I would like to have your opinions on this case: whether the issuing should consider a draft discrepant or request a substitution of the draft if:
+ Tenor on draft is incorrect or unable to establish the maturity date
+ Amount in words and figure of draft are inconsistent, etc...
Thanks for your comments!
Discrepancy on Draft
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PhanThanhNhan
- Posts: 102
- Joined: Fri Apr 05, 2019 5:23 pm
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PhanThanhNhan
- Posts: 102
- Joined: Fri Apr 05, 2019 5:23 pm
Discrepancy on Draft
Pls give your comments!!!
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HOANGTHIANHTHU_invalid
- Posts: 189
- Joined: Fri Apr 05, 2019 5:15 pm
Discrepancy on Draft
Hi,
Drafts are required under the L/C available by negotiation (of sight draft) or under the L/C available by acceptance (of time draft).
There has been a common view among L/C experts that drafts are not part of documents required in Field 46A, therefore, discrepancies, if any, on drafts does not constitute good reason for the issuing bank to reject the documents. This view is also received the support from judges like David Steel of the English Commercial Court in connection with the CMB vs. CIC case.
However, there is also a contrary view that drafts are required by L/C (though not in Field 46A), hence, drafts presented must comply with L/C requirement.
In practice issuing banks often ignore discrepancies on sight draft such as: draft missing L/C number, draft not endorsed or even draft not presented. However, if drafts (especially time drafts) contain discrepancies such as wrong tenor, wrong drawee, overdrawn... which may have an adverse legal implications for the issuing bank, it may request the presenter to re-present new drafts. This request does not release the issuing bank from the obligation to honour when the correct drafts are re-presented.
Other comments are appreciated.
Regards,
N.H.Duc
Drafts are required under the L/C available by negotiation (of sight draft) or under the L/C available by acceptance (of time draft).
There has been a common view among L/C experts that drafts are not part of documents required in Field 46A, therefore, discrepancies, if any, on drafts does not constitute good reason for the issuing bank to reject the documents. This view is also received the support from judges like David Steel of the English Commercial Court in connection with the CMB vs. CIC case.
However, there is also a contrary view that drafts are required by L/C (though not in Field 46A), hence, drafts presented must comply with L/C requirement.
In practice issuing banks often ignore discrepancies on sight draft such as: draft missing L/C number, draft not endorsed or even draft not presented. However, if drafts (especially time drafts) contain discrepancies such as wrong tenor, wrong drawee, overdrawn... which may have an adverse legal implications for the issuing bank, it may request the presenter to re-present new drafts. This request does not release the issuing bank from the obligation to honour when the correct drafts are re-presented.
Other comments are appreciated.
Regards,
N.H.Duc
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RobReissner
- Posts: 19
- Joined: Fri Apr 05, 2019 5:25 pm
Discrepancy on Draft
Dear all,
I can agree that discrepancies in a draft should not be a reason for a bank to decline on honouring the documents all together. A reason for having drafts drawn on applicant excluded in UCP600.
However, a bank is entitled to require a draft to be drawn correctly before agreeing to accept it. After all, by acceptance a separate and negotiable payment obligation is created. Therefore, the draft should fulfil its (legal) purpose. From the UK Bills of Exchange Act I quote the following:
9 Sum payable
(2)Where the sum payable is expressed in words and also in figures, and there is a discrepancy between the two, the sum denoted by the words is the amount payable.
11 Bill payable at a future time
A bill is payable at a determinable future time within the meaning of this Act which is expressed to be payable—
(1)At a fixed period after date or sight.
(2)On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening may be uncertain.
An instrument expressed to be payable on a contingency is not a bill, and the happening of the event does not cure the defect.
It shows that, in case of a difference between the amount in figures and in words, the amount in words prevails. Also the tenor should be determinable, otherwise it would not be a bill of exchange. No doubt the tenor should match with the agreed requirement.
Kind regards,
Rob Reissner
I can agree that discrepancies in a draft should not be a reason for a bank to decline on honouring the documents all together. A reason for having drafts drawn on applicant excluded in UCP600.
However, a bank is entitled to require a draft to be drawn correctly before agreeing to accept it. After all, by acceptance a separate and negotiable payment obligation is created. Therefore, the draft should fulfil its (legal) purpose. From the UK Bills of Exchange Act I quote the following:
9 Sum payable
(2)Where the sum payable is expressed in words and also in figures, and there is a discrepancy between the two, the sum denoted by the words is the amount payable.
11 Bill payable at a future time
A bill is payable at a determinable future time within the meaning of this Act which is expressed to be payable—
(1)At a fixed period after date or sight.
(2)On or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening may be uncertain.
An instrument expressed to be payable on a contingency is not a bill, and the happening of the event does not cure the defect.
It shows that, in case of a difference between the amount in figures and in words, the amount in words prevails. Also the tenor should be determinable, otherwise it would not be a bill of exchange. No doubt the tenor should match with the agreed requirement.
Kind regards,
Rob Reissner
Discrepancy on Draft
Agree entirely with Rob Reissner regarding practice. Also, our Bill of Exchange Act in Canada contains provisions identical to those stated by Rob.
Rita Ricci
Rita Ricci
Discrepancy on Draft
See also Opinions 95-96, R205.
In my opinion only drafts drawn on applicant should be considered for examination. Something revised ISBP should address.
Daniel
In my opinion only drafts drawn on applicant should be considered for examination. Something revised ISBP should address.
Daniel
Discrepancy on Draft
The draft is discrepant if it does not meet the requirements stated in the credit. A draft is a special document - a financial document - the document that states the amount, currency, date on which payment is demanded and from whom payment is demanded.