AN IRREEVOCABLE LC AVALIABLE BY DEFERRED PAYMENT AS FOLLOWS:
1-20% OF LC VALUE AGAINST SHIPPING DOCUMENTS
2-40% OF LC VALUE TO BE PAID AFTER 15 WEEKS FROM B/L DATE PROVIDED PRESNTATION OF COMPLIATION CERTIFICATE
3-THE REMAINING 40% AFTER 20 WEEKS FROM B/L DATE.
DOES BENEFICARY IS LIABLE TO THE THRID PAYMENT ALTHOUTHT SECOND PAYMENT CONDITIONS NOT COMPLIED WITH
[edited 2/11/01 3:22:00 PM]
DEFERRED PAYMENT LC
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KHALEDEL-TEMTAMY
- Posts: 2
- Joined: Fri Apr 05, 2019 5:13 pm
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
DEFERRED PAYMENT LC
Literally yes. The presentation of compliance documents under payment term one trigers the payment of payment term number three. Payment number two requires additional document which is not the case for number three.
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KHALEDEL-TEMTAMY
- Posts: 2
- Joined: Fri Apr 05, 2019 5:13 pm
DEFERRED PAYMENT LC
IF ARTICLE 41 OF UCP 500 IS APPLICABLE
CAN THE CREDIT NOW WILL BE CEASE FOR THE THIRD PAYMENT
CAN THE CREDIT NOW WILL BE CEASE FOR THE THIRD PAYMENT
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
DEFERRED PAYMENT LC
No article 41 does not apply here. The beneficiary does not need to perform for payment number 3 since presentation of documents under payment number one is sufficient. In addition, article 41 talks about beneficiary's performance in a sequence of events within a specific period for each event. If there is break in the sequence of events given as stipulated in the credit, the credit will cease to be available for that event and any subsequent once.
The letter of credit in question does not seem to require the beneficiary to perform in any order. The payment terms provides how the beneficary will be paid. Theoretically, the beneficiary could present documents under payment number 2 and get paid (for sight LC) or get the issuing banks acceptance for payment in future date(for deferred payment LC) even before presenting documents under payment number one. If the intention was to have the benefiary be paid in the sequence of the payment terms, then payment number three should have been linked to payment number two. The condition should have been in a language similar to the following:
a) beneficiary will not be paid under payment number three unless the condition under payment number 2 has been satisfied by the beneficiary or
b) payment number 3 to be made x number of days after the presentation of documents under payment number two etc.
[edited 2/14/01 8:04:30 PM]
[edited 2/15/01 6:12:25 AM]
The letter of credit in question does not seem to require the beneficiary to perform in any order. The payment terms provides how the beneficary will be paid. Theoretically, the beneficiary could present documents under payment number 2 and get paid (for sight LC) or get the issuing banks acceptance for payment in future date(for deferred payment LC) even before presenting documents under payment number one. If the intention was to have the benefiary be paid in the sequence of the payment terms, then payment number three should have been linked to payment number two. The condition should have been in a language similar to the following:
a) beneficiary will not be paid under payment number three unless the condition under payment number 2 has been satisfied by the beneficiary or
b) payment number 3 to be made x number of days after the presentation of documents under payment number two etc.
[edited 2/14/01 8:04:30 PM]
[edited 2/15/01 6:12:25 AM]
DEFERRED PAYMENT LC
Taking the literal meaning of the payment conditions in three stages, the beneficiary should be entitled to the third payment even if he is not paid in the second payment due to not meeting the conditions for second payment. In the third payment, there is no specific conditions to be observed. Therefore the bank cannot dishonour the third payment due to non-compliance in the second payment.
The "instalment" here is for payment (binding the applicant) and not for performance or delivery (binding the beneficiary). We must not get confused over this important point. So article 41 of UCP 500 does not apply here.
Mr. AbdultaderB is right to suggest re-wording the payment terms so that the real intention of the applicant is reflected clearly and precisely.
Otherwise according to the judicial decisions of many well known LC cases, the terms and conditions of an LC, in a dispute, are to be interpreted by a court of law against the interests of the drafter, the issuing bank, who has an obligation under articles 5 and 12 of UCP 500, to make them clear, complete and precise in the first place.
I am from www.tolee.com
[edited 5/22/01 3:18:04 PM]
[edited 10/28/01 12:38:15 AM]
The "instalment" here is for payment (binding the applicant) and not for performance or delivery (binding the beneficiary). We must not get confused over this important point. So article 41 of UCP 500 does not apply here.
Mr. AbdultaderB is right to suggest re-wording the payment terms so that the real intention of the applicant is reflected clearly and precisely.
Otherwise according to the judicial decisions of many well known LC cases, the terms and conditions of an LC, in a dispute, are to be interpreted by a court of law against the interests of the drafter, the issuing bank, who has an obligation under articles 5 and 12 of UCP 500, to make them clear, complete and precise in the first place.
I am from www.tolee.com
[edited 5/22/01 3:18:04 PM]
[edited 10/28/01 12:38:15 AM]