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Copyright © International Chamber of Commerce (ICC). All rights reserved. ( Source of the document: ICC Digital Library )
1997 LC CASE SUMMARIES No. 6009-40/95, (N.Y. Sup. Ct. 21 February 1997)
Topics:
Wrongful Dishonor; Waiver.
Type of Lawsuit:
Beneficiary sued issuer for wrongful dishonor.
Parties:
Plaintiff/Beneficiary- Bangkok Best Manufacturing Company, Inc.
Defendant/Issuer- The Park Avenue Bank (NY)
Applicant- Initial Funding Corp.
Account Party- International Manufacturing Associates
Advising Bank- Bank of Ayudhya Public Co. Ltd. (Bangkok)
Counsel:
For Plaintiff: David A. Robinson, New York, NY.
For Defendant: John P. McCahey, Hahn & Hessen, New York, NY.
Underlying Transaction:
Not stated.
LC:
Silent as to amount. Subject to UCP 500.
Decision:
The Supreme Court, New York County, granted summary judgment to the issuer.
Rationale:
The issuer was under no obligation to honor the presentation as the applicant had declined to waive the discrepancies, and as the issuer has a s eparate right to demand onforming documents.
Article
Factual Summary:
To accommodate a client, the applicant arranged for letters of credit to be issued for the account of the client to secure transactions between the client (named on the LC as the account party) and the beneficiary. On some presentations under the credits, discrepancies were waived. On two occasions, the issuer contacted the applicant, but not the client/account party, for permission to waive discrepancies, but the applicant refused to do so. After one of the credits had expired, the account party contacted the issuer and informed it that it had received the goods and wished to waive the discrepancies. The issuer declined to honor and the beneficiary brought suit for wrongful dishonor.
Legal Analysis:
1. Waiver: Prior Presentations; Course of Dealing: The court first rejected the argument that the bank was required to waive the discrepancies because it had done so on prior occasions. The court noted that the actions of the issuer, applicant, or account party with respect to prior drawings was "irrelevant".
2.Waiver: Consent of Issuer Needed: The court further ruled that the account party's waiver after the expiration of the credit was "of no legal significance" as the bank had its own "right to insist on conforming documents."
3. Waiver: Applicant's Bad Faith: In finding that the issuer had no duty to pay over the discrepancies the court noted that "[t]he bad faith of [the applicant] in refusing to approve discrepant documents is of no moment. Nor is it relevant that [the applicant and account party] may have been unjustly enriched by the bank's failure to pay the credits."
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