentation. An 20 adviser undertakes to the issuer and to the beneficiary to advise accurately as to the 21 terms of the letter of credit, confirmation, amendment, or advice received by the 22 person requested to advise, and undertakes to the beneficiary to check the apparent 23 authenticity of the request to advise. Even if the advice is inaccurate, the letter of 24 credit, confirmation, or amendment is enforceable as issued. 25 (d) A person who notifies a transferee beneficiary of the terms of a letter of 26 credit, confirmation, amendment, or advice has the rights and obligations of an adviser 27 under (c) of this section. The terms in the notice to the transferee beneficiary may 28 differ from the terms in a notice to the transferor beneficiary to the extent permitted 29 by the letter of credit, confirmation, amendment, or advice received by the person who 30 notifies the transferee beneficiary. 31 * Sec. 10. AS 45.05.108 is repealed and reenacted to read:

01 Sec. 45.05.108. Issuer's rights and obligations. (a) Except as otherwise 02 provided in AS 45.05.109, an issuer shall honor a presentation that, as determined by 03 the standard practice referred to in (e) of this section, appears on its face to comply 04 strictly with the terms and conditions of the letter of credit. Except as otherwise 05 provided in AS 45.05.113 and unless otherwise agreed with the applicant, an issuer 06 shall dishonor a presentation that does not appear so to comply. 07 (b) An issuer has a reasonable time after presentation, but not beyond the end 08 of the seventh business day of the issuer after the day of the issuer's receipt of 09 documents, 10 (1) to honor the presentation; 11 (2) if the letter of credit provides for honor to be completed more than 12 seven business days after presentation, to accept a draft or incur a deferred obligation; 13 or 14 (3) to give notice to the presenter of discrepancies in the presentation. 15 (c) Except as otherwise provided in (d) of this section, an issuer is precluded 16 from asserting a discrepancy as a basis for dishonor if 17 (1) timely notice is not given; or 18 (2) the discrepancy is not stated in the notice, if timely notice is given. 19 (d) Failure to give the notice specified in (b) of this section or to mention 20 fraud, forgery, or expiration in the notice does not preclude the issuer from asserting 21 as a basis for dishonor fraud or forgery as described in AS 45.05.109(a) or expiration 22 of the letter of credit before presentation. 23 (e) An issuer shall observe the standard practice of financial institutions that 24 regularly issue letters of credit. A determination of the issuer's observance of the 25 standard practice is a matter of interpretation for a court. A court shall offer the 26 parties a reasonable opportunity to present evidence of the standard practice. 27 (f) An issuer is not responsible for 28 (1) the performance or nonperformance of the underlying contract, 29 arrangement, or transaction; 30 (2) an act or omission of others; or 31 (3) observance or knowledge of the usage of a particular trade, other

01 than the standard practice referred to in (e) of this section. 02 (g) If an undertaking constituting a letter of credit under AS 45.05.102(a)(10) 03 contains nondocumentary conditions, an issuer shall disregard the nondocumentary 04 conditions and treat them as if they were not stated. 05 (h) An issuer that dishonors a presentation shall return the documents or hold 06 them at the disposal of, and send advice to that effect to, the presenter. 07 (i) An issuer that honors a presentation as permitted or required by this chapter 08 (1) is entitled to be reimbursed by the applicant in immediately 09 available funds not later than the date of the payment of funds; 10 (2) takes the documents free of claims of the beneficiary or presenter; 11 (3) is precluded from asserting a right of recourse on a draft under 12 AS 45.03.414 - 45.03.415; 13 (4) except as otherwise provided in AS 45.05.110 and 45.05.117, is 14 precluded from restitution of money paid or other value given by mistake to the extent 15 the mistake concerns discrepancies in the documents or tender that are apparent on the 16 face of the presentation; and 17 (5) is discharged to the extent of the issuer's performance under the 18 letter of credit unless the issuer honored a presentation in which a required signature 19 of a beneficiary was forged. 20 * Sec. 11. AS 45.05.109 is repealed and reenacted to read: 21 Sec. 45.05.109. Fraud and forgery. (a) If a presentation is made that 22 appears on its face to comply strictly with the terms and conditions of the letter of 23 credit, but a required document is forged or materially fraudulent, or honor of the 24 presentation would facilitate a material fraud by the beneficiary on the issuer or 25 applicant, the issuer 26 (1) shall honor the presentation, if honor is demanded by 27 (A) a nominated person that has given value in good faith and 28 without notice of forgery or material fraud; 29 (B) a confirmer that has honored its confirmation in good faith; 30 (C) a holder in due course of a draft that was drawn under the 31 letter of credit and that was taken after acceptance by the issuer or nominated

