Colorado § 4-5-103 - Scope.

§ 4-5-103. Scope.

(a) This article applies to letters of credit and to certain rights and obligations arising out of transactions involving letters of credit.

(b) The statement of a rule in this article does not by itself require, imply, or negate application of the same or a different rule to a situation not provided for, or to a person not specified, in this article.

(c) With the exception of this subsection (c), subsections (a) and (d) of this section, sections 4-5-102 (a)(9) and (10), 4-5-106 (d), and 4-5-114 (d), and except to the extent prohibited in sections 4-1-302 and 4-5-117 (d), the effect of this article may be varied by agreement or by a provision stated or incorporated by reference in an undertaking. A term in an agreement or undertaking generally excusing liability or generally limiting remedies for failure to perform obligations is not sufficient to vary obligations prescribed by this article.

(d) Rights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.

Source: L. 96: Entire article R&RE, p. 193, § 1, effective July 1. L. 2006: (c) amended, p. 498, § 31, effective September 1.

Editor's note: This section is similar to former § 4-5-102 as it existed prior to 1996.

ANNOTATION

Annotator's note. Since § 4-5-103 is similar to § 4-5-102 as it existed prior to the 1996 repeal and reenactment of this article, relevant cases construing that provision have been included in the annotations to this section.

For overview of the law and history concerning letters of credit, see Colo. Nat'l Bank v. Bd. of County Comm'rs, 634 P.2d 32 (Colo. 1981).

A document may be a letter of credit if it requires a documentary draft or documentary demand for payment or, if it contains neither requirement, but conspicuously declares itself to be a letter of credit. Raiffeisen-Zentralkasse Tirol v. First Nat'l Bank, 671 P.2d 1008 (Colo. App. 1983).

"Standby" letters of credit included in this article. Purported "standby" letters of credit, by which the issuer claims to undertake only a secondary liability to pay damages resulting from its customers' failure to perform an underlying contract, which require documentary drafts and which are conspicuously entitled letters of credit, clearly fall within the scope of this article. Bd. of County Comm'rs v. Colo. Nat'l Bank, 43 Colo. App. 186, 607 P.2d 1010 (1979), aff'd in part, rev'd in part on other grounds, 634 P.2d 32 (Colo. 1981).

Letter of credit is separate and independent from underlying business transaction between the bank's customer and the beneficiary of the letter of credit. Colo. Nat'l Bank v. Bd. of County Comm'rs, 634 P.2d 32 (Colo. 1981).

Letters of credit not ultra vires. Letters of credit issued by a state bank, being authorized by § 11-7-107(2), and falling within the provisions of subsection (1), are binding, primary obligations, dependent solely on presentation of conforming documents, and are, therefore, not ultra vires. United Bank v. Quadrangle, Ltd., 42 Colo. App. 486, 596 P.2d 408 (1979).

Court's remedial powers limited by terms of letter of credit. Where the rights of all parties are defined and established under a letter of credit, a court may not fashion an equitable remedy to benefit a third party. Schmidt-Tiago Constr. Co. v. City of Colo. Springs, 633 P.2d 533 (Colo. App. 1981).

Surety contract not similar. An analogy between a surety contract and a letter of credit is not well taken. Gen. Ins. Co. of Am. v. City of Colo. Springs, 638 P.2d 752 (Colo. 1981).

Applied in Dovenmuehle, Inc. v. E. Bank, 38 Colo. App. 507, 563 P.2d 24 (1977); City of Colo. Springs v. Gen. Ins. Co., 44 Colo. App. 174, 616 P.2d 147 (Colo. 1980).