The comments given here are enlightening.
Usually banks would take a lot of precautions when adding confirmation to an LC or when negotiating documents. They would not do so for any LC. They would look at the structure of the letter of the credit & issuing bank’s credit worthiness, integrity, experience in letters of credit business etc. However, as a service to their customers they would be willing to examine documents for any LC whether they have been designated as a nominated bank or otherwise. Here I don’t mean that banks should take the examination of documents for these letters of credit lightly. In fact my approach is strict compliance with the terms and conditions of the credit so that no room is given for the issuing bank to manipulate. This approach might, in many cases, fire-back on the bank examining the documents since it would be accused of complicating the process. As we all know, in most cases, when the two parties, the applicant and the beneficiary, are in good terms, most discrepancies are waived.
The mere examination of documents seems to put the bank at a very high risk whether it is for a fee or otherwise. In no way would the fees charged cover the risks associated. My sense is that if banks know the risk they would be taking in just examining documents, few would be willing to do so without taking the precautions stated above. The question of whether a discrepancy is valid or not by itself is a wide subject.
[edited 9/20/01 7:46:20 PM]
Negotiation - Liability of Banks not giving value
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AbdulkaderBazara
- Posts: 256
- Joined: Fri Apr 05, 2019 5:15 pm
Negotiation - Liability of Banks not giving value
Jeremy,
Don't blame us for dwelling on an irrelevant issue again. This time you bring it forth! But it makes the Discussion Forum more interesting to read anyway.
We wonder how you would deal effectively with the elephant in Bali in the presence of your attractive girl friend? She should be happy to hear this.
Of course, unless she is also a DC expert.
Our previous comments on the relationship amongst you, your dear girl friend and your wife is purely according to the legal obligations point of view. It has no connection to whether this is a Newtonian or Einstein way of thinking. Whether we like it or not, we are bound by law if we choose to live in this planet called Earth.
We met a couple of German and Swiss tourists in Bali and they lived there for at least one month, staying in farmers' houses, ploughing the land and doing other farmer's works with the hosts to get de-pressurised.
The Pertamina Cottage is a great hotel where you actually live in bungalows scattered in a garden, with kitchen, suite, and a place to BBQ and hang your laundries at the backyard. This is a property of the National Oil Company of Indonesia.
Bye and take care of yourself and your girl friend. Bon Voyage!
T. O.
[edited 9/21/01 2:15:25 PM]
[edited 10/28/01 12:24:43 AM]
Don't blame us for dwelling on an irrelevant issue again. This time you bring it forth! But it makes the Discussion Forum more interesting to read anyway.
We wonder how you would deal effectively with the elephant in Bali in the presence of your attractive girl friend? She should be happy to hear this.
Of course, unless she is also a DC expert.
Our previous comments on the relationship amongst you, your dear girl friend and your wife is purely according to the legal obligations point of view. It has no connection to whether this is a Newtonian or Einstein way of thinking. Whether we like it or not, we are bound by law if we choose to live in this planet called Earth.
We met a couple of German and Swiss tourists in Bali and they lived there for at least one month, staying in farmers' houses, ploughing the land and doing other farmer's works with the hosts to get de-pressurised.
The Pertamina Cottage is a great hotel where you actually live in bungalows scattered in a garden, with kitchen, suite, and a place to BBQ and hang your laundries at the backyard. This is a property of the National Oil Company of Indonesia.
Bye and take care of yourself and your girl friend. Bon Voyage!
T. O.
[edited 9/21/01 2:15:25 PM]
[edited 10/28/01 12:24:43 AM]
Negotiation - Liability of Banks not giving value
My personal thoughts/reactions to the above, without any responsibility are:
1. When acting in a nominated/issuing bank capacity, the bank usually -in my experience- takes a pro-rata (proportionate) charge, in relation to the documents value, which compensates them for taking on the ‘documentary risk’, i.e. the risk of having settled (or undertaken to make settlement on a future date) but then it being established the documents are discrepant and there consequently being no right of reimbursement or an obligation to refund (unless the documents are nonetheless taken up).
