This section sets the remedies and damages rules for letter-of-credit breaches, including recovery, limits on damages, interest, and attorney fees.
§5-111. Remedies (a) 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 foreseeable damages for pecuniary loss but not unforeseeable damages, exemplary damages, or damages for nonpecuniary loss. 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. (b) 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 foreseeable damages for pecuniary loss resulting from the breach, but not unforeseeable damages, exemplary damages, or damages for nonpecuniary loss less any amount saved as a result of the breach. (c) If an adviser or nominated person other than a confirmor breaches an obligation under this Chapter or an issuer breaches an obligation not covered in Subsection (a) or (b), a person to whom the obligation is owed may recover foreseeable damages for pecuniary loss resulting from the breach, but not unforeseeable damages, exemplary damages, or damages for nonpecuniary loss, less any amount saved as a result of the breach. To the extent of the confirmation, a confirmor has the liability of an issuer specified in this Subsection and Subsections (a) and (b). (d) An issuer, nominated person, or adviser who is found liable under Subsection (a), (b), or (c) shall pay interest on the amount owed thereunder from the date of wrongful dishonor or other appropriate date. (e) Reasonable attorney fees and other expenses of litigation must be awarded to the prevailing party in an action in which a remedy is sought under this Chapter. (f) Damages that would otherwise be payable by a party for breach of an obligation under this Chapter may be stipulated by agreement or undertaking, unless the damages stipulated are so manifestly unreasonable as to be contrary to public policy. Added by Acts 1974, No. 92, §1, eff. Jan. 1, 1975. Acts 1989, No. 135, §4, eff. Jan. 1, 1990; Acts 1999, No. 171, §1, eff. Jan. 1, 2000.