01 person; or 02 (D) an assignee of the issuer's or nominated person's deferred 03 obligation if the obligation was taken for value and without notice of forgery 04 or material fraud after the obligation was incurred by the issuer or nominated 05 person; and 06 (2) acting in good faith, may honor or dishonor the presentation in a 07 case not covered by (1) of this subsection. 08 (b) If an applicant claims that a required document is forged or materially 09 fraudulent or that honor of the presentation would facilitate a material fraud by the 10 beneficiary on the issuer or applicant, a court of competent jurisdiction may 11 temporarily or permanently enjoin the issuer from honoring a presentation or grant 12 similar relief against the issuer or other persons only if the court finds that 13 (1) the relief is not prohibited under the law applicable to an accepted 14 draft or deferred obligation incurred by the issuer; 15 (2) a beneficiary, issuer, or nominated person who may be adversely 16 affected is adequately protected against loss that the beneficiary, issuer, or nominated 17 person may suffer because the relief is granted; 18 (3) all of the conditions that entitle a person to the relief under the law 19 of this state are met; and 20 (4) on the basis of the information submitted to the court, the applicant 21 is more likely than not to succeed under its claim of forgery or material fraud, and the 22 person demanding honor does not qualify for protection under (a)(1) of this section. 23 * Sec. 12. AS 45.05.110 is repealed and reenacted to read: 24 Sec. 45.05.110. Warranties. (a) If its presentation is honored, the beneficiary 25 warrants to 26 (1) the issuer, another person to whom presentation is made, and the 27 applicant that there is no fraud or forgery of the kind described in AS 45.05.109(a); 28 and 29 (2) the applicant that the drawing does not violate an agreement 30 between the applicant and beneficiary or another agreement intended by them to be 31 augmented by the letter of credit.

01 (b) The warranties in (a) of this section are in addition to warranties arising 02 under AS 45.03, AS 45.04, AS 45.07, and AS 45.08 because of the presentation or 03 transfer of documents covered by those chapters. 04 * Sec. 13. AS 45.05.111 is repealed and reenacted to read: 05 Sec. 45.05.111. Remedies. (a) If an issuer wrongfully dishonors or repudiates 06 its obligation to pay money under a letter of credit before presentation, the beneficiary, 07 successor, or nominated person presenting on its own behalf may recover from the 08 issuer the amount that is the subject of the dishonor or repudiation. If the issuer's 09 obligation under the letter of credit is not for the payment of money, the claimant may 10 obtain specific performance or, at the claimant's election, recover an amount equal to 11 the value of performance from the issuer. In either case, the claimant may also 12 recover incidental but not consequential damages. The claimant is not obligated to 13 take action to avoid damages that might be due from the issuer under this subsection. 14 If, although not obligated to do so, the claimant avoids damages, the claimant's 15 recovery from the issuer is reduced by the amount of damages avoided. The issuer has 16 the burden of proving the amount of damages avoided. In the case of repudiation, the 17 claimant does not need to present a document. 18 (b) If an issuer wrongfully dishonors a draft or demand presented under a letter 19 of credit or honors a draft or demand in breach of the issuer's obligation to the 20 applicant, the applicant may recover damages resulting from the breach, including 21 incidental but not consequential damages, less any amount saved as a result of the 22 breach. 23 (c) If an adviser or nominated person other than a confirmer breaches an 24 obligation under this chapter or an issuer breaches an obligation not covered in (a) or 25 (b) of this section, a person to whom the obligation is owed may recover damages 26 resulting from the breach, including incidental but not consequential damages, less any 27 amount saved as a result of the breach. To the extent of the confirmation, a confirmer 28 has the liability of an issuer specified in this subsection and in (a) and (b) of this 29 section. 30 (d) An issuer, nominated person, or adviser who is found liable under (a) - (c) 31 of this section shall pay interest on the amount owed under the liability from the date

