Adding Confirmation to LC
Adding Confirmation to LC
If a bank adds its confirmation to an LC, which terms, among others, provides that if original documents could not be presented, then in substitution of such originals, a copy of letter of indemnity form of which is given in the LC may be presented. The form of letter of indemnity is issued by the beneficiary in favour of the applicant without involving the banks. My question is as a confirming bank under such a credit, it the confirming bank responsible for chasing for the presentation of the documents notwithstanding that the issuing bank has paid under the LC based on the documents and those substituted by the letter of indemnity. Also if the issuing bank requests the confirming bank to obtain the documents from the beneficiary, is the confirming bank under any duty to assist. Notwithstanding that the confirming bank is not a party to the letter of indemnity, is there a possibility that the confirming bank will be implicated under the letter of indemnity if it turns out that the documents can never be presented. Would the issuing bank demand for refund of payment under the LC to the confirming bank.
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PGauntlett
- Posts: 153
- Joined: Fri Apr 05, 2019 5:25 pm
Adding Confirmation to LC
Presumably this is an oil l/c. Upon payment by the bank of a presentation of invoice and LOI the l/c is dead. It is not the confirming bank's (or anyone else's) responsibility to chase up presentation of the shipping documents.
Obviously it is in the interests of the party issuing the LOI to present documents that will release him from his liablity. However, he may well have to wait for these documents to be sent to him by the the company from whom he puchased the cargo.
The only time a bank may be liable under an LOI is if they have counter-signed it. Basically, it is an Art 21 type of document.
Some oil financing banks which have large exposures from counter-signing LOI's will give priority to chasing presenters for documents to cancel LOI's but these are matters outside the l/c as it is utilised and has fallen away.
Although it can take years for an LOI to be cancelled (if the parties are at the end of a large string of buyers/sellers) a claim under an LOI is extremely rare.
Obviously it is in the interests of the party issuing the LOI to present documents that will release him from his liablity. However, he may well have to wait for these documents to be sent to him by the the company from whom he puchased the cargo.
The only time a bank may be liable under an LOI is if they have counter-signed it. Basically, it is an Art 21 type of document.
Some oil financing banks which have large exposures from counter-signing LOI's will give priority to chasing presenters for documents to cancel LOI's but these are matters outside the l/c as it is utilised and has fallen away.
Although it can take years for an LOI to be cancelled (if the parties are at the end of a large string of buyers/sellers) a claim under an LOI is extremely rare.