This query partly involves U.S. law, but please don't be put off by that as I am hoping for a "common sense" approach.
An article in July/August 2006 issue of DCW was about the use of the words "successors" and "assigns" in a transferable lease standby subject to UCP 500 and how confusing this is.
I have a twist on this. I am now starting to see requests from New York landlords for lease credits subject to ISP98 where it states that the credit is transferable by the beneficiary or its "successors and assigns". ISP 98 Rules 6.11 - 6.13 provide guidelines on what to do if a presentation is received received from someone other than the named beneficiary who states that he is designated by law to succeed to the interests of the named beneficiary. However, nowhere in the ISP98 does it cover the situation where a transfer request is received from someone other than the named beneficiary who claims the same as the above.
We currently have a clause that we sometimes insert into credits that states: "Each draft hereunder shall be signed by the beneficiary or on behalf of the beneficiary by one who shall state on the draft that 'The signor is a successor by operation of law to the beneficiary,' (which successor shall include, without limitation, any liquidator, rehabilitator, receiver, or conservator)." For the situation I described, I would like to add to this wording that any transfer request must be signed the same way AND if a we receive such a transfer request, we reserve the right to also require any of the documentation listed in Rule 6.13 of the IS98.
Obviously, my first choice would be to get rid of "successors and assigns" altogether, but our success rate on that in under 50%. So, do you think my proposal would mitigate our risk or are there other factors that I am missing?
Thank you,
Lisa
Successors and/or assigns
Successors and/or assigns
Lisa,
Not sure if I can be of much help.
Firstly I would observe that while Rules 6.11 - 6.13 apparently deal with ‘successors’, I cannot see that they deal with ‘assigns’. To me ‘successors’ are very different from ‘assigns’ and I would not regard an ‘assign(ee)’ as being a party that has succeeded to the interests of -in this case- a beneficiary by ‘operation of law’ but as a party that had gained its rights by the process of assignment instead. Of course, things might be different in the US and furthermore I am not a lawyer and might have totally misunderstood the position on this side of the Atlantic.
Secondly, if a beneficiary wants to be able to transfer -in the general sense of the term- its rights to a party that is not a ‘successor’ -which is presumably the intention of putting reference to ‘assigns’ in the standby- then the standby ought instead to be stated to be ‘transferable’ -and thus fall within the ambit of Rules 6.01 - 6.05- and not contain any reference to ‘assigns’, ‘assignment’ etc in my opinion. Thereby overcoming doubt has to how to deal with transfer -in the general sense of the term- of the beneficiary’s rights. However, if reference to assignment is to remain then my opinion is that the standby ought to make clear how notice of the assignment of the beneficiary’s rights is to be given to the issuer and its effect.
Regards, Jeremy
Not sure if I can be of much help.
Firstly I would observe that while Rules 6.11 - 6.13 apparently deal with ‘successors’, I cannot see that they deal with ‘assigns’. To me ‘successors’ are very different from ‘assigns’ and I would not regard an ‘assign(ee)’ as being a party that has succeeded to the interests of -in this case- a beneficiary by ‘operation of law’ but as a party that had gained its rights by the process of assignment instead. Of course, things might be different in the US and furthermore I am not a lawyer and might have totally misunderstood the position on this side of the Atlantic.
Secondly, if a beneficiary wants to be able to transfer -in the general sense of the term- its rights to a party that is not a ‘successor’ -which is presumably the intention of putting reference to ‘assigns’ in the standby- then the standby ought instead to be stated to be ‘transferable’ -and thus fall within the ambit of Rules 6.01 - 6.05- and not contain any reference to ‘assigns’, ‘assignment’ etc in my opinion. Thereby overcoming doubt has to how to deal with transfer -in the general sense of the term- of the beneficiary’s rights. However, if reference to assignment is to remain then my opinion is that the standby ought to make clear how notice of the assignment of the beneficiary’s rights is to be given to the issuer and its effect.
Regards, Jeremy
Successors and/or assigns
There is just a mention to a transfer to a "appointed successor"
in The official commentary on the ISP (p.259). So M. Byrne seemed to have this fact in mind.
But naively, I would think that when issuing a SB transferable by bnfciary or successors/assigns, the issuer would give the ways and the means i.e. by giving specific intructions to ensure that a successor/assign is the "right" one.
Daniel
in The official commentary on the ISP (p.259). So M. Byrne seemed to have this fact in mind.
But naively, I would think that when issuing a SB transferable by bnfciary or successors/assigns, the issuer would give the ways and the means i.e. by giving specific intructions to ensure that a successor/assign is the "right" one.
Daniel
Successors and/or assigns
Daniel,
Forgive me as I may well have misunderstood you. Para 1 of p259 says ‘’The event triggering succesion may be death, incpacity, insolvency, bankruptcy, incompetence, a merger or name change or some similar situation’. Clearly, assignment (of the standby) is not considered to fall within transfer by operation of law. With respect to the reference in para 2 to a ‘duly appointed successor of a beneficiary other than when the credit is transferable’, ‘transfer’ can of course only be read as meaning the process envisaged in Rules 6.01 - 6.05. Overall, therefore, the Commentary would appear to support my view that Rules 6.11 - 6.13 does not cover ‘assigns’.
