## Facts

- Carter Petroleum Products, Inc. (Carter) sold fuel products to Highway 210, LLC (Highway 210), which operated a gas station.
- Brotherhood Bank & Trust Co. (Bank) issued an irrevocable letter of credit (Letter of Credit No. 2001-270) for the benefit of Carter on Highway 210’s account, with an aggregate amount of \$175,000.
- The letter of credit allowed Carter to draw at sight if Carter also submitted a signed statement that Highway 210 had failed to pay outstanding invoices according to the payment terms.
- The letter of credit required each draft to state that it was “Drawn under [Bank]’s Letter of Credit #2001-270 dated July 26, 2001.”
- The “July 26, 2001” date was a typographical error; the operative letter of credit at issue was dated October 19, 2001 and replaced an earlier July 26, 2001 letter of credit.
- The letter of credit provided it would be honored if presented at the Bank’s office in Shawnee, Kansas “no later than June 26, 2002.”
- On June 26, 2002, Carter attempted to draw on the letter of credit by presenting the draft and required statement at 5:05 p.m.
- The Bank’s lobby had closed at 5:00 p.m. and the doors were locked, but a Bank employee opened the doors and allowed Carter’s representative to enter; the Bank’s drive-through window remained open until 7:00 p.m.
- Carter’s documentation referenced the October 19, 2001 date rather than the erroneous July 26, 2001 date.
- The Bank dishonored Carter’s demand, asserting (1) the presentation was untimely because it occurred after regular banking hours, and (2) the draft did not strictly comply because it did not contain the “dated July 26, 2001” language.
- Carter sued for wrongful dishonor; the district court granted summary judgment to Carter, and the Bank appealed.

## Issues

1. Whether a sight draft presented at 5:05 p.m. on the credit’s expiration date was timely when the credit required presentment “no later than June 26, 2002” but did not specify a time-of-day cutoff and the Bank was still open for business through its drive-through.
2. Whether Carter failed to satisfy the letter of credit’s documentary conditions by stating the correct October 19, 2001 date rather than repeating the credit’s erroneous requirement that the draft recite “dated July 26, 2001.”

## Decision

- The Kansas Court of Appeals affirmed the grant of summary judgment for Carter.
- The court held Carter’s presentment on June 26, 2002 was timely; the letter of credit did not impose a specific hour-of-day limit, and the Bank could not impose a restriction not stated in the credit.
- The court held the presentation complied with the letter of credit despite the date discrepancy because the “July 26, 2001” reference was a typographical error and Carter’s documents clearly identified the operative letter of credit.
- The Bank’s refusal to honor the draw constituted wrongful dishonor.

## Legal Principles

- An issuer must honor a letter of credit draw when the beneficiary presents the documents required by the credit and those documents comply with the credit’s terms.
- If an issuer intends to limit presentment on the expiration date to particular banking hours, cutoff times, or methods of presentment, the letter of credit must state those limits.
- When a letter of credit states an expiration date without specifying an hour, presentment on that date is not rendered late merely because it occurs after the bank’s lobby closing time, especially when the bank remains open for business in another channel.
- The strict-compliance rule does not permit an issuer to dishonor based on an obvious clerical error in the issuer’s own text when the beneficiary’s documents otherwise meet the credit’s requirements and clearly identify the credit being drawn upon.
- Unclear or ambiguous letter-of-credit terms are construed against the issuer that drafted them.

## Conclusion

The Court of Appeals of Kansas affirmed summary judgment for Carter because Carter presented its draw on the stated expiration date and submitted the required documents, and the Bank could not avoid payment by adding an unstated time-of-day restriction or by insisting Carter repeat an issuer-created typographical date error.


Carter Petroleum Products, Inc. v. Brotherhood Bank & Trust Co., 97 P.3d 505 (2004)