01 of wrongful dishonor or other appropriate date. 02 (e) Attorney fees and costs shall be awarded under Rules 79 and 82, Alaska 03 Rules of Civil Procedure, to the prevailing party in an action in which a remedy is 04 sought under this chapter. 05 (f) Damages that would otherwise be payable by a party for breach of an 06 obligation under this chapter may be liquidated by agreement or undertaking, but only 07 in an amount or by a formula that is reasonable in light of the harm anticipated. 08 * Sec. 14. AS 45.05.112 is repealed and reenacted to read: 09 Sec. 45.05.112. Transfer of letter of credit. (a) Except as otherwise 10 provided in AS 45.05.113, unless a letter of credit provides that it is transferable, the 11 right of a beneficiary to draw or otherwise demand performance under a letter of credit 12 may not be transferred. 13 (b) Even if a letter of credit provides that it is transferable, the issuer may 14 refuse to recognize or carry out a transfer if 15 (1) the transfer would violate applicable law; or 16 (2) the transferor or transferee has failed to comply with a requirement 17 stated in the letter of credit, or with another requirement that 18 (A) relates to transfer imposed by the issuer; and 19 (B) is within the standard practice referred to in 20 AS 45.05.108(e) or is otherwise reasonable under the circumstances. 21 * Sec. 15. AS 45.05.113 is repealed and reenacted to read: 22 Sec. 45.05.113. Transfer by operation of law. (a) A successor of a 23 beneficiary may consent to amendments, sign and present documents, and receive 24 payment or other items of value in the name of the beneficiary without disclosing its 25 status as a successor. 26 (b) A successor of a beneficiary may consent to amendments, sign and present 27 documents, and receive payment or other items of value in its own name as the 28 disclosed successor of the beneficiary. Except as otherwise provided in (e) of this 29 section, an issuer shall recognize a disclosed successor of a beneficiary as beneficiary 30 in full substitution for the successor's predecessor upon compliance with 31 (1) the requirements for recognition by the issuer of a transfer of

01 drawing rights by operation of law under the standard practice in AS 45.05.108(e); or 02 (2) in the absence of the standard practice referred to in 03 AS 45.05.108(e), other reasonable procedures sufficient to protect the issuer. 04 (c) An issuer is not obliged to determine whether a purported successor is a 05 successor of a beneficiary or whether the signature of a purported successor is genuine 06 or authorized. 07 (d) Honor of a purported successor's apparently complying presentation under 08 (a) or (b) of this section has the consequences specified in AS 45.05.108(i) even if the 09 purported successor is not the successor of a beneficiary. Documents signed in the 10 name of the beneficiary or of a disclosed successor by a person who is not the 11 beneficiary or the successor of the beneficiary are forged documents for the purposes 12 of AS 45.05.109. 13 (e) An issuer whose rights of reimbursement are not covered by (d) of this 14 section, or by substantially similar law, and any confirmer or nominated person may 15 decline to recognize a presentation under (b) of this section. 16 (f) A beneficiary whose name is changed after the issuance of a letter of credit 17 has the same rights and obligations as a successor of a beneficiary under this section. 18 * Sec. 16. AS 45.05.114 is repealed and reenacted to read: 19 Sec. 45.05.114. Assignment of proceeds. (a) In this section, "proceeds of a 20 letter of credit" means the cash, check, accepted draft, or other item of value paid or 21 delivered upon honor or giving of value by the issuer or a nominated person under the 22 letter of credit. The term does not include a beneficiary's drawing rights or documents 23 presented by the beneficiary. 24 (b) A beneficiary may assign its right to part or all of the proceeds of a letter 25 of credit. The beneficiary may do so before presentation as a present assignment of 26 the beneficiary's right to receive proceeds contingent upon the beneficiary's 27 compliance with the terms and conditions of the letter of credit. 28 (c) An issuer or nominated person need not recognize an assignment of 29 proceeds of a letter of credit until the issuer or nominated person consents to the 30 assignment. 31 (d) An issuer or nominated person does not have an obligation to give or