2. However, if a bank checks documents, without performing a nominated/issuing bank role and without any responsibility on its part, on what basis does it calculate its charge? Given the absence of responsibility, I would anticipate a flat charge, thus quite possibly making the operation low income/high cost in nature. This, combined with delays in getting the documents to the right bank and the potential risks of being accused of negligence, mean that I would not regard non-nominated/issuing bank document checking as a ‘service’ I would recommend be made available other than in exceptional circumstances. Of course, I recognise that the markets some banks operate in may not allow this approach.
[edited 9/21/01 2:04:57 PM]
1. When acting in a nominated/issuing bank capacity, the bank usually -in my experience- takes a pro-rata (proportionate) charge, in relation to the documents value, which compensates them for taking on the ‘documentary risk’, i.e. the risk of having settled (or undertaken to make settlement on a future date) but then it being established the documents are discrepant and there consequently being no right of reimbursement or an obligation to refund (unless the documents are nonetheless taken up).
2. However, if a bank checks documents, without performing a nominated/issuing bank role and without any responsibility on its part, on what basis does it calculate its charge? Given the absence of responsibility, I would anticipate a flat charge, thus quite possibly making the operation low income/high cost in nature. This, combined with delays in getting the documents to the right bank and the potential risks of being accused of negligence, mean that I would not regard non-nominated/issuing bank document checking as a ‘service’ I would recommend be made available other than in exceptional circumstances. Of course, I recognise that the markets some banks operate in may not allow this approach.
[edited 9/21/01 2:04:57 PM]
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
Negotiation - Liability of Banks not giving value
My query to the real meaning of the statement "DOCUMENTS ARE IN FULL COMPLIANCE WITH THE TERMS AND CONDITIONS OF THE L/C AND DOCUMENTS VALUE HAS BEEN ENDORSED ON THE REVERSE SIDE OF THE L/C” and the consequences thereof is to seek demarcation of borders in the negotiation process.
This demarcation is important in view of the following:
1. If we look at article 2 negotiation is mentioned as an action authorized from the issuing bank. The article does not tell what is the exact nature of this (process) action on the part of the negotiating bank nor the issuing bank.
2. Article 9 states that payment under L/Cs available by negotiation is without recourse.
3. Article 10 defines negotiation as “ the giving of value” and further adds that mere examination of documents is not negotiation.
In light of the above how should we know that negotiation took place or not. If we receive a documentary remittance schedule from the nominated bank, bearing such a clause could we assume, as a beneficiary, as an issuing bank that we negotiated documents? Could the negotiating bank assume that it did not,in effect, negotiated documents but only examined them and forwarded them to the issuing bank for ultimate payment?
If we assume that the nominated bank advised the beneficiary of the L/C which is available by negotiation and expressed his willingness to negotiate the documents thereunder, then this statement under question can further complicate things, since this bank becomes liable to pay without recourse to the beneficiary, which is,in essence, the same as being a confirming bank.
To add further complications, what if the issuing bank goes bankrupt, or it detected certain discrepancies in the documents that were not detected by this negotiating/nominated bank?
Another complication can be the stipulation of the following condition in the credit “value will be remitted four working days upon receipt of the documents in full compliance with the terms and conditions of the credit” as some “smart” bank impose this condition for countries like India, Pakistan china and others. Here the question arises, does the beneficiary know that the nominated bank is aware of this implication? Is the beneficiary entitled to claim money (value of his docs) from the nominated bank even if the payment was not forthcoming from the issuing bank?
The value of the document for the beneficiary relies on the fact that his documents are in order. Therefore he is entitled, at least as he sees, to be paid for his good performance.
So "giving of value" for the beneficiary is get paid.
