Article 10(a) states that all credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation. If a credit has been advised to beneficiary which have the following language:
"This letter of credit is available for payment upon presentation of your draft(s)(or demand for payment) accompanied by the following documents:"
If complying documents have been presented accompanied by a sight draft or a sight demand for payment, could the issuing bank claim the presentation as discrepant or invalid because the credit does not comply with article 10(a) and thus the issuing bank can either amend its undertaking or even withdraw it?
Similarly let's assume that a letter of credit missed to stipulate an expiry date but indicated the latest shipment date. If complying documents have been presented prior to the latest date of shipment, in case of dispute or the applicant declared bankruptcy, could the issuing bank invalidate it's undertaking since it has not been issued in accordance with article 42(a) i.e. it missed to state its expiry date? If the documents have presented within 21 from the latest date of shipment stipulated in the credit, what would be the effect in this case?
[edited 2/15/02 8:27:07 AM]
Article 10(a) & 42(a) of UCP 500
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AbdulkaderBazara
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larryBacon
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Article 10(a) & 42(a) of UCP 500
Advising banks have very little to do in order to claim their fees. This, I suggest, is an example where they should be worth their fees in refusing to advise the credit if it is missing vital but basic information such as expiry date or the tenor of the draft.
Despite this, if advised to the beneficiary, the beneficiary should not accept the credit without this information. Usually it is a simple matter for the advising bank to request and receive this, whether at the behest of the beneficiary or not.
Unfortunately, I know that some banks adopt the policy that they do not take account of such glaring errors at the time of advising. This may be that they prefer to await amendments increasing their fees, or that a full examination is not economically warranted until a presentation is made.
Laurence
Despite this, if advised to the beneficiary, the beneficiary should not accept the credit without this information. Usually it is a simple matter for the advising bank to request and receive this, whether at the behest of the beneficiary or not.
Unfortunately, I know that some banks adopt the policy that they do not take account of such glaring errors at the time of advising. This may be that they prefer to await amendments increasing their fees, or that a full examination is not economically warranted until a presentation is made.
Laurence
Article 10(a) & 42(a) of UCP 500
I would consider the stipulation „available for payment“ as being eq. of „available by payment“ which is widely excepted as to mean „available by sight payment“, so I would see no problem here.
Re. the second issue, „If the documents have been presented within 21 days from (or even after) date of shipment as indicated by the transport document (provided there is no specific time limit stipulated in L/C), this would be acceptable in my opinion.
Idea that the issuing bank could invalidate it's undertaking because it has not issued L/C in accordance with a provision of UCP500 is not very favourable to myself.
Pavel Andrle
Re. the second issue, „If the documents have been presented within 21 days from (or even after) date of shipment as indicated by the transport document (provided there is no specific time limit stipulated in L/C), this would be acceptable in my opinion.
Idea that the issuing bank could invalidate it's undertaking because it has not issued L/C in accordance with a provision of UCP500 is not very favourable to myself.
Pavel Andrle
Article 10(a) & 42(a) of UCP 500
My personal views, without liability/responsibility, are:
1. I believe the credit does clearly indicate it is available by sight payment (I do not regard the absence of the word ‘sight’ as being material).
2. Where a credit omitted to stipulate an expiry date I would not anticipate that a court would regard the instrument as ‘invalid’ or ‘voidable’. Rather, that it would regard the expiry date as being the l.s.d. plus the post-shipment presentation period. In the absence of an l.s.d. I would look to Raymond Jack et al, who suggest in the 3rd edition of ‘Documentary Credits’ (Butterworths):
“Very occasionally there is no statement of time in which documents must be presented …… It is to be implied that presentation must take place within a reasonable time …… it is open to [the issuing bank] to serve a notice on the beneficiary …… giving the beneficiary a final further period, which must be a reasonable one ……’.
[edited 2/18/02 3:53:06 PM]
1. I believe the credit does clearly indicate it is available by sight payment (I do not regard the absence of the word ‘sight’ as being material).
2. Where a credit omitted to stipulate an expiry date I would not anticipate that a court would regard the instrument as ‘invalid’ or ‘voidable’. Rather, that it would regard the expiry date as being the l.s.d. plus the post-shipment presentation period. In the absence of an l.s.d. I would look to Raymond Jack et al, who suggest in the 3rd edition of ‘Documentary Credits’ (Butterworths):
“Very occasionally there is no statement of time in which documents must be presented …… It is to be implied that presentation must take place within a reasonable time …… it is open to [the issuing bank] to serve a notice on the beneficiary …… giving the beneficiary a final further period, which must be a reasonable one ……’.
[edited 2/18/02 3:53:06 PM]
Article 10(a) & 42(a) of UCP 500
Futhermore re. the first issue - even the most common format used for issuance of L/C - Swift MT700 uses in field 41a term of availability as being "BY PAYMENT".
Pavel Andrle
Pavel Andrle
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larryBacon
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Article 10(a) & 42(a) of UCP 500
When a credit is advised as being available by/for payment, by definition only immediate payment is envisaged. Therefore when a credit is available by payment and a draft is involved, that draft can only be a sight draft.
When a credit is available by acceptance or deferred payment, the tenor can vary, but not so when the credit is available by payment.
Laurence
When a credit is available by acceptance or deferred payment, the tenor can vary, but not so when the credit is available by payment.
Laurence