Sub-Articles 13(b), 14(c), 14(d)(i)
Is it a predominant principle in the Articles of the UCP quoted above that banks determining whether to take up, refuse or seek a waiver of discrepancies in documents covered by a letter of credit, are required to act within this 7 day period and cannot amend that period (extend or curtail)?
Amendment of Reasonable Time
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hatemshehab
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AbdulkaderBazara
- Posts: 256
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Amendment of Reasonable Time
The reply to above query maybe found on pages 40 and 41 of UCP 500 & 400 Compared under sub-title "Duty to Examine Within a Reasonable Time".
[edited 9/9/01 1:31:10 PM]
[edited 9/9/01 1:31:10 PM]
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
Amendment of Reasonable Time
Thank you Abdullkader for your response.
Having read the pages you pointed out, may I conclude that the reasonable period can be amended based on the following excerpt from UCP500 & 400 Compared.
“ Among other criteria on which reasonableness depends are the circumstances of presentation, the type and value of documents. At one end of the spectrum one may encounter an examination of hundreds of documents. This examination could consume every hour of the seven-day period.”
I , as a trade finance manager; in an issuing bank (assuming) I opted to amend that period to be 10 days. Is that permissible? According to me it is permissible.
Having read the pages you pointed out, may I conclude that the reasonable period can be amended based on the following excerpt from UCP500 & 400 Compared.
“ Among other criteria on which reasonableness depends are the circumstances of presentation, the type and value of documents. At one end of the spectrum one may encounter an examination of hundreds of documents. This examination could consume every hour of the seven-day period.”
I , as a trade finance manager; in an issuing bank (assuming) I opted to amend that period to be 10 days. Is that permissible? According to me it is permissible.
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
Amendment of Reasonable Time
I agree with you. It is permissible provided it is incorporated in the terms and conditions of the credit. Your authority to make such changes stems from Article 1 of UCP 500.
As it is in all cases, the question of whether the beneficiary would object to it and request for an amendment is another issue.
As a side issue, I believe, as Trade Finance Manager, it would be appropriate to inform my customer (applicant) of my intension of amending the term from 7 business days to 10 so that he /she is aware of the expected time frame of examining documents.
On the other hand, in accordance with page 41 (second paragraph) of UCP 500 & 400 compared, the seven-day period may be considered flexible upon "force majeure" conditions or by natural consequences.
[edited 9/9/01 3:34:04 PM]
[edited 9/9/01 4:26:29 PM]
As it is in all cases, the question of whether the beneficiary would object to it and request for an amendment is another issue.
As a side issue, I believe, as Trade Finance Manager, it would be appropriate to inform my customer (applicant) of my intension of amending the term from 7 business days to 10 so that he /she is aware of the expected time frame of examining documents.
On the other hand, in accordance with page 41 (second paragraph) of UCP 500 & 400 compared, the seven-day period may be considered flexible upon "force majeure" conditions or by natural consequences.
[edited 9/9/01 3:34:04 PM]
[edited 9/9/01 4:26:29 PM]
Amendment of Reasonable Time
FREEDOM OF CONTRACT NOT TO BE ABUSED
Despite the provision of "freedom of contract" in Article 1 of the UCP 500, it is not advisbale to change some rules there, such as (given on non-exclusive basis)
1, 2, 3, 4, 9, 13 & 14.
The reason is that these rules are the back bone rules that have established the authority and popularity of the UCP 500 that give traders the confidence in using it.
For example, if you change Article 9 to read "The isuing bank will pay only if the applicant has the money", it is no more a DC - a definite undertaking of a bank against timely presentation of complying documents.
The "reasonable time" issue is more a legal issue than an UCP issue. That is why the UCP never has any rule for the parties to determine what exactly is the reasonable time for a specific presentation. It only sets a maximum time limit, which is often misinterpreted by some parts of the world to be the "reasonable time" itself.
REASONABLE TIME CLAUSE IN A DC SHOULD ALSO BE "REASONABLE" BY ITSELF
If a standby requiring a simple default statement extends the reasonable time to 10 days, even if the beneficiary does not object to this, the court may thnik that this is an unreasonable clause. It may lead to unpleasant surprises for the issuing bank, as in the Santander and Glencore cases.
Freedom of contract should not be abused.
http://www.tolee.com
[edited 9/9/01 5:32:42 PM]
Despite the provision of "freedom of contract" in Article 1 of the UCP 500, it is not advisbale to change some rules there, such as (given on non-exclusive basis)
1, 2, 3, 4, 9, 13 & 14.
The reason is that these rules are the back bone rules that have established the authority and popularity of the UCP 500 that give traders the confidence in using it.
For example, if you change Article 9 to read "The isuing bank will pay only if the applicant has the money", it is no more a DC - a definite undertaking of a bank against timely presentation of complying documents.
The "reasonable time" issue is more a legal issue than an UCP issue. That is why the UCP never has any rule for the parties to determine what exactly is the reasonable time for a specific presentation. It only sets a maximum time limit, which is often misinterpreted by some parts of the world to be the "reasonable time" itself.
REASONABLE TIME CLAUSE IN A DC SHOULD ALSO BE "REASONABLE" BY ITSELF
If a standby requiring a simple default statement extends the reasonable time to 10 days, even if the beneficiary does not object to this, the court may thnik that this is an unreasonable clause. It may lead to unpleasant surprises for the issuing bank, as in the Santander and Glencore cases.
Freedom of contract should not be abused.
http://www.tolee.com
[edited 9/9/01 5:32:42 PM]