Evergreen clause

[Shahed]

Bank A issued a Standby L/C with evergreen clause (auto-renewal clause) which states "It is a condition of this Letter of Credit that it is deemed to be automatically extended without amendment for one year from the date of expiry hereof or any future expiration date, unless at least 30 days prior to any expiration date, we notify XYZ company attn: Mr. B with a copy to C Company in writing that we elect not to consider this Letter of Credit renewed for any such additional period".

Bank A decided not to renew the L/C and issued notice of non-renewal to XYZ prior to 30 days of the then expiry date.

But they made two mistake, a] failed to write attn: B and b] did not copied to C Company.

At expiry Bank A consider this L/C as null and void but beneficiary is not agreeing with them. As per beneficiary Bank A didn't fulfilled the L/C terms because of point a] and b].

What do you think ? Can Bank A treat the L/C as cancelled as it passed the expiry date and they issued non-renewal notice prior to 30 days of the expiry date or L/C is still valid as notice to the beneficiary was not exactly as per terms of the L/C.

Shahed
[edited 12/22/2008 8:40:01 PM]

[svishu]

Bank A cannot cancel the LC as they have not fulfilled the terms and conditions stipulated in the SBLC. They have an option of giving a fresh notice as is required in the credit. However if payment is sought under the said credit, bank A has an obligation to effect the payment.
Viswanath

[JimBarnes]

There are several reported court decisions in the US involving challenges to a "credit expired" defense based on alleged insufficiencies in the issuing bank's notice of non-extension.

Such challenges may be addressed by taking a strict compliance approach or by looking at all relevant facts such as whether in fact the beneficiary timely received notice of LC expiry.

I have written up several of these cases in the annual survey of LC cases I co-author with Jim Byrne.

Regards, Jim Barnes