01 withhold its consent to an assignment of proceeds of a letter of credit, but consent may 02 not be unreasonably withheld if the assignee possesses and exhibits the letter of credit 03 and if presentation of the letter of credit is a condition to honor. 04 (e) Rights of a transferee beneficiary or nominated person are independent of 05 the beneficiary's assignment of the proceeds of a letter of credit and are superior to 06 the assignee's right to the proceeds. 07 (f) Neither the rights recognized by this section between an assignee and an 08 issuer, transferee beneficiary, or nominated person nor the issuer's or nominated 09 person's payment of proceeds to an assignee or a third person affect the rights between 10 the assignee and a person other than the issuer, transferee beneficiary, or nominated 11 person. The mode of creating and perfecting a security interest in or granting an 12 assignment of a beneficiary's rights to proceeds is governed by AS 45.09 or other law. 13 As against a person other than the issuer, transferee beneficiary, or nominated person, 14 the rights and obligations arising on the creation of a security interest and its 15 perfection, or other assignment of a beneficiary's rights to proceeds are governed by 16 AS 45.09 or other law. 17 * Sec. 17. AS 45.05.115 is repealed and reenacted to read: 18 Sec. 45.05.115. Statute of limitations. An action to enforce a right or 19 obligation arising under this chapter must be commenced within one year after the 20 expiration date of the relevant letter of credit or one year after the cause of action 21 accrues, whichever occurs later. A cause of action accrues when the breach occurs, 22 regardless of the aggrieved party's lack of knowledge of the breach. 23 * Sec. 18. AS 45.05.116 is repealed and reenacted to read: 24 Sec. 45.05.116. Choice of law and forum. (a) The liability of an issuer, 25 nominated person, or adviser for an action or omission is governed by the law of the 26 jurisdiction chosen by an agreement in the form of a record signed or otherwise 27 authenticated by the affected parties in the manner provided in AS 45.05.104 or by a 28 provision in the letter of credit, confirmation, or other undertaking. The jurisdiction 29 whose law is chosen does not need to bear a relation to the transaction. 30 (b) Unless (a) of this section applies, the liability of an issuer, nominated 31 person, or adviser for action or omission is governed by the law of the jurisdiction in

01 which the issuer, nominated person, or adviser is located. The issuer, nominated 02 person, or adviser is considered to be located at the address indicated in the 03 undertaking of the issuer, nominated person, or adviser. If more than one address is 04 indicated, the issuer, nominated person, or adviser is considered to be located at the 05 address from which the undertaking of the issuer, nominated person, or adviser was 06 issued. For the purpose of jurisdiction, choice of law, and recognition of interbranch 07 letters of credit, but not enforcement of a judgment, all branches of a bank are 08 considered separate juridical entities, and a bank is considered to be located at the 09 place where the bank's relevant branch is considered to be located under this 10 subsection. 11 (c) Except as otherwise provided in this subsection, the liability of an issuer, 12 nominated person, or adviser is governed by rules of custom or practice, such as the 13 Uniform Customs and Practice for Documentary Credits, to which the letter of credit, 14 confirmation, or other undertaking is expressly made subject. If this chapter would 15 govern the liability of an issuer, nominated person, or adviser under (a) or (b) of this 16 section, if the relevant undertaking incorporates rules of custom or practice, and if 17 there is conflict between this chapter and those rules as applied to that undertaking, 18 those rules govern except to the extent of a conflict with the nonvariable provisions 19 specified in AS 45.05.103(c). 20 (d) If there is conflict between this chapter and AS 45.03, AS 45.04, AS 45.09, 21 or AS 45.14, this chapter governs. 22 (e) The forum for settling disputes arising out of an undertaking within this 23 chapter may be chosen in the manner and with the binding effect that governing law 24 may be chosen under (a) of this section. 25 * Sec. 19. AS 45.05.117 is repealed and reenacted to read: 26 Sec. 45.05.117. Subrogation of issuer, applicant, and nominated person. 27 (a) An issuer who honors a beneficiary's presentation is subrogated to the rights of 28 (1) the beneficiary to the same extent as if the issuer were a secondary 29 obligor of the underlying obligation owed to the beneficiary; and 30 (2) the applicant to the same extent as if the issuer were the secondary 31 obligor of the underlying obligation owed to the applicant.

