New Jersey Statutes 12A:5-117. Subrogation of issuer, applicant, and nominated person
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Terms Used In New Jersey Statutes 12A:5-117
- Applicant: means a person at whose request or for whose account a letter of credit is issued. See New Jersey Statutes 12A:5-102
- Beneficiary: A person who is entitled to receive the benefits or proceeds of a will, trust, insurance policy, retirement plan, annuity, or other contract. Source: OCC
- Beneficiary: means a person who under the terms of a letter of credit is entitled to have its complying presentation honored. See New Jersey Statutes 12A:5-102
- Issuer: 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 New Jersey Statutes 12A:5-102
- Letter of credit: means a definite undertaking that satisfies the requirements of 12A:5-104 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 New Jersey Statutes 12A:5-102
- Nominated person: means a person whom the issuer (a) designates or authorizes to pay, accept, negotiate, or otherwise give value under a letter of credit and (b) undertakes by agreement or custom and practice to reimburse. See New Jersey Statutes 12A:5-102
- Obligation: 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: includes corporations, companies, associations, societies, firms, partnerships and joint stock companies as well as individuals, unless restricted by the context to an individual as distinguished from a corporate entity or specifically restricted to one or some of the above enumerated synonyms and, when used to designate the owner of property which may be the subject of an offense, includes this State, the United States, any other State of the United States as defined infra and any foreign country or government lawfully owning or possessing property within this State. See New Jersey Statutes 1:1-2
- Presentation: means delivery of a document to an issuer or nominated person for honor or giving of value under a letter of credit. See New Jersey Statutes 12A:5-102
- Presenter: means a person making a presentation as or on behalf of a beneficiary or nominated person. See New Jersey Statutes 12A:5-102
12A:5-117. Subrogation of Issuer, Applicant, and Nominated Person.
a. An issuer that honors a beneficiary‘s presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary; and of the applicant, to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.
b. An applicant that reimburses an issuer is subrogated to the rights of the issuer against any beneficiary, presenter, or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the issuer to the rights of the beneficiary stated in subsection a. of this section.
c. A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of:
(1) the issuer against the applicant to the same extent as if the nominated person were a secondary obligor of the obligation owed to the issuer by the applicant;
(2) the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and
(3) the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.
d. Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections a. and b. of this section do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection c. of this section do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person, and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense, or excuse.
a. An issuer that honors a beneficiary‘s presentation is subrogated to the rights of the beneficiary to the same extent as if the issuer were a secondary obligor of the underlying obligation owed to the beneficiary; and of the applicant, to the same extent as if the issuer were the secondary obligor of the underlying obligation owed to the applicant.
b. An applicant that reimburses an issuer is subrogated to the rights of the issuer against any beneficiary, presenter, or nominated person to the same extent as if the applicant were the secondary obligor of the obligations owed to the issuer and has the rights of subrogation of the issuer to the rights of the beneficiary stated in subsection a. of this section.
c. A nominated person who pays or gives value against a draft or demand presented under a letter of credit is subrogated to the rights of:
(1) the issuer against the applicant to the same extent as if the nominated person were a secondary obligor of the obligation owed to the issuer by the applicant;
(2) the beneficiary to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the beneficiary; and
(3) the applicant to the same extent as if the nominated person were a secondary obligor of the underlying obligation owed to the applicant.
d. Notwithstanding any agreement or term to the contrary, the rights of subrogation stated in subsections a. and b. of this section do not arise until the issuer honors the letter of credit or otherwise pays and the rights in subsection c. of this section do not arise until the nominated person pays or otherwise gives value. Until then, the issuer, nominated person, and the applicant do not derive under this section present or prospective rights forming the basis of a claim, defense, or excuse.
L.1997,c.395,s.1.