Article

Note: Installer, Decor Floors Engineering, Ltd., contracted with Yuen Hung Wai to supply and lay carpet. Payment was to be in three installments with a 30% deposit paid by LC upon confirmation of the order, a 40% payment by way of LC upon delivery of the carpet, and the remaining 30% balance to be paid within 14 days of the installation of the carpet. Delivery of the carpet was to take place between six to eight weeks after receipt of the order and deposit confirmation

Applicant, Mr. Yuen, obtained an LC issued by Bank of China which required presentation of "original clean cargo receipt issued and signed by [Applicant] ... certifying that the goods have been received in good order and conditions in trust for the Bank of China (Hong Kong) Ltd indicating date of receipt of goods, description and quantity of goods received, invoice value ... ."

Although Applicant provided Installer/Beneficiary with a cargo receipt which it presented to Issuer, payment was refused due to various discrepancies, including that the bill of lading failed to indicate the quantity of goods received and that the goods were in trust for the Bank of China (Hong Kong). Moreover, the 30% deposit was not received until later.

A dispute arose between the parties as to the time within which performance must be completed, the LC expired, and Installer/Beneficiary was not paid although it installed the carpet. Installer/Beneficiary then sued Applicant for breach of contract. The trial court, HH Judge H C Wong, gave judgment for the Installer and dismissed the Applicant's counterclaim. On appeal, the High Court of the Hong Kong Special Administrative Region Court of Appeal, Rogers V.P., affirmed.

The appellate court ruled that the contract's requirement of a deposit confirmation by means of posting the LC was only fulfilled once the funds had been actually deposited at the Beneficiary's bank on 24 September and that the eight-week period for delivery only commenced at that time. It stated that "the provision of the [LC] ... was not a deposit confirmation nor was it payment and hence time could only have started running from 24 September 2002." Since Beneficiary performed within the time specified within the agreement, the court concluded that it was entitled to payment notwithstanding expiration of the LC.

[JEB/rdhf]

COPYRIGHT OF THE INSTITUTE OF INTERNATIONAL BANKING LAW & PRACTICE

The views expressed in this Case Summary are those of the Institute of International Banking Law and Practice and not necessarily those of ICC or the other partners in DC-PRO.