Factual Summary: To guarantee against defects in construction of a mine, contractor obtained an LC in favor of the owner. After the owner/beneficiary had paid 80% of the contract amount, it drew on the LC.57 2001 LC CASE SUMMARIES due to alleged construction defects. The applicant/ contractor sued for an injunction barring payment of the LC which the trial court denied. On appeal, affirmed.

Legal Analysis:

1. Injunction; Fraud vs. Contract Dispute: The applicant argued that the beneficiary "fabricated defects in the mine simply to justify the drawing down of the letter of credit". The appellate court indicated that the record did not support this contention and noted that the applicant's "own experts had issued reports detailing the mine's defects months before the attempted draw down." The court noted that the dispute did "not go to the heart of the transaction. . . At best, the evidence submitted merely supports allegations of breach of contract, not fraud, and as such is insufficient to justify enjoining payment of the letter of credit."


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.