ICC Digital Library Forum

Is an oral rejection of Documents presented under a letter of credit valid
under Art 16 of UCP 500. Does ir make difference if the L/C is confirmed or unconfermed?

The answer to your question lies in article 14 d(i) which I would quote below:

"If the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or, if that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents, or to the Beneficiary, if it received the documents directly from him."

The expression "telecommunication" would include telephonic communication. Unless the communication is recorded it would be difficult to prove that discrepancies have been communicated to the presenter. In some cases the presenter may not deny that some discrepancies have been advised to him and would argue a discrepancy that the bank would find in his second presentation of documents, that he missed to correct, as ever been advised to him. Another risk you would also take is that you maybe informed by the presenter that you have not talked to the right person in the presenter’s company or the bank. Thus your message did not reach the right department / authority to take timely action for the correction, looking for another buyer etc.

The expression "by other expeditious means" may, among other methods, allow face to face communication if beneficiary happened to call at the bank’s counter. Again this put the bank in a defensive situation if the beneficiary would deny that he/ she has been advised of the discrepancies.

To avoid all these, it is recommended that you make use of a written message either through swift, telex, telegram etc. If the beneficiary visits the bank, it is safe to provide him with discrepancies in writing against acknowledgement and then if necessary provide the required explanation.

I wouldn’t know how article 16 applies to this type of communication since it is usually interactive and one would, instantly, know whether there is communication lines failure / problem. However, if at later stage the bank have a dispute with the presenter and it has been requested by court of law to present a proof and found out that the recording machine has lost the message, I am not sure what the consequence would be.

In the absence of the presenter, if the bank opted to recorded the discrepancies in the answering machine of the presenter, it would be difficult to ascertain whether the presenter has received the message and denied receiving it or the recording machine was faulty and no message was recorded.

It is worth mentioning here that some courts in some countries would not accept recorded messages.

[edited 7/27/01 10:30:24 AM]

Since John Alexander refers to Article 16, do we assume that a written rejection has been lost, leaving only the oral rejection ?

Although it is common practice for banks to give both, under Article 14 di the bank is only required to give such notice by telecommunication or other expeditious means.

If the beneficiary has received this notice orally, what is the difficulty in using this to correct the documents or contact the applicant for a waiver ?
If the beneficiary suspects that such oral notice may vary over time or not be recorded by the bank, he can ask for written confirmation or send a written version to the bank asking for confirmation of rejection on such basis.

Hi in Bulgaria.

This question concerns two
UCP sub-Articles: - Sub-Article 13(b) states that the
issuing bank has a reasonable time not exceeding
7 banking days after receipt of documents. The sub-Article further states that the 7
days encompasses the time to "inform the party from which it received the
documents".

· Sub-Article 14(d)(i) makes it clear that notice of refusal by the issuing bank must
be "by telecommunication or, if that is not possible, by other expeditious means ,
without delay but no later than the close of the seventh banking day ... ".

There is no compulsion to use any particular means of delivery other than the
implication that first recourse should be to telecommunication (which would
include fax) and the general proviso of " expeditious means ".

An issuing bank is, by its own actions, endangering its compliance with sub-Article
13(b) if it waits until the last possible moment to attempt to send its notice by a
particular means of communication. Since no party can be certain in advance that a
particular means will be functional, it would seem normal prudence for an issuing
bank to attempt the communication sufficiently in advance to allow for a change to
alternative means, but still meet the deadline. It would seem improbable that a bank
could simultaneously lose all means of communication (including courier) and
claim Article 16 in defence rather than Article 17.

Telecommunication, in these circumstances,
includes telephone (followed by written confirmation where necessary).

An issuing bank could, however, claim
an Article 16 defence if it could,
in the final analysis, prove that the communication had
left its domain and the failure
occurred thereafter on the part of one of the agents for delivery (e.g. the SWIFT organization,
for example).

The facts of the transmission, however, do not, in this case,
appear to have been clearly established as to where the problem
lies.

From the facts provided this would constitute a failure to give notice and preclusion
would apply.

[edited 7/27/01 11:23:53 AM]
[edited 7/27/01 11:25:42 AM]

DEFECTS OF ORAL COMMUNICATION

Giving refusal advice orally, whether face-to-face or through a telephone, is quite risky from communication effectiveness point of view.

As a Member of the Institute of Training and Development (MITD) of England, I understand that oral communication has the following defects:

(1) The listener cannot concentrate due to:

(a) Physical Condition: too tired, feeling sick, having pains at the back, in a bad mood, too emotional, day dreaming, anxious to leave for next appointment and the like;

(b) Environmental Condition: room too dark, too noisy, other attractions such as a sexy lady is passing by and the like;

(c) Other Conditions: speaking too softly, foreign language/dialect, jargons, don't like the speaker, no interest in the subject, bad news not welcome and similar reasons.

(2) The speaker lacks communication skills to convey his messages clearly, completely and precisely.

(3) The listener misinterprets the messages due to differences in cultures, social background, education, values, styles, trade customs and practices and the like.

(4) The speaker says 3 whilst he actually means 4 due to bad coordination in brain sectors. This defect will grow with age.

TELEPHONE REFUSAL ADVICE IS QUITE RISKY

Better stop at this point. These defects of oral communication are enough to show that oral refusal advice is not recommended for such an important message that could cost the issuing bank millions of dollars if not performed well, being clear, complete and precise. A more strict rule in communication is the five "Cs" - Correct, Clear, Complete, Concise, and Consistent.

Telephone communication is even worst than face-to-face communication because parties engaged in telephone communication cannot use (the speaker) or see (the listener) body language, which is a very important communication tool.

Even if video telephone were used, it would not be as effective as face-to-face communication. Cyber football games cannot be compared to real soccer matches, such as Brazil vs. France in the last World Cup.

We are from http://www.tolee.com

[edited 9/27/02 11:14:53 PM]

An oral rejection is only as good as the paper it is written on !!!

IN SENDING REFUSAL NOTICE, WRITTEN FORMAT IS BETTER THAN VERBAL

To respond to the comments from Mr. Bacon on 30 July 2001, we think a refusal notice given verbally by telephone against a written refusal notice may not be as good as a refusal notice sent to the presenter in writing.

The reasons are:

(1) Coordination of human eyes (sight) and mouth (sound) may not work out perfectly all the time. Our brain, as a CPU, may have down times and bugs.

(2) That is why sometimes when we see "3" in a paper we may say "4" without awareness of it.

(3) This is supported by the fact that we often see a news reporter in a TV station making mistakes occasionally when he/she reads on a news scroll displayed on a TV monitor placed in front of him/her.

This is one of the many reasons why formal documents, deeds etc, must be in written format.

We are from http://www.tolee.com

[edited 9/27/02 11:12:39 PM]