Factual Summary:

The issuer dishonored a pre-sentation based on two discrepancies: 1) the bank detected that two of the packages listed in two of the shipping documents, though purportedly containing the same number of identical items, were of substan-tially different weights, despite the fact that the LC made no reference to the weight of the shipment, and; 2) the presence of two "notifying parties" on the shipping documents where the LC required documentation instructing the consignee bank to "notify applicant."

The beneficiary brought an action for wrongful dishonor and sought summary judgement. The trial court denied the beneficiary's motion. On appeal, affirmed.

Legal Analysis:

1. Weight Inconsistency between Documents:

The issuer argued that the inconsistent weights constituted a discrepancy. The court, however, ruled that this difference did not amount to a discrepancy since the credit "made no reference to the weight of the shipment." The court concluded that the difference in weight "was irrelevant to its obligation to pay.... While this discrepancy may indicate the existence of a dispute between the parties, that is not relevant to the bank's obligation..."

2. Ambiguity in the LC: Notify Party:

With respect to the shipping documents, the issuer alleged that the inclusion of an additional notify party amounted to a discrepancy based on standard practice in the trade. It contended that when a consignee bank receives shipping documents, it is not only required to notify the "notify party" of the documents' arrival, but also to deliver the documents to it. Thus, the addition of a second notify party created an ambiguity as to who should receive the documents.

The court rejected this argument, noting that the second party was added at the request of the applicant. Citing UCC -1-205(2) on usage of trade, the court rejected the issuer's contention that "notify" has such a special meaning when used in an LC and on a bill of lading as to justify the assumption that all parties to the transaction were familiar with it so that the inclusion of a second notify party would contradict an instruction to notify one party. Additionally, evidence was produced showing that the behavior of the bank itself indicated that it was unaware of the alleged usage, because it had refused to deliver documents to anyone other than the party whose LC number and invoice matched the shipping documents.



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.