Article

Note: To pay for the purchase of goods, Gordon & Ferguson, Inc. (Buyer/Applicant) applied to by Bank of America (Issuer) for issuance of a commercial letter of credit in favor of RJM2, Ltd. (Seller/Beneficiary). Capital Business Credit LLC (Factor) was Buyer's factor. The purchase orders provided that the goods were to be delivered "FOB China". The goods were turned over to the carrier in China, but the bills of lading indicated transport to California instead of New Jersey as required by the LC. When Seller/Beneficiary presented nonconforming documents, Issuer dishonored the LC and Buyer/Applicant refused Seller's direct demand for payment, claiming that it did not accept delivery of the goods in the US.

Seller/Beneficiary then sued Buyer/Applicant for breach of contract and the Factor for tortious interference with contract. Factor moved for summary judgment and Seller moved for partial summary judgment. The Supreme Court of New York, Friedman, J., granted partial summary judgment in favor of Seller/Beneficiary and granted summary judgment in favor of Factor.

Noting that the Seller had performed its obligation under the "FOB China" term by having delivered the goods to the carrier in China and promptly demanding payment from Buyer (after the refusal of its presentation under the LC in accordance with US UCC § 2-325 (failure to pay by agreed letter of credit), the Judge concluded that there was no outstanding triable issue of fact.

As to Factor's claim of tortuous interference, the complaint alleged that Factor had induced Buyer/ Applicant to request Issuer to dishonor Seller/ Beneficiary's presentation and apparently to refuse to waive the discrepancy regarding the destination of the goods. The Judge noted that there was a discrepancy in the presentation and that Factor would have been entitled to insist on strict enforcement of the LC terms. Moreover, the Judge noted that it was the Issuer that dishonored the LC and that the reason for refusal was irrelevant to Buyer/Applicant's payment obligation.

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