I agree with Jeremy that we should distinguish between the following terms: presentation of documents by the beneficiary, examination by the bank, giving value, forwarding document to issuing bank, examination of documents, then giving of value” but where is the clear cut border in examination and giving of value, since the whole process is a complex one?
This demarcation is important in view of the following:
1. If we look at article 2 negotiation is mentioned as an action authorized from the issuing bank. The article does not tell what is the exact nature of this (process) action on the part of the negotiating bank nor the issuing bank.
2. Article 9 states that payment under L/Cs available by negotiation is without recourse.
3. Article 10 defines negotiation as “ the giving of value” and further adds that mere examination of documents is not negotiation.
In light of the above how should we know that negotiation took place or not. If we receive a documentary remittance schedule from the nominated bank, bearing such a clause could we assume, as a beneficiary, as an issuing bank that we negotiated documents? Could the negotiating bank assume that it did not,in effect, negotiated documents but only examined them and forwarded them to the issuing bank for ultimate payment?
If we assume that the nominated bank advised the beneficiary of the L/C which is available by negotiation and expressed his willingness to negotiate the documents thereunder, then this statement under question can further complicate things, since this bank becomes liable to pay without recourse to the beneficiary, which is,in essence, the same as being a confirming bank.
To add further complications, what if the issuing bank goes bankrupt, or it detected certain discrepancies in the documents that were not detected by this negotiating/nominated bank?
Another complication can be the stipulation of the following condition in the credit “value will be remitted four working days upon receipt of the documents in full compliance with the terms and conditions of the credit” as some “smart” bank impose this condition for countries like India, Pakistan china and others. Here the question arises, does the beneficiary know that the nominated bank is aware of this implication? Is the beneficiary entitled to claim money (value of his docs) from the nominated bank even if the payment was not forthcoming from the issuing bank?
The value of the document for the beneficiary relies on the fact that his documents are in order. Therefore he is entitled, at least as he sees, to be paid for his good performance.
So "giving of value" for the beneficiary is get paid.
I agree with Jeremy that we should distinguish between the following terms: presentation of documents by the beneficiary, examination by the bank, giving value, forwarding document to issuing bank, examination of documents, then giving of value” but where is the clear cut border in examination and giving of value, since the whole process is a complex one?
Negotiation - Liability of Banks not giving value
My personal thoughts/reactions, without any responsibility, are:
A. I agree with your point 1.
B. Sub-Articles 9a & b only deal with issuing and confirming banks, and reference to paying/negotiating ‘without recourse’ applies only to such banks in these sub-Articles.
C. Thank you for pointing out sub-Article 10bii says ‘Mere examination of the documents without giving of value does not constitute a negotiation.’ I had forgotten this when I made my first posting.
D. I would find it odd that a nominated bank would make the statement you quote if it has not negotiated (per Position Paper No. 2). This is because if value has not yet been given, it would at least seem premature to endorse the credit in a way that indicates it has. Also, I would find it odd that a bank would express any opinion on the compliance of the documents if it had not negotiated (per Position Paper No. 2).
Nonetheless, if you are asking, could -of itself- the making of the statement by the nominated bank to the issuing bank be taken as indicating with certainty that the nominated bank has negotiated (per Position Paper No. 2), then I say ‘I would have thought not’, given the absence of the word ‘negotiated’ or ‘negotiation’ etc. To me, if the matter was of importance to the issuing bank, it would have to make further enquiries of the nominated bank.
E. Regarding the beneficiary, I am surprised that any nominated bank would not make clear, and receive the beneficiary’s agreement prior to despatch of the documents to the issuing bank, as to the basis on which the nominated will handle documents, so as to avoid any doubt on the subject. Thus, if a nominated bank were not prepared to negotiate (i.e. make immediate payment or undertake an obligation to make payment) I would expect it clearly to say so to the beneficiary (whether at the time of advising the credit, on presentation of documents or on checking of documents, depending at what stage the decision was reached). I would also expect it to obtain the beneficiary’s written confirmation (if not already in the beneficiary’s covering letter) that the documents were to be forwarded to the issuing bank under protection of the credit (sometimes called ‘in trust’ or, more dangerously, ‘on a collection basis’) without any responsibility on the part of the nominated bank, before despatch of the documents to the issuing bank.
