Amendment; - Confirming Bank's obligation to the Beneficiar

[JohnP]

Does the Confirming Bank have an obligation to the Beneficiary, to Advise accurately, the Amendment instructions received from the Issuing Bank?

Whilst the principle of "reasonable care" is established within Article 7, does this principle extend beyond checking "the apparent authenticity" of the instructions received from the Issuer?
What if the Confirming Bank omits, in error, part of the amendment request from the Issuer, and this omission results in loss by the Beneficiary?

Article 12 states, relative to Incomplete or Unclear Instructions, an Advising Bank may "give preliminary notification to the Beneficiary for information only and without responsibility. This preliminary notification should state clearly that the notification is provided for information only and without the responsibility of the Advising Bank."

By corollary, does the above Article support the principle that when instructions are complete and clear, Amendment details are advised with the responsibility of the Advising Bank?

If so, responsibility to whom? - The Issuing Bank alone? - or, responsibility also towards the Beneficiary? - If the latter, is the situation different, should the credit be Unconfirmed, or Confirmed by the Advising Bank?

Views onthe above? - I have a client in dispute, revolving onthis issue.

[KarenHan_disabled]

As a confirming bank, you have a definite undertaking in the LC on top of the LC issuing bank's undertaking.

Your responsibilities is more than reasonable care. You have to ensure the amended terms are acceptable to you. For an irrevocable LC, you have the right not to confirm the amendment.

If you need clarification with the LC issuing bank prior to your confirmation, you may advise the beneficiary with a qualified statement saying that amendment does not bear your confirmation and you are seeking a clarification from the issuing bank. Even after your clarification, you still have the right not to confirm the LC amendment. If you choose to do so, you have to inform both the beneficiary and the issuing bank of your decision.

Regards

[T.O.Lee]

PLEASE DON'T MIX UP THE DUTIES OF AN ADVISING BANK WITH THAT OF A CONFIRMING BANK

Advising the DC and the related amendments are the duties of the advising bank, not that of the confirming bank, although these two roles are often played by the same bank, the advising bank.

DUE DILIGENCE

On top of exercising reasonable care, as stipulated in the UCP 500, a bank has ALSO a duty of DUE DILIGENCE under most legislations. This is to be determined by a court of law according to the applicable law.

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[edited 11/12/01 10:20:04 PM]

[larryBacon]

Article 9 d iv disallows partial acceptance of amendments. It follows from this that partial advice of an amendment is not permitted, since the beneficiary, upon receipt of such an amendment, but without knowledge of the fact that this is partial, would draw the obvious conclusion that the amendment advised was complete. He may then advise the bank of his acceptance of the amendment, but this would not be valid as this is precluded by Article 9.

Laurence

[PavelA]

Article 7 talks about „ reasonable care“ obligation in connection with the checking of the apparent authenticity of the credit „only“. Here it might be interesting to note that it does not mention this obligation also in connection to amendments. I believe that mayority of banks exercise the same care also when advising amendments.

However our issue is rather whether the advising bank is obliged „to advise accurately, the Amendment instructions received from the Issuing Bank“. In my opinion UCP does not cover this directly, however the art. 16 covers the issue to some extent. I also believe that the applicable law would give the answer.

Pavel Andrle

[larryBacon]

Article 12 states that ".... The credit will be advised, confirmed or amended, only when complete and clear instructions have been received ....".

It is clear from this that only amendments based on complete and clear instructions should be advised. If such instructions are indeed clear and complete, a basic duty of care should ensure that the resultant advice is equally clear and complete.

Laurence

[T.O.Lee]

ADVISING BANK’S DUTY OF CARE IS THE SAME FOR DC AND ITS AMENDMENTS

We support the opinions of Laurence in an advising bank’s duty of care in amendments being the same as in advising the DC itself

It is only simple common sense that the advising bank should use the same level of duty of care in treating DC and its amendments. We need not and should not try to resolve this issue by application of laws, as suggested by one member here. The courts around the world are already too busy with accumulating dispute cases. We should not waste the precise time of the courts to resolve something which can otherwise be easily resolved by simple common sense.

DON’T BRING TO COURTS ISSUES THAT CAN BE EASILY RESOLVED BY SIMPLE COMMON SENSE

We still remember in September 2000, a Judge in a High Court in Asia, in delivery of his judicial decisions on a DC payment dishonour dispute case, blamed the Defendants for not resolving the discrepancies out of court with the Plaintiff as the main issues could be easily resolved with simple common sense.

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