ICC Digital Library Forum

We presented documents under Usance Export Lc to Issuing Bank
as it was available with them on acceptance basis. The documents had many discrepancies including in draft, which was drawn on us instead of Issuing Bank. The issuing bank confirmed acceptance of the discrepant documents. Now, in case, Issuing bank fails honour on due date, whether we will be
having any legal remedy, since the draft was defective (ie. not
drawn on Issuing Bank)

I infer:
1. the issuing bank has not purported to accept the draft.
2. you were aware of the discrepancies and sent the documents to the issuing bank on an ‘approval’ (or ‘in trust’) basis.

I can only see a bank would want rights -in the circumstances you describe- if it was a nominated bank and had negotiated (given drafts were on the issuing bank) in accordance with UCP600. In order to negotiate after the documents have been ‘honoured’ by the issuing bank I believe you would need their express authority as the documents are no longer available for you to purchase. If you do not have this authority you might well not have any rights against the issuing bank under the UCP.

[edited 4/1/2009 11:23:12 AM]

Hi,

I agree with Jeremy and I am of further opinion that:

If the issuing bank gave a proper acceptance like this: “We accept the documents and shall honour on due date, i.e., on xx xx 2009” it must pay the beneficiary at maturity. The beneficiary can take legal action against the issuing bank in case it fails to pay at maturity.

From your description I see that there was no accepted draft returned to the beneficiary and your bank was not the nominated bank under the L/C. Therefore, if your bank discounted the issuing bank’s acceptance without obtaining the issuing bank’s authorization, it can not bring a lawsuit in its own name against the issuing bank in case the issuing bank fails to honour on due date.

Best regards,
N.H. Duc