Regards, Jeremy
Forgive me as I may well have misunderstood you. Para 1 of p259 says ‘’The event triggering succesion may be death, incpacity, insolvency, bankruptcy, incompetence, a merger or name change or some similar situation’. Clearly, assignment (of the standby) is not considered to fall within transfer by operation of law. With respect to the reference in para 2 to a ‘duly appointed successor of a beneficiary other than when the credit is transferable’, ‘transfer’ can of course only be read as meaning the process envisaged in Rules 6.01 - 6.05. Overall, therefore, the Commentary would appear to support my view that Rules 6.11 - 6.13 does not cover ‘assigns’.
Regards, Jeremy
Successors and/or assigns
Jeremy,
You might as well have misunderstood as I was not very clear. I was just trying to say that a request to transfer from a party other than the beneficiary, i.e. a successor or an assignee, should be specifically provided for in the original SB since ISP does not provide rules in that case.
Daniel
P.S. Tina won the cow fighting
You might as well have misunderstood as I was not very clear. I was just trying to say that a request to transfer from a party other than the beneficiary, i.e. a successor or an assignee, should be specifically provided for in the original SB since ISP does not provide rules in that case.
Daniel
P.S. Tina won the cow fighting
Successors and/or assigns
Daniel,
Just hope Tina was not on TV5 as otherwise I'd be gutted* I missed it.
Jeremy
* Slang for very disappointed.
Just hope Tina was not on TV5 as otherwise I'd be gutted* I missed it.
Jeremy
* Slang for very disappointed.
Successors and/or assigns
I take it that you are referring to an LC in which the issuer undertakes to honor demands made by a named beneficiary and its successors and assigns.
I would interpret "successor" to mean "successor by operation of law" as defined in UCC Article 5 and specially treated in UCC 5-113 on transfers by operation of law.
I would interpret "assigns" to mean assignees of LC proceeds. I wouldn't be surprised if some drafters of such language think it refers to transferees of drawing rights, but they would be ignorant of LC law and practice and terminology and therefore wrong and destined for frustration. Transfer and assignment are separately treated in UCC 5-112 and 5-114 (and also separately treated in our secured transactions law which treats only the latter as collateral).
The words "and its successors and assigns" in an LC do not add anything to what is already provided for claimed assignees, transferees, and successors under the UCC. I think this remains true for LCs issued subject to either UCP or ISP.
Under the UCC and ISP98 Rules 1.10 and 6, I would give no effect to the words "and its successors and assigns" until the named beneficiary or a claimed successor or assign requested recognition, in which case I would apply the UCC and ISP provisions, including the substantial discretion they give issuers, as written. I would not treat these words as an advance acknowledgement or consent by the issuer of any transfer of drawing rights or assignment of LC proceeds or succession by operation of law.
Incidentally, these words probably qualify as nondocumentary conditions, which is another reason we have codified law and ISP rules giving them a documentary basis.
This is another bit of awkwardness that was started or advanced in the US by the insurance regulators' insistence that reinsurance LCs run to the insurer and any liquidator, etc., without stipulating the documents that should evidence the liquidator's succession by operation of law.
This is but a small slice of a set of difficult set of issues going back to when LCs included engagement language running to drawers, endorsers, and bona fide holders.
Well advised landlords provide for transfer of drawing rights by presentation of a demand for transfer reciting that the transferee is the new owner or has otherwise succeeded to the all or substantially all of rights of the landlord in the underlying lease
Regards, Jim
I would interpret "successor" to mean "successor by operation of law" as defined in UCC Article 5 and specially treated in UCC 5-113 on transfers by operation of law.
I would interpret "assigns" to mean assignees of LC proceeds. I wouldn't be surprised if some drafters of such language think it refers to transferees of drawing rights, but they would be ignorant of LC law and practice and terminology and therefore wrong and destined for frustration. Transfer and assignment are separately treated in UCC 5-112 and 5-114 (and also separately treated in our secured transactions law which treats only the latter as collateral).
The words "and its successors and assigns" in an LC do not add anything to what is already provided for claimed assignees, transferees, and successors under the UCC. I think this remains true for LCs issued subject to either UCP or ISP.
Under the UCC and ISP98 Rules 1.10 and 6, I would give no effect to the words "and its successors and assigns" until the named beneficiary or a claimed successor or assign requested recognition, in which case I would apply the UCC and ISP provisions, including the substantial discretion they give issuers, as written. I would not treat these words as an advance acknowledgement or consent by the issuer of any transfer of drawing rights or assignment of LC proceeds or succession by operation of law.
Incidentally, these words probably qualify as nondocumentary conditions, which is another reason we have codified law and ISP rules giving them a documentary basis.
This is another bit of awkwardness that was started or advanced in the US by the insurance regulators' insistence that reinsurance LCs run to the insurer and any liquidator, etc., without stipulating the documents that should evidence the liquidator's succession by operation of law.
This is but a small slice of a set of difficult set of issues going back to when LCs included engagement language running to drawers, endorsers, and bona fide holders.
Well advised landlords provide for transfer of drawing rights by presentation of a demand for transfer reciting that the transferee is the new owner or has otherwise succeeded to the all or substantially all of rights of the landlord in the underlying lease
Regards, Jim