Note: In the context of an ongoing business relationship, Mercantile International Group plc ("Mercantile") allegedly acted as an "exclusive" agent for seller, Chuan Soon Huat Industrial Group ("Chuan"), a Singapore Company which produced timber products including doors and window frames. Under the arrangement, Mercantile arranged for the sale of products to a final buyer, usually located in the United Kingdom. Seller would then approve the order or adjust it to inventory accordingly. Payment was to be by commercial LC for the account of Mercantile issued by HSBC payable to Chuan. The timing of the payment on the LC varied from "sight to 30 days sight." The LCs required that Mercantile's "reference number be shown on the invoices presented" and that Mercantile be the "notify party" on the bills of lading. The LCs also required that invoices and packing lists be presented which indicated that Mercantile was the "customer" and acting as an agent for the final buyer. The ultimate buyer would pay Mercantile at a slight markup from the wholesale price with which Mercantile reimbursed the issuer for payments under the LC to Chuan. The instant dispute arose regarding the cancellation of a contract by Mercantile's main customer, Wickes Building Supply Limited ("Wickes"). The contract provided for payment to Mercantile "by promissory note payable at 60 days sight of documents, supported by a stand-by letter of credit." Mercantile sued seller for breach of an agency relationship based on a 1994 agreement under which seller was liable for damages caused by Wickes' breach. Mercantile also sued for unlawful interference in contracts between Mercantile and Wickes, or for wrongfully inducing Wickes to break its contractual obligations to Mercantile, if no agency relationship was found. The Queen's Bench Division (Commercial Court), Smith, J., entered judgment in favor of the seller. In its analysis, the court focused on the agreement which provided that Mercantile would "provide letters of credit for sales 'on behalf of [seller] to the end buyers worldwide'" and other similar provisions. The court concluded that such phraseology indicated that Mercantile was acting as an agent of seller under the terms of the contract. The court also found evidence that certain letters seller sent to Wickes by seller did not induce it to breach its contract with Mercantile, and concluded that no damages had resulted.. 2001 LC CASE SUMMARIES


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