On January 10, 1997, bank F of Chicago opened a sight letter of credit with bank a for us $15783. The shipment date of the certificate is February 25 and March 8, respectively. The beneficiary is a foreign trade company in B city, and the name of the goods is iron nail.
On February 12, bank a received the first amendment under the letter of credit, requiring the shipment date to be advanced to February 15 and February 24 respectively, and modifying the description of goods, etc. Bank A immediately contacts the beneficiary for a response. The beneficiary sent a written confirmation to bank a on February 19, refusing to modify, and bank a sent a telegram of the same content to bank F. On March 3, the beneficiary presented the documents, and bank a negotiated the documents after verification, and sent the documents for foreign exchange according to the requirements of the issuing bank. A bank No. bp95i1327 / 97. On March 13, bank a received a telegram from bank f stating that the document was late loaded and expired, so as to refuse to pay and prepare to return the document.
It is found that the date of shipment of this document is February 25 and the date of presentation is March 3, which fully meets the requirements of the L / C before amendment. Accordingly, bank a argued against the discrepancy proposed by bank F.
Since then, bank f has repeatedly called to insist on the above discrepancies, and twice returned the documents to bank a, but bank a did not give way, and twice sent the documents to the issuing bank again. Due to the reasonable and forceful refutation of bank a, bank f finally made the payment on April 25. Foreign lawyer
Comment and analysis
The reason for the dispute is that the issuing bank and the negotiating bank have different understanding of the binding force of the L / C terms which have been amended by the issuing bank but have not been agreed by the beneficiary. The issuing bank believes that the documents shall be reviewed in accordance with the amended L / C terms, and there are inconsistencies, so it refuses to pay; the negotiating bank believes that although the L / C terms have been modified by the issuing bank, but the beneficiary's consent has not been obtained, the amended L / C cannot be binding on the beneficiary, and the documents can only be reviewed in accordance with the amended L / C terms.
Can the applicant and the issuing bank unilaterally modify the L / C have legal effect? The answer is No. On the one hand, from the perspective of the basic relationship between the opening of L / C and the basic transaction, the opening of L / C serves the basic transaction. As a payment condition, L / C should conform to the agreement of the importers and exporters reflected in the basic transaction contract. Unless the importers and exporters reach an agreement on modifying the payment conditions of the basic transaction contract, the terms of L / C cannot be modified. On the other hand, it is based on the understanding of normal trading order and rules, Article 9 of uco500 stipulates:
“…… An irrevocable letter of credit cannot be amended or cancelled without the consent of the issuing bank, the confirming bank (if any) and the beneficiary The terms of the original credit shall remain in force for the beneficiary until the beneficiary has accepted the amendment to the bank notifying the amendment. " According to UCP500, it is clear that if the beneficiary does not accept the amended terms of the letter of credit, the documents can only be reviewed according to the original terms of the letter of credit.
In this case, the issuing bank's practice is improper. As the beneficiary does not agree to the amended terms of the credit, the issuing bank cannot impose the application of the amended terms of the credit. The issuing bank shall make payment in the absence of discrepancies in the documents examined in accordance with the terms of the original L / C.
Source: Tianjin foreign law firm
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