F. I am also surprised that, on an unconfirmed credit, an ‘advising nominated bank’ would express any ‘willingness to negotiate the documents thereunder’. This is particularly so if it is that bank’s practice not to express any willingness to pay, accept drafts or incur a deferred payment undertaking on unconfirmed credits that are available in this way. Why the difference of policy? Clearly, any such expression of ‘willingness’ does create risk and therefore, in my opinion, is best avoided.
G. Assuming a bank has negotiated (per Position Paper No. 2) under an unconfirmed credit, then its rights against the beneficiary in the event of the issuing bank running into financial difficulties, or identifying discrepancies not identified by the negotiating bank, must be a product of the express/implied terms of the agreement between the negotiating bank and the beneficiary and local law.
H. I believe ‘the clear cut border in examination and giving of value’ is that negotiation only occurs, per Position Paper No. 2, when and where the nominated bank has made ‘immediate payment’ or clearly undertaken to the beneficiary an ‘obligation to make payment’. Also, in the case of an unconfirmed credit, that this border is delineated beyond doubt when the nominated bank makes clear to the beneficiary the basis on which it is handling the documents and the beneficiary agrees to this in writing.
[edited 9/25/01 2:33:00 PM]
A. I agree with your point 1.
B. Sub-Articles 9a & b only deal with issuing and confirming banks, and reference to paying/negotiating ‘without recourse’ applies only to such banks in these sub-Articles.
C. Thank you for pointing out sub-Article 10bii says ‘Mere examination of the documents without giving of value does not constitute a negotiation.’ I had forgotten this when I made my first posting.
D. I would find it odd that a nominated bank would make the statement you quote if it has not negotiated (per Position Paper No. 2). This is because if value has not yet been given, it would at least seem premature to endorse the credit in a way that indicates it has. Also, I would find it odd that a bank would express any opinion on the compliance of the documents if it had not negotiated (per Position Paper No. 2).
Nonetheless, if you are asking, could -of itself- the making of the statement by the nominated bank to the issuing bank be taken as indicating with certainty that the nominated bank has negotiated (per Position Paper No. 2), then I say ‘I would have thought not’, given the absence of the word ‘negotiated’ or ‘negotiation’ etc. To me, if the matter was of importance to the issuing bank, it would have to make further enquiries of the nominated bank.
E. Regarding the beneficiary, I am surprised that any nominated bank would not make clear, and receive the beneficiary’s agreement prior to despatch of the documents to the issuing bank, as to the basis on which the nominated will handle documents, so as to avoid any doubt on the subject. Thus, if a nominated bank were not prepared to negotiate (i.e. make immediate payment or undertake an obligation to make payment) I would expect it clearly to say so to the beneficiary (whether at the time of advising the credit, on presentation of documents or on checking of documents, depending at what stage the decision was reached). I would also expect it to obtain the beneficiary’s written confirmation (if not already in the beneficiary’s covering letter) that the documents were to be forwarded to the issuing bank under protection of the credit (sometimes called ‘in trust’ or, more dangerously, ‘on a collection basis’) without any responsibility on the part of the nominated bank, before despatch of the documents to the issuing bank.
F. I am also surprised that, on an unconfirmed credit, an ‘advising nominated bank’ would express any ‘willingness to negotiate the documents thereunder’. This is particularly so if it is that bank’s practice not to express any willingness to pay, accept drafts or incur a deferred payment undertaking on unconfirmed credits that are available in this way. Why the difference of policy? Clearly, any such expression of ‘willingness’ does create risk and therefore, in my opinion, is best avoided.
