Article

Factual Summary: To assume its performance of engineering services in connection with the design of a mining faculty, contractor arraigned for issuance of a standby payable to mine operator. Unable to resolve disputes between themselves, the beneficiary notified the applicant that it intended to draw on the LC. Contending that the drawing would be contrary to their contact and in bad faith, the applicant sought injunctive relief. The trial court denied the relief.


Legal Analysis:

1. Injunction: Monetary Loss:The court concluded that the applicant's evidence of the possibility of monetary loss did not justify an injunction where unusual circumstances were not shown. The evidence in the court's opinion did not show undue financial risk of future insolvency nor market fluctuations in the commodities being mined which presented no unusual risk, but merely financial weakness.

2. Injunction: Beneficiary outside the U.S.: The court also rejected the applicant's claim that any judgement rendered in the U.S. against the beneficiary would be unenforceable because the beneficiary had no assets in the U.S. The court stated that such a risk was foreseeable to the applicant and stated that to enjoin payment on the LC for that reason would frustrate the legal certainty parties rely upon when using LCs in international business.

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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.