Note:The seller, Arma Far East Ltd., sued the buyer, Uni Fit Garment Factory Ltd., for the recovery of US$75,663.50, the price of double-faced leather garments. The buyer counterclaimed for loss and damage for non-delivery and defective goods and for the repayment of money overpaid to the seller. The High Court of the Hong Kong Special Administrative Region Court of First Instance, Hon Ching, J., ruled in favor of the seller.

Pursuant to the contract, payment was to be made by LC. The court stated that its terms required "an official cargo receipt certifying that the goods had been received in good order and perfect condition. The cargo receipt must also evidence the delivery of the goods with the specified style numbers. One of the style numbers was ]590'." The buyer was to issue the cargo receipt.

The style number in the cargo receipt issued by the buyer was "500" rather than "590", and the receipt also failed to mention that the goods had been received in good order. Accordingly, the cargo receipt failed to comply with the LC terms. The court concluded that "the discrepancies found in the [buyer's] cargo receipt must have been intended to prevent the [beneficiary/seller] from getting payment from the bank. I note that they were not waived by the [buyer]. By reason of the above matters, I do not find this line of defense to be credible."

Comment:It is a rare but satisfying experience to find a reported case where an applicant received its just reward for a "built-in" discrepancy. While most LC issuers are reluctant to issue credits containing such features, sometimes the applicant insists. The inference against the applicant/buyer for resorting to such a tactic in an action as between buyer and seller is justified and welcome.


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.