01 (b) An applicant that reimburses an issuer is subrogated to the rights of the 02 issuer against a beneficiary, presenter, or nominated person to the same extent as if the 03 applicant were the secondary obligor of the obligations owed to the issuer, and the 04 applicant has the rights of subrogation of the issuer to the rights of the beneficiary 05 stated in (a) of this section. 06 (c) A nominated person who pays or gives value against a draft or demand 07 presented under a letter of credit is subrogated to the rights of 08 (1) the issuer against the applicant to the same extent as if the 09 nominated person were a secondary obligor of the obligation owed to the issuer by the 10 applicant; 11 (2) the beneficiary to the same extent as if the nominated person were 12 a secondary obligor of the underlying obligation owed to the beneficiary; and 13 (3) the applicant to the same extent as if the nominated person were a 14 secondary obligor of the underlying obligation owed to the applicant. 15 (d) Notwithstanding an agreement or term to the contrary, the rights of 16 subrogation stated in (a) and (b) of this section do not arise until the issuer honors the 17 letter of credit or otherwise pays, and the rights of subrogation stated in (c) of this 18 section do not arise until the nominated person pays or otherwise gives value. Until 19 then, the issuer, nominated person, and the applicant do not derive under this section 20 present or prospective rights forming the basis of a claim, defense, or excuse. 21 * Sec. 20. AS 45.09.103(a) is amended to read: 22 (a) This subsection applies to documents , [AND] instruments , rights to 23 proceeds of written letters of credit, and [TO] goods other than those covered by a 24 certificate of title described in (b) of this section, mobile goods described in (c) of this 25 section, and minerals described in (e) of this section: 26 (1) except as otherwise provided in this subsection, perfection and the 27 effect of perfection or nonperfection of a security interest in collateral are governed 28 by the law of the jurisdiction where the collateral is when the last event occurs on 29 which is based the assertion that the security interest is perfected or unperfected; 30 (2) if the parties to a transaction creating a purchase money security 31 interest in goods in one jurisdiction understand at the time that the security interest

01 attaches that the goods will be kept in another jurisdiction, then the law of the other 02 jurisdiction governs the perfection and the effect of perfection or nonperfection of the 03 security interest from the time it attaches until 30 days after the debtor receives 04 possession of the goods and thereafter if the goods are taken to the other jurisdiction 05 before the end of the 30-day period; 06 (3) if collateral is brought into and kept in this state while subject to 07 a security interest perfected under the law of the jurisdiction from which the collateral 08 was removed, the security interest remains perfected, but , if action is required by 09 AS 45.09.301 - 45.09.318 to perfect the security interest, 10 (A) if the action is not taken before the expiration of the period 11 of perfection in the other jurisdiction or the end of four months after the 12 collateral is brought into this state, whichever period first expires, the security 13 interest becomes unperfected at the end of that period and is thereafter 14 considered to have been unperfected as against a person who became a 15 purchaser after removal; 16 (B) if the action is taken before the expiration of the period 17 specified in (A) of this paragraph, the security interest continues perfected 18 thereafter; 19 (C) for the purpose of priority over a buyer of consumer goods 20 (AS 45.09.307), the period of the effectiveness of a filing in the jurisdiction 21 from which the collateral is removed is governed by the rules with respect to 22 perfection in (A) and (B) of this paragraph. 23 * Sec. 21. AS 45.09.104 is amended by adding a new paragraph to read: 24 (14) to a transfer of an interest in a letter of credit other than the rights 25 to proceeds of a written letter of credit. 26 * Sec. 22. AS 45.09.105(c) is amended to read: 27 (c) The following definitions apply to this chapter: 28 (1) "broker" (AS 45.08.102) ; 29 (2) "certificated security" (AS 45.08.102) ; 30 (3) "check" (AS 45.03.104) ; 31 (4) "clearing corporation" (AS 45.08.102) ;

