Michigan Laws 440.5111 – Wrongful dishonor, repudiation, or breach; rights of claimant or applicant; liability of issuer, nominated person, or adviser; attorney fees; liquidated damages
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(1) If an issuer wrongfully dishonors or repudiates its obligation to pay money under a letter of credit before presentation, the beneficiary, successor, or nominated person presenting on its own behalf may recover from the issuer the amount that is the subject of the dishonor or repudiation. If the issuer’s obligation under the letter of credit is not for the payment of money, the claimant may obtain specific performance or, at the claimant’s election, recover an amount equal to the value of performance from the issuer. In either case, the claimant may also recover incidental but not consequential damages. The claimant is not obligated to take action to avoid damages that might be due from the issuer under this subsection. If, although not obligated to do so, the claimant avoids damages, the claimant’s recovery from the issuer must be reduced by the amount of damages avoided. The issuer has the burden of proving the amount of damages avoided. In the case of repudiation the claimant need not present any document.
(2) If an issuer wrongfully dishonors a draft or demand presented under a letter of credit or honors a draft or demand in breach of its obligation to the applicant, the applicant may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach.
Terms Used In Michigan Laws 440.5111
- Adviser: means a person who, at the request of the issuer, a confirmer, or another adviser, notifies or requests another adviser to notify the beneficiary that a letter of credit has been issued, confirmed, or amended. See Michigan Laws 440.5102
- Applicant: means a person at whose request or for whose account a letter of credit is issued. See Michigan Laws 440.5102
- Confirmer: means a nominated person who undertakes, at the request or with the consent of the issuer, to honor a presentation under a letter of credit issued by another. See Michigan Laws 440.5102
- Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
- Document: means a draft or other demand, document of title, investment security, certificate, invoice, or other record, statement, or representation of fact, law, right, or opinion that is not oral which is both of the following:
(i) Presented in a written or other medium permitted by the letter of credit or, unless prohibited by the letter of credit, by the standard practice referred to in section 5108(5). See Michigan Laws 440.5102Issuer: means a bank or other person that issues a letter of credit, but does not include an individual who makes an engagement for personal, family, or household purposes. See Michigan Laws 440.5102 Letter of credit: means a definite undertaking that satisfies the requirements of section 5104 by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value. See Michigan Laws 440.5102 Litigation: A case, controversy, or lawsuit. Participants (plaintiffs and defendants) in lawsuits are called litigants. Money: means a medium of exchange authorized or adopted by a domestic or foreign government. See Michigan Laws 440.1201 Nominated person: means both of the following:
(i) A person whom the issuer designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit. See Michigan Laws 440.5102Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period. Person: means an individual, corporation, business trust, estate, trust, partnership, limited liability company, association, joint venture, government, governmental subdivision, agency, or instrumentality, public corporation, or any other legal or commercial entity. See Michigan Laws 440.1201 Presentation: means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit. See Michigan Laws 440.5102 Remedy: means any remedial right to which an aggrieved party is entitled with or without resort to a tribunal. See Michigan Laws 440.1201
(3) If an adviser or nominated person other than a confirmer breaches an obligation under this article or an issuer breaches an obligation not covered in subsection (1) or (2), a person to whom the obligation is owed may recover damages resulting from the breach, including incidental but not consequential damages, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmer has the liability of an issuer specified in this subsection and subsections (1) and (2).
(4) An issuer, nominated person, or adviser who is found liable under subsection (1), (2), or (3) shall pay interest on the amount owed from the date of wrongful dishonor or other appropriate date.
(5) Reasonable attorney’s fees and other expenses of litigation shall be awarded to the prevailing party in an action in which a remedy is sought under this article.
(6) Damages that would otherwise be payable by a party for breach of an obligation under this article may be liquidated by agreement or undertaking, but only in an amount or by a formula that is reasonable in light of the harm anticipated.