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Note: AAH Pharmaceuticals Ltd. (Buyer/ Applicant) applied for a commercial letter of credit in favor of Waypharm (Supplier/Beneficiary). The terms of the LC were unusual in that it permitted Supplier/Beneficiary to substitute products of its own choice for those ordered by Buyer/Applicant. Supplier/Beneficiary drew on the LC using documents that were for substitute goods, not for the goods ordered by Buyer/Applicant. Buyer/Applicant consulted Issuer as to whether the drawing could be refused but concluded that refusal was not possible due to the wording of the LC.

Buyer's/Applicant's Officer discovered that not all the goods listed on the documents presented under the LC had been delivered to the freight forwarder, and that Supplier/Beneficiary refused to allow Buyer/ Applicant to inspect the goods at its or freight forwarder's warehouse. Buyer's/Applicant's Officer failed to inform the ultimate parent company of the danger of fraud as required by company regulations. When this series of transactions resulted in a loss of UK£10 million to the company, Buyer terminated Buyer's/Applicant's Officer's employment on the grounds of "willful neglect of duty".

Buyer's/Applicant's Officer sued Buyer/ Applicant,challenging the termination of employment. The High Court, McCombe, J., entered judgment in favor of Buyer/Applicant. On appeal, the Court of Appeal, Civil Division, Rix, Moses and Sir Keane LJJ affirmed the decision and dismissed the appeal.

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