Wording of some non-renewal notice in a SBLC is as follow - It is a condition of this Letter of Credit that it shall be deemed to be automatically extended without amendment for one year from the present or any future expiration date hereof, unless at least forty five (45) days prior to any such expiration date we shall notify you in writing by registered mail or courier that we elect not to consider this standby letter of credit renewed.
Does it means that notice is effective upon sending of the notice (by the issuing bank) or receipt of the notice (by the beneficiary)?
Regards,
Shahed
Toronto
Non-renewal notice
Non-renewal notice
I think notification takes place upon receipt of notice by the beneficiary.
Regards
Antoine
Regards
Antoine
Non-renewal notice
RR (Canada): This question continues to come up from time to time. The wording in this case would be interpreted as taking effect upon sending. The wording of the such conditions is extremely important since if it is worded in a way to mean that the beneficiary must receive the notice, this could present a risk for the bank if for some reason the bank is unable to deliver the notice to the beneficiary. For example if the beneficiary has moved or the premises at the mailing address are demolished and the issuing bank has no other way to deliver the notice, the beneficiary will never receive it. Meanwhile the deadline for receipt of the notice could expire, causing the auto-extension to take effect for another year. In usual practice it is recommended to ensure the wording of an auto-extension condition be based on the sending of the notice, and not the receipt by the beneficiary.
Non-renewal notice
Thanks Rita.
May I have your recommended wording for such evergreen clause, which will clearly mean the non-renewal notice be effective upon sending.
Many thanks
Shahed
May I have your recommended wording for such evergreen clause, which will clearly mean the non-renewal notice be effective upon sending.
Many thanks
Shahed
Non-renewal notice
On the topic of LCs providing for automatic extensions limited by non-extension notices, see the recently published and heavily annotated ISP98 model standby forms, particularly Forms 2 and 11.1. Jim
Non-renewal notice
Hi Jim,
ISP98 model standby forms, Forms 2 and 11 discussed about "First alternative statement", not the questioned raised by me.
Shahed
ISP98 model standby forms, Forms 2 and 11 discussed about "First alternative statement", not the questioned raised by me.
Shahed
Non-renewal notice
Shahed, I don't want to side track the discussion on the meaning of "notify", becasue that is much affected by the particular law applicable to the LC. I do want to point those interested in variations in non-extension clauses to the SLC text on sending/receiving a notice of non-extension and the related endnote in ISP98 Form 2. (The recently posted ISP98 standby forms arefreely available at www.iiblp.org). I urge readers to look at the ISP98 forms, on this and other topics, including Form 11.1, which assumes application of US law.
Reproduced below is the "send/receive" text and endnote from ISP98 Form 2:
The expiration date of this Standby shall be automatically extended for successive one year periods, unless Issuer notifies Beneficiary by registered mail or other receipted means of delivery sent to Beneficiary’s above-stated address [30] or more days before the then current expiration date that Issuer elects not to extend the expiration date.*
*Send/receive. Automatic extension clauses vary in the extent to which they spell out where and how a notice of non-extension must or may be sent to, or be received by, the beneficiary in order to establish an expiration date that is not subject to further automatic extension. For alternative wording, consider: “…is sent to Beneficiary’s above-stated address by registered mail or by [inter]nationally recognized courier or is received by Beneficiary at Beneficiary’s above-stated or current address….” Under ISP98 Rule 4.11(c)(ii) (Non-Documentary Terms or Conditions), standby requirements based on when, where, and how issuer notices are sent or received by the issuer or beneficiary are effective. However, there may be practical difficulties in proving when an issuer’s non-extension notice was sent to or received by the beneficiary. Strict compliance concepts applicable to beneficiary presentations under a standby are sometimes applied to issuer notices to a beneficiary. Some standbys address these concerns by providing alternative beneficiary addresses or by providing that timely actual receipt of notice by the beneficiary is sufficient.
If notice by e-mail, telefax, or the like is also to be permitted, then the automatic extension clause should state the alternative, e.g. “Such notice may also be given by [e-mail] [telefax] [authenticated SWIFT message] sent to the following Beneficiary [address][number].…”
Regards, Jim Barnes
Reproduced below is the "send/receive" text and endnote from ISP98 Form 2:
The expiration date of this Standby shall be automatically extended for successive one year periods, unless Issuer notifies Beneficiary by registered mail or other receipted means of delivery sent to Beneficiary’s above-stated address [30] or more days before the then current expiration date that Issuer elects not to extend the expiration date.*
*Send/receive. Automatic extension clauses vary in the extent to which they spell out where and how a notice of non-extension must or may be sent to, or be received by, the beneficiary in order to establish an expiration date that is not subject to further automatic extension. For alternative wording, consider: “…is sent to Beneficiary’s above-stated address by registered mail or by [inter]nationally recognized courier or is received by Beneficiary at Beneficiary’s above-stated or current address….” Under ISP98 Rule 4.11(c)(ii) (Non-Documentary Terms or Conditions), standby requirements based on when, where, and how issuer notices are sent or received by the issuer or beneficiary are effective. However, there may be practical difficulties in proving when an issuer’s non-extension notice was sent to or received by the beneficiary. Strict compliance concepts applicable to beneficiary presentations under a standby are sometimes applied to issuer notices to a beneficiary. Some standbys address these concerns by providing alternative beneficiary addresses or by providing that timely actual receipt of notice by the beneficiary is sufficient.
If notice by e-mail, telefax, or the like is also to be permitted, then the automatic extension clause should state the alternative, e.g. “Such notice may also be given by [e-mail] [telefax] [authenticated SWIFT message] sent to the following Beneficiary [address][number].…”
Regards, Jim Barnes
Non-renewal notice
Hi Shahed, Sorry for not replying sooner - thought this issue was closed. In any event I was going to provide the same text that Jim has already provided with reference to the ISP model forms 2 and 11.1.
Kind regards
Rita
Kind regards
Rita