G. Assuming a bank has negotiated (per Position Paper No. 2) under an unconfirmed credit, then its rights against the beneficiary in the event of the issuing bank running into financial difficulties, or identifying discrepancies not identified by the negotiating bank, must be a product of the express/implied terms of the agreement between the negotiating bank and the beneficiary and local law.
H. I believe ‘the clear cut border in examination and giving of value’ is that negotiation only occurs, per Position Paper No. 2, when and where the nominated bank has made ‘immediate payment’ or clearly undertaken to the beneficiary an ‘obligation to make payment’. Also, in the case of an unconfirmed credit, that this border is delineated beyond doubt when the nominated bank makes clear to the beneficiary the basis on which it is handling the documents and the beneficiary agrees to this in writing.
[edited 9/25/01 2:33:00 PM]
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
Negotiation - Liability of Banks not giving value
1. I agree with you that such a statement is odd but it is there for a simple fact that negotiation credit are not fully understood by many bankers. Do not be amazed to see basic educational queries demanding information on what is the difference between payment credits and negotiation credit.
Now, Jeremy, the absence of the word negotiation might not solve the plight of such bank if we add the further complications I have stated. I appreciate that if we talk the language of letters of credit solely then we might find an escape goat the beneficiary or the issuing bank but this is not the case because implied consent, absence of words and contrasting conditions might have a devastating effect on such bank. One questions that I might raise to that bank on what basis you have indicated your statement? Is it a mere examination of documents or a negotiation? Where do you state that is mere examination, I do not see the “word” examination in your statement?
Therefore, yes we should be more prudent in dealing with those sensitive issues to make sure that there is a consistency in the process.
2. The problem of the negotiation credits relies in our understanding of the “ giving of value” in light of a cocktail credit to quote Mr. Lee. In negotiable instruments negotiation is an outright purchase for immediate value, which is exactly all the same in L/C operations. In L/Cs it breaks into two respective stages taking up documents and actual furnishing of payment. If this is accepted, to me it is accepted, and then it would answer our query that there was no negotiation since there was no actual payment. But does all laws accept this? Can we bind the courts to our UCP or the papers of the ICC? Are we sure how would he local jurisdiction might not construe what the business community or even the judge’s own interpretations of this phrase in connection with other conditions stated in the L/C?
3. Another thing to be looked into is position paper an integral part of UCP? IF NOT then article 10 b ii is not clear enough for the banking community.
I mean to say that article 10 b ii does not reflect clarity in position paper 2
Although I appreciate your valid points I still did not see the border that demarks examination from “giving of value”
The statement that was provided for the documents entails taking up documents which is an essential part of negotiation. To the beneficiary it is his destiny; therefore it could be an implied consent on the part of the nominated bank to have committed a “sin”- NEGOTIATION.
[edited 9/26/01 11:55:02 AM]
Now, Jeremy, the absence of the word negotiation might not solve the plight of such bank if we add the further complications I have stated. I appreciate that if we talk the language of letters of credit solely then we might find an escape goat the beneficiary or the issuing bank but this is not the case because implied consent, absence of words and contrasting conditions might have a devastating effect on such bank. One questions that I might raise to that bank on what basis you have indicated your statement? Is it a mere examination of documents or a negotiation? Where do you state that is mere examination, I do not see the “word” examination in your statement?
Therefore, yes we should be more prudent in dealing with those sensitive issues to make sure that there is a consistency in the process.
2. The problem of the negotiation credits relies in our understanding of the “ giving of value” in light of a cocktail credit to quote Mr. Lee. In negotiable instruments negotiation is an outright purchase for immediate value, which is exactly all the same in L/C operations. In L/Cs it breaks into two respective stages taking up documents and actual furnishing of payment. If this is accepted, to me it is accepted, and then it would answer our query that there was no negotiation since there was no actual payment. But does all laws accept this? Can we bind the courts to our UCP or the papers of the ICC? Are we sure how would he local jurisdiction might not construe what the business community or even the judge’s own interpretations of this phrase in connection with other conditions stated in the L/C?
