Article

Factual Summary: To assure payment for a shipment of frozen food products, N.T.P. Genita (Buyer) was contractually required to obtain a confirmed standby LC in favor of Mago Int’l (Seller). The standby was issued subject to UCP600 and required presentation of

+BENEFICIARY’S SIGNED DECLARATION CERTIFYING THAT THE APPLICANT HAS FAILED TO PAY THE BENEFICIARY WITHIN THE AGREED PAYMENT TERM OF 45 DAYS AFTER THE DATE OF INVOICE(S), THE GOODS ALREADY SHIPPED TO THE APPLICANT, QUOTING THE INVOICE(S) NUMBER

+PHOTOCOPY OF DATED AND SIGNED UNPAID COMMERCIAL INVOICE(S)

+PHOTOCOPY OF B/L EVIDENCING SHIPMENT OF THE GOODS TO THE APPLICANT

Seller/Beneficiary shipped the goods via two carriers and received two sets of bills of lading. When Buyer/Applicant failed to pay, Seller/Beneficiary drew on the standby in the amount of USD 260,000 by presenting documents to Confirmer.

Confirmer refused the first presentation, citing the following discrepancies:

+MERCHANDISE DESCRIPTION ON INVOICES NOT AS PER SBCL;

+BENEFICIARIES SIGNED DECLARATION NOT EXACTLY AS PER SBCL;

+CONFIRMATION OF BENEFICIARIES [*6][sic] BANK MISSING THAT THE SIGNATURE ON ALL PRESENTED DOCUMENTS ARE LEGALLY BINDING UPON THE BENEFICIARY

+COPIES OF NNC B/L’S PRESENTED FOR INVOICE 199 (6-7) USD 64260,000 AND 199 (1-5) USD 160.650,000 AND PARTLY UNREADABLE

These discrepancies related to documents involving one of the two shipments. In a Declaration, a representative of Confirmer explained that “NNC” meant non-negotiable copies of bills of lading.

Seller/Beneficiary attempted to cure the first presentation, making a re-presentation. The Judge stated that Seller/Beneficiary “managed to cure all but the last of the deficiencies of the first”, namely that it “once again presented photocopies of non-negotiable bills of lading with respect to invoices 199(1-5) and (6-7)”. In a series of exchanges, Seller/Beneficiary explained “it could not obtain photocopies of the original bills of lading because the shipper retained the originals.” Confirmer responded that “only a copy of the ‘original, signed’ bill of lading would trigger its obligation to pay.”

A third presentation was reviewed the day before the LC expired. The Judge stated that the Confirmer rejected this re-presentation on the ground that “it did not include photocopies of the original, negotiable bills of lading that evidenced shipment of the goods to [Buyer/Applicant].”

A fourth presentation was made two days after the LC expired which was refused on the ground that the LC had expired.

Seller/Beneficiary then sued Confirmer for wrongful dishonor. Both parties moved for summary judgment. The trial court granted summary judgment in favor of Confirmer.

Legal Analysis:

1. Sight Drafts Not Meeting Requirements for Drawing on LC

The Judge noted that in order for a beneficiary to draw on an LC, documentation must appear at first glance to conform to the LC’s requirements. “Where the documents presented appear to comply with the terms of the LC, the issuing or confirming bank is obligated to honor its agreement by paying the [beneficiary].” Item 46A of the LC did not specify whether an unsigned, copy of a non-negotiable copy of a bill of lading would satisfy the third listed requirement, that being a “PHOTOCOPY OF A B/L EVIDENCING SHIPMENT OF THE GOODS TO THE APPLICANT”.

Beneficiary argued that “a non-negotiable copy of a bill of lading is equivalent to a copy of the original bill of lading” and therefore, met the required terms of the LC. Beneficiary cited UCP600, Art. 17(d). to support this argument. Confirmer argued that a bill of lading must appear to indicate the carrier, be signed by the carrier, and be “the sole original bill of lading” in order to indicate that shipment has occurred, citing UCP 600, Art. 20.

The Judge found the Confirmer’s argument, in citing Art. 20, to be more persuasive. The LC required a “photocopy of a bill of lading” be submitted to the Confirmer. The LC did not specify this copy needed to be a copy of the signed, original document. Beneficiary provided an unsigned copy which, at first glance, did not comply with the LC’s requirements because it did not demonstrate that shipment of the frozen food products had occurred. Therefore, although the LC had not required a signed original document, the Beneficiary’s document was insufficient to trigger payment.

[TLA]

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