Note: BC Bangladesh, alternatively BC Overseas, a fabric supplier, introduced Rich Easy Limited, the ultimate buyer to Unison Knitwear Limited, a shirt manufacturer. The buyer's representative orally ordered "2,000 dozen of the shirts at the price of US$ 69 per dozen FOB" from the manufacturer and opened a negotiable commercial LC in favor of the manufacturer which restricted negotiation to Citibank Hong Kong. At the request of the supplier, this LC was amended twice to make the credit freely negotiable so as to permit the manufacturer to obtain a back-to-back LC in favor of the supplier and to extend the expiry date. Although there was an alleged breach by the buyer, for reasons not stated, there was no drawing on the LC and the manufacturer sued the buyer for breach of contract. The buyer defended on the ground that the contract was between itself and the supplier and not with the manufacturer. The trial court entered judgment for US$ 78,660 and the buyer appealed. The High Court of the Hong Kong Special Administrative Region Court of Appeal, Hon Le Pichon, J., affirmed. The buyer argued that the amendments to the LC indicated that the real party in interest was the supplier and not the manufacturer. The appellate court rejected these arguments, indicating that the role of the supplier was "perfectly explicable: it was intimately involved in the transaction and stood to benefit from it in the form of an order from the plaintiff to supply the fabrics and accessories required to fill the orders placed by the defendant. That [the supplier] should have been interested in the terms of the letter of credit issued to the plaintiff is evident from the reason stated in the correspondence: it wanted to secure payment through a back to back letter of credit which was not possible without the first amendment. The second amendment is also explicable in view of the delay in production caused by colour discrepancies which was [the suppliers'] responsibility." Furthermore, applicant's refusal to call "crucial witnesses such as [the buyer's representative] who played a pivotal role in the transaction" influenced the Court as to the complete veracity of the applicant..


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.