3. Another thing to be looked into is position paper an integral part of UCP? IF NOT then article 10 b ii is not clear enough for the banking community.
I mean to say that article 10 b ii does not reflect clarity in position paper 2
Although I appreciate your valid points I still did not see the border that demarks examination from “giving of value”
The statement that was provided for the documents entails taking up documents which is an essential part of negotiation. To the beneficiary it is his destiny; therefore it could be an implied consent on the part of the nominated bank to have committed a “sin”- NEGOTIATION.
[edited 9/26/01 11:55:02 AM]
Negotiation - Liability of Banks not giving value
Hatem Shehab,
A. I hope I am addressing you correctly. Should ‘Hatem Shehab’ not be correct, no doubt you’ll let me know.
B. My personal reactions to your statements above (and apologies if I have misunderstood anything you’ve said), without responsibility, are:
I. It cannot be ruled out that language a nominated bank has used to a beneficiary may, in the absence of immediate settlement, be inferred -by a court- as undertaking an obligation to make payment. Hence my views in E. above.
II. I am not quite sure what you mean by ‘outright purchase for immediate value’. For example, under English law covering negotiable instruments, the giving of value is considered to be ‘consideration’ that would support a ‘simple’ contract. (I would not wish to elaborate; suffice it to say ‘giving value’ does not necessarily involve paying the face value, less any interest etc., of a negotiable instrument. Also, having given value, one still has a legal right of recourse against the previous holder/the drawer etc.)
III. I agree one cannot always be certain how a court will interpret a particular provision of UCP or what weight a court will give to a related ICC document. One just has to make an operational judgement, employing any risk reduction measures available.
IV. I also agree that examination of documents is necessary for a bank to take them up. However, should a (non-confirming) nominated bank not wish to ‘take up’ complying documents, I would have thought it would make this clear to the beneficiary (at whatever stage), thereby putting the matter beyond doubt.
V. Finally, and I sincerely regret it, but I am struggling to see the problem.
Jeremy.
[edited 9/26/01 3:12:05 PM: grammar]
A. I hope I am addressing you correctly. Should ‘Hatem Shehab’ not be correct, no doubt you’ll let me know.
B. My personal reactions to your statements above (and apologies if I have misunderstood anything you’ve said), without responsibility, are:
I. It cannot be ruled out that language a nominated bank has used to a beneficiary may, in the absence of immediate settlement, be inferred -by a court- as undertaking an obligation to make payment. Hence my views in E. above.
II. I am not quite sure what you mean by ‘outright purchase for immediate value’. For example, under English law covering negotiable instruments, the giving of value is considered to be ‘consideration’ that would support a ‘simple’ contract. (I would not wish to elaborate; suffice it to say ‘giving value’ does not necessarily involve paying the face value, less any interest etc., of a negotiable instrument. Also, having given value, one still has a legal right of recourse against the previous holder/the drawer etc.)
III. I agree one cannot always be certain how a court will interpret a particular provision of UCP or what weight a court will give to a related ICC document. One just has to make an operational judgement, employing any risk reduction measures available.
IV. I also agree that examination of documents is necessary for a bank to take them up. However, should a (non-confirming) nominated bank not wish to ‘take up’ complying documents, I would have thought it would make this clear to the beneficiary (at whatever stage), thereby putting the matter beyond doubt.
V. Finally, and I sincerely regret it, but I am struggling to see the problem.
Jeremy.
[edited 9/26/01 3:12:05 PM: grammar]
Negotiation - Liability of Banks not giving value
Jeremy,
"GIVING VALUE" AND "CONSIDERATION' ARE TOTALLY DIFFERENT CONCEPTS AND SHOULD HAVE NO RELATION TO EACH OTHER WHATSOEVER
Please note that equating "giving of value" as "consideration" in an English simple contract is a dangerous if not misleading analogy and this may not be relevant too.
