Factual Summary: Payment for 20,000 tons bitumen was to be made by confirmed LC. The LC required presentation of clean shipped on board bills of lading as well as other documents indicating that shipment was effected not later than 25 October 1993. The last date for presentation of the documents was 10 November 1993, the expiry date for the LC. There were, however, delays in loading the goods and by 25 October 1993 the loading was incomplete. Nonetheless, loading continued, and the shipper together with the broker convinced the carrier to issue an antedated on board bill of lading indicating that the goods were loaded by 25 October 1993. They also prepared corresponding documents. When the documents were presented to the confirmer on 9 November 1993, one day before expiry, the presentation lacked a certificate of inspection. Although the certificates were not delivered until 11 November 1993 at the earliest, the confirmer honored and forwarded the documents to the issuer with a statement that "documents were presented to us prior to the L/C expiry date ... ." When the issuer dishonored based on discrepancies, the confirmer took possession of the cargo and searched for a buyer. Because the confirmer gained possession of the goods in Vietnam, it limited its search for a buyer to that country to avoid transport costs. The market for the product in Vietnam, however, proved unfavorable and a prolonged search for a buyer caused the goods to be damaged and required the confirmer to sell the goods at a lower price than they were worth at the time the confirmer acquired them. The confirmer then brought an action against the beneficiary, beneficiary's agent, carrier, and shipping broker for participation in a fraudulent scheme in antedating the bill of lading. In these actions, the confirmer sought damages for the money it had paid on the LC. The trial court entered judgment against the carrier, shipper and its employee, and broker. On an appeal by the carrier and agent, the intermediate appellate court affirmed as to the carrier and reversed as to the agent. On appeal, the carrier's appeal was denied.

Legal Analysis

1.Fraud; Loss; Causation: The carrier argued that its fraudulent issuance of documents did not cause the confirmer to accept a lower price for the goods. Rather, it contended by selling to a buyer in Vietnam without seeking buyers in other markets, the confirmer broke the chain of causation. Therefore, the carrier argued, damages should be reduced by the reasonable market value of the goods at the time the confirmer received them, not by the ultimate price received from the Vietnamese buyer.. The appellate court rejected this argument, stating that "a direct causal link existed between the original fraud and the damage caused, namely the loss sustained on the re-sale of the goods which prima facie represents the amount of the benefit received as a result of the transaction." The court noted that "the task of proving that the claimant has suffered loss which was reasonably avoidable is not satisfied simply by demonstrating that he acted precipitately or unreasonably in entering into a contract of sale which collapsed. It is necessary also to prove that, had he not done so, his loss (or some part of it) would have been avoided. That, in turn, involves proof that on the balance of probabilities a better price, or at least a more profitable deal than that ultimately obtained, would have resulted." The court concluded that the defendant/carrier failed to disprove causation.

2. Mitigation: The carrier argued that the confirmer failed to properly mitigate its loss by refusing to consider markets outside of Vietnam. The court rejected this argument, concluding that the defendant/ carrier had not established its necessary burden of proof. The court reasoned that "If an issue is raised by the [carrier] that the price received was diminished by reason of the claimant's failure to take steps in negotiating the sale, or by effecting an alternative sale at a higher price, so that the loss suffered (or part of it) is attributable to such failure rather than to the original fraud, then the burden of that issue lies on the [carrier]. That being so, it is part of that burden not merely to show that the confirmer failed in some respect to act reasonably, but that his failure did in fact lead to a diminution in the price he could have obtained had reasonable steps been taken."

3. UCP400 Article 15: The agent of the beneficiary argued that the confirmer, by accepting documents that were discrepant and presented after the date of expiry, had violated UCP400 Article 15 which requires banks "to examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit…." The agent submitted that the confirmer's loss "flowed not from the fraud but from [its] own negligence and failure to comply with their obligations under the UCP." The court rejected this argument stating that the confirmer "suffered its loss as soon as it paid out the money to beneficiary in reliance on the false representations made to it by the beneficiary."


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.