Okla. Stat. tit. 12A § 5-104
A letter of credit, confirmation, advice, transfer, amendment, or cancellation may be issued in any form that is a signed record
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Okla. Stat. tit. 12A, § 5-104
Oklahoma Code Comment
LC transactions traditionally have been awash in paper documentation: the LC itself, the draft, and all of the various shipping and insurance documents that frequently accompany the draft. However, as the growth of electronic commerce accelerates, it may be desirable to permit the establishment of LCs, and presentation of documents for payment, without the use of paper. Former Article 5 contained significant barriers to electronic issuance and presentation.
Former Section 5-104 provided that a letter of credit had to be in "writing." Sub section 1-201(46) defines a "writing" to include "any ... intentional reduction to tangible form." Some commentators have suggested that electronic messages satisfy the "writing" requirement, citing the acceptance of telegrams, telexes and telecopies as writings by various courts. However, telegrams, telexes and telecopies generally print out the transmission immediately upon receipt, for storage on paper. Most electronic messages, in contrast, are stored as magnetic patterns on erasable media. Accordingly, some doubt may exist as to whether such electronic messages are "reduced to tangible form."
Former Section 5-104 also required that the LC be "signed." A document is "signed" if it "includes any symbol executed or adopted by a party with present intention to authenticate a writing." UCC § 1-201(39). This could exclude certain existing encryption techniques used in electronic commerce, as well as the use of third-party services for authentication. It also could stifle future innovation in new directions. In addition, because the definition of "signed" is limited to the authentication of "writings," all the limitations of "writings" apply by implication. Thus, even though Permanent Editorial Board Commentary No. 15, dated July 16, 1996, interprets the terms "signed" and "writing" to validate electronic filing under Article 9, statutory authority is desirable.
A "document" under former sub section 5-103(b) was any paper, "including document of title, security, invoice, certificate, notice of default and the like." In addition, the issuer's obligations in former Sections 5-109 and 5- 114 were tied to the examination of "documents." In particular, former sub section 5-109(2) exculpated an issuer who paid on a fraudulent presentation under a letter of credit after due examination of "documents" which appeared to comply with the letter of credit "on their face." The exculpation clause for reasonable document examination would not reach examination of anything which was not a "document" under former Article 5.
Revised Section 5-104 permits letters of credit and associated communications to be created in mediums other than in writing. A letter of credit, confirmation, advice, transfer, amendment or cancellation may be issued in any form that is a "record" and is authenticated (i) by a signature, or (ii) in accordance with the agreement of the parties or the standard practice of financial institutions. A "record," in turn, is defined in revised sub section 5-102(a)(14) as "information that is inscribed on a tangible medium, or that is stored in an electronic or other medium and is retrievable in perceivable form." This pair of definitions leaves the issuer and beneficiary with significant latitude for issuing wholly electronic letters of credit. In addition, the phrase "by agreement of the parties" will include course of dealing and usage of trade in the banking industry under the standards established in Section 1-205 of the UCC's general provisions. The phrase also will encompass the terms of any rules that may apply because the information is transmitted over a particular network or by a particular communications system (in the same way that Part B of Regulation J applies to wire transfers over FEDWIRE or the NACHA rules apply to ACH transfers).
Revised Article 5 also significantly alters the definition of "document." Under revised sub section 5-102(a)(6) , the term will include any communication (i) which is presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, permitted by the standard practice of financial institutions, and (ii) which is capable of being examined for compliance with the terms and conditions of the letter of credit. The only prohibition is that a document may not be oral. This language will permit electronic presentation of documents under the LC so long as either (i) the issuer has expressly agreed to the method of presentation, or (ii) the method of presentation used by the beneficiary has become generally accepted in the banking industry.
The reference to the standard practice of financial institutions invokes what is known as the "reasonable document checker" standard. This standard recognizes that there are accepted guidelines in the banking industry for evaluating the presented documents against the requirements in the letter of credit. A presentation will be deemed to comply with the requirements of the LC if a "reasonable document checker" would give the documents "a passing grade." To the extent methodologies for electronic presentation become widely accepted over time, presentation using those methodologies eventually may be implied in general document descriptions contained in the letter of credit. In the meantime, the issuer may use the express terms of the LC to remain in complete control of the types of documents that are acceptable.
Prior Statutory Provisions:
15 Okla. Stat. § 401 (1910), which defined "letter of credit."
15 Okla. Stat. §§ 402, 404, 405 & 409 (1910).