Why? because in Civil Law, a contract needs not have "consideration". So your analogy would not work in Civil Law countries, for example in Scotland when you explain negotiation in this way.
"NEGOTIATION" IS "PURCHASE UPON REQUEST" THE SOPHISTICATED WAY
In our DC workshops, we would explain "giving of value" as "paying a price". For simplicity sake, negotiation in DC may be deemed as a more sophisticated form of "purchase upon request", where all the complexities come in, such as right of recourse, in good faith, an innocent endorsee gets a better position than the endorser in case of frauds and so on.
Jeremy and Hatem, please don't try to ride on the elephant named "negotiation". We may fall unless we can fly.
E-NEGOTIATION IS MORE COMPLEX
In e-commerce, negotiation would be more complex. We do not have "e-negotiation" defined in the eUCP vocabulary. Can we negotiate e-documents and e-drafts? If we wish to do so, we have to change the paper based laws on negotiation first in many jurisdictions. Should the paper based judges be re-educated to cope?
We are already having an e-discussion here and we soon have to change our profession to e-consultant.
http://www.tolee.com
[edited 9/27/01 3:52:27 AM]
"GIVING VALUE" AND "CONSIDERATION' ARE TOTALLY DIFFERENT CONCEPTS AND SHOULD HAVE NO RELATION TO EACH OTHER WHATSOEVER
Please note that equating "giving of value" as "consideration" in an English simple contract is a dangerous if not misleading analogy and this may not be relevant too.
Why? because in Civil Law, a contract needs not have "consideration". So your analogy would not work in Civil Law countries, for example in Scotland when you explain negotiation in this way.
"NEGOTIATION" IS "PURCHASE UPON REQUEST" THE SOPHISTICATED WAY
In our DC workshops, we would explain "giving of value" as "paying a price". For simplicity sake, negotiation in DC may be deemed as a more sophisticated form of "purchase upon request", where all the complexities come in, such as right of recourse, in good faith, an innocent endorsee gets a better position than the endorser in case of frauds and so on.
Jeremy and Hatem, please don't try to ride on the elephant named "negotiation". We may fall unless we can fly.
E-NEGOTIATION IS MORE COMPLEX
In e-commerce, negotiation would be more complex. We do not have "e-negotiation" defined in the eUCP vocabulary. Can we negotiate e-documents and e-drafts? If we wish to do so, we have to change the paper based laws on negotiation first in many jurisdictions. Should the paper based judges be re-educated to cope?
We are already having an e-discussion here and we soon have to change our profession to e-consultant.
http://www.tolee.com
[edited 9/27/01 3:52:27 AM]
Negotiation - Liability of Banks not giving value
T.O.,
Re your first point, I quote from ‘Byles on Bills of Exchange’ 26th Edition, the ‘bible’ of English law regarding negotiable instruments:
‘Consideration is the SAME THING as value; by Section 2[of the Bills of Exchange Act 1882] “value means valuable consideration”, which, in section 27(1) is stated as constituted by:
(a) any consideration sufficient to support a simple contract;
(b) ……’. [emphasis added]
Therefore, I stand by my point B III above, which referred to English law (alone).
I agree that ‘consideration’ is a concept found primarily in Anglo-American jurisdictions and not in, for example, in Scotland and Europe. However, I believe that what would be considered ‘giving value’ in a civil code jurisdiction would usually also be regarded as ‘consideration’ in England.
To avoid us wandering too much off the subject, I suggest we leave it there.
Re your 2nd point, given Position Paper No. 2, I would have thought what ‘negotiation’ meant -in the context of credit operations- was pretty clear cut, unless there was local law to indicate otherwise.
Jeremy.