01 (5) "contract for sale" (AS 45.02.106) ; 02 (6) "control" (AS 45.08.106) ; 03 (7) "delivery" (AS 45.08.301) ; 04 (8) "entitlement holder" (AS 45.08.102) ; 05 (9) "financial asset" (AS 45.08.102) ; 06 (10) "holder in due course" (AS 45.03.302) ; 07 (11) "letter of credit" (AS 45.05.102); 08 (12) "note" (AS 45.03.104) ; 09 (13) "proceeds of a letter of credit" (AS 45.05.114(a)); 10 (14) [(12)] "sale" (AS 45.02.106) ; 11 (15) [(13)] "securities intermediary" (AS 45.08.102) ; 12 (16) [(14)] "security" (AS 45.08.102) ; 13 (17) [(15)] "security certificate" (AS 45.08.102) ; 14 (18) [(16)] "security entitlement" (AS 45.08.102) ; 15 (19) [(17)] "uncertificated security" (AS 45.08.102). 16 * Sec. 23. AS 45.09.106 is amended to read: 17 Sec. 45.09.106. Definitions: "account"; "general intangibles." "Account" 18 means a right to payment for goods sold or leased or for services rendered that is not 19 evidenced by an instrument or chattel paper, whether or not it has been earned by 20 performance. "General intangibles" means personal property (including a thing in 21 action) other than goods, accounts, chattel paper, documents, instruments, investment 22 property, rights to proceeds of written letters of credit, investment property, and 23 money. All rights to payment earned or unearned under a charter or other contract 24 involving the use or hire of a vessel and all rights incident to the charter or contract 25 are accounts. 26 * Sec. 24. AS 45.09.304(a) is amended to read: 27 (a) A security interest in chattel paper or negotiable documents may be 28 perfected by filing. A security interest in the rights to proceeds of a written letter 29 of credit can be perfected only by the secured party's taking possession of the 30 letter of credit. A security interest in money or instruments (other than instruments 31 that constitute part of chattel paper) can be perfected only by the secured party's taking

01 possession, except as provided in (d) and (e) of this section and AS 45.09.306(b) and 02 (c) on proceeds. 03 * Sec. 25. AS 45.09.305 is amended to read: 04 Sec. 45.09.305. When possession by secured party perfects security interest 05 without filing. A security interest in [LETTERS OF CREDIT AND ADVICES OF 06 CREDIT (AS 45.05.116(b)(1)),] goods, instruments, money, negotiable documents, or 07 chattel paper may be perfected by the secured party's taking possession of the 08 collateral. A security interest in the rights to proceeds of a written letter of credit 09 may be perfected by the secured party's taking possession of the letter of credit. 10 If the collateral, other than goods covered by a negotiable document, is held by a 11 bailee, the secured party is considered to have possession from the time the bailee 12 receives notification of the secured party's interest. A security interest is perfected by 13 possession from the time possession is taken without relation back and continues only 14 so long as possession is retained unless otherwise specified in this chapter. The 15 security interest may be otherwise perfected as provided in this chapter before or after 16 the period of possession by the secured party. 17 * Sec. 26. TRANSITION PROVISIONS. (a) This Act applies to a letter of credit that 18 is issued on or after the effective date of this Act. This Act does not apply to a transaction, 19 event, obligation, or duty arising out of or associated with a letter of credit that was issued 20 before the effective date of this Act. 21 (b) A transaction arising out of or associated with a letter of credit that was issued 22 before the effective date of this Act and the rights, obligations, and interests flowing from that 23 transaction are governed by a statute or other law amended, repealed, or repealed and 24 reenacted by this Act as if the repeal, amendment, or repeal and reenactment had not occurred 25 and may be terminated, completed, consummated, or enforced under that statute or other law. 26 * Sec. 27. This Act takes effect January 1, 2000.