Dear all
Would appreciate your opinion on the following.
A standby subject to UCP600 calls for:
1) beneficiary's statement of default
2) copy of the commercial invoice
The beneficiary is requesting the inclusion of the following clause in the L/C:
Quote
This guarantee is payable upon simple demand.
Unquote
Would you agree to this condition and if not what would your objection be?
Thanks in advance
Regards
Carmel
standby
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CarmelBorg
- Posts: 21
- Joined: Fri Apr 05, 2019 5:13 pm
standby
The term ‘simple demand’ is often interpreted as meaning a demand for payment without any statement of default or accompanying documents. Therefore, the statement is possibly inconsistent with the requirement for a statement of default and copy invoice. This could therefore possibly cause dispute as to what the terms of the standby actually were.
Provided the standby is not to be available with another bank, I would (only) be willing to agree to inclusion of the statement if ‘guarantee’ were amended to ‘standby letter of credit’ and the applicant agreed in writing that the issuing bank was entitled (had the right) to honour a demand that did not include a statement of default or was not accompanied by a copy invoice. If the applicant does not like this the solution is simple: drop this absurd requirement.
If the standby is to be available with another bank, I would refuse to include the statement as worded and require it to be amended to not be possibly inconsistent with the standby’s terms, e.g. ‘This standby letter of credit is payable merely on presentation of the documents specified herein.’
Provided the standby is not to be available with another bank, I would (only) be willing to agree to inclusion of the statement if ‘guarantee’ were amended to ‘standby letter of credit’ and the applicant agreed in writing that the issuing bank was entitled (had the right) to honour a demand that did not include a statement of default or was not accompanied by a copy invoice. If the applicant does not like this the solution is simple: drop this absurd requirement.
If the standby is to be available with another bank, I would refuse to include the statement as worded and require it to be amended to not be possibly inconsistent with the standby’s terms, e.g. ‘This standby letter of credit is payable merely on presentation of the documents specified herein.’
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CarmelBorg
- Posts: 21
- Joined: Fri Apr 05, 2019 5:13 pm
standby
Jeremy
My thoughts exactly. Despite huge pressure and assertions that some huge bank found no difficulty with this wording, we did not give in.
Thanks for your contribution.
Regards
Carmel
My thoughts exactly. Despite huge pressure and assertions that some huge bank found no difficulty with this wording, we did not give in.
Thanks for your contribution.
Regards
Carmel