Re your first point, I quote from ‘Byles on Bills of Exchange’ 26th Edition, the ‘bible’ of English law regarding negotiable instruments:
‘Consideration is the SAME THING as value; by Section 2[of the Bills of Exchange Act 1882] “value means valuable consideration”, which, in section 27(1) is stated as constituted by:
(a) any consideration sufficient to support a simple contract;
(b) ……’. [emphasis added]
Therefore, I stand by my point B III above, which referred to English law (alone).
I agree that ‘consideration’ is a concept found primarily in Anglo-American jurisdictions and not in, for example, in Scotland and Europe. However, I believe that what would be considered ‘giving value’ in a civil code jurisdiction would usually also be regarded as ‘consideration’ in England.
To avoid us wandering too much off the subject, I suggest we leave it there.
Re your 2nd point, given Position Paper No. 2, I would have thought what ‘negotiation’ meant -in the context of credit operations- was pretty clear cut, unless there was local law to indicate otherwise.
Jeremy.
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hatemshehab
- Posts: 220
- Joined: Fri Apr 05, 2019 5:19 pm
Negotiation - Liability of Banks not giving value
1. Undoubtedly yes. I may be wrong and if you prove me so I will consider that a privilege because I would be gaining extra knowledge.
2. I take seriously the advise of Mr. Lee that this issue is a big elephant, but I want to reply out of courtesy to Jeremy so that he is not left with unreasonable silence.
3. I mean by outright purchase for immediate value is straight purchase, Instant and unconditional.
4. Negotiation entails consideration in the sense that it involves a promise for payment now or in future. Such consideration may have been communicated to the beneficiary upon advising the original credit instrument. Therefore the nominated bank has undertaken that it will negotiate docs presented by the beneficiary.
5. Since negotiation of documents entails transfer of title then consideration is presumed in such process.
6. If we talk about consideration which is “the price for which the promise of the other is bought” to quote Pollock, then what is the effect of this promise; value for receiving docs from beneficiary and stating that they are in full compliance with terms and conditions of L/C?
7. If we look into the essential of valid consideration we find:
a) It should be at the desire of promisor. Therefore any willingness to negotiate documents will be construed as a component of such consideration.
b) It might be past, present or future. If the bank willing to negotiate docs as per his term of negotiation can’t this be construed as a future consideration.
c) It must be “something of value” what value would one give for complying docs?
Jeremy in order not to confuse any body I will also leave the conversation here, however I would certainly welcome your remarks to my private e-mail.
As for Mr. T O LEE he will have to bear my thirst for more clarification on this giant elephant when he comes to Saudi Arabia the coming week.
2. I take seriously the advise of Mr. Lee that this issue is a big elephant, but I want to reply out of courtesy to Jeremy so that he is not left with unreasonable silence.
3. I mean by outright purchase for immediate value is straight purchase, Instant and unconditional.
4. Negotiation entails consideration in the sense that it involves a promise for payment now or in future. Such consideration may have been communicated to the beneficiary upon advising the original credit instrument. Therefore the nominated bank has undertaken that it will negotiate docs presented by the beneficiary.
5. Since negotiation of documents entails transfer of title then consideration is presumed in such process.
6. If we talk about consideration which is “the price for which the promise of the other is bought” to quote Pollock, then what is the effect of this promise; value for receiving docs from beneficiary and stating that they are in full compliance with terms and conditions of L/C?
7. If we look into the essential of valid consideration we find:
a) It should be at the desire of promisor. Therefore any willingness to negotiate documents will be construed as a component of such consideration.
b) It might be past, present or future. If the bank willing to negotiate docs as per his term of negotiation can’t this be construed as a future consideration.
c) It must be “something of value” what value would one give for complying docs?
Jeremy in order not to confuse any body I will also leave the conversation here, however I would certainly welcome your remarks to my private e-mail.
As for Mr. T O LEE he will have to bear my thirst for more clarification on this giant elephant when he comes to Saudi Arabia the coming week.