I would like to seek a clarification of the words " without regard to a default" in the definition of a direct pay credit provided in ISP 98.I am also unable to appreciate the fine difference between a "direct pay" & a financial standby and would appreciate some inputs from the members.
thanks & regards,
Khalid
[edited 1/4/02 9:57:27 AM: change the word able to unable]
Direct Pay Standby
Direct Pay Standby
My personal views, without responsibility/liability, are:
I understand the direct pay standby is not intended (automatically) to cover the guaranteed parties default with respect to the underlying transaction, unlike other standbys or demand guarantees. Rather, it is intended to be (or at least available to be) the prime means of settlement of a due debt, that has not (necessarily) arisen through default. Therefore, I believe ISP is saying that a direct pay standby typically covers an underlying financial transaction but does not concern itself, in its terms, with whether or not default has taken place by the guaranteed party. I understand direct pay standbys are commonly payable merely against sight drafts and/or a statement that the sum demanded is due.
[edited 1/4/02 3:37:35 PM]
I understand the direct pay standby is not intended (automatically) to cover the guaranteed parties default with respect to the underlying transaction, unlike other standbys or demand guarantees. Rather, it is intended to be (or at least available to be) the prime means of settlement of a due debt, that has not (necessarily) arisen through default. Therefore, I believe ISP is saying that a direct pay standby typically covers an underlying financial transaction but does not concern itself, in its terms, with whether or not default has taken place by the guaranteed party. I understand direct pay standbys are commonly payable merely against sight drafts and/or a statement that the sum demanded is due.
[edited 1/4/02 3:37:35 PM]
Direct Pay Standby
To add to what Jeremy has already explained, "direct pay" SBLC (a made in USA product) is used to pay off rents, instalment payments, which have nothing to do with "drawing against a default situation" in banker's guarantees, which are used mainly to guarantee performance of contractual obligations.
If you rent the whole Empire State building, the owner may need you to open a direct pay standby to make sure that he does not need to chase you monthly for the rents. One thing good is that he does not need to worry about payment dishonour. He just sits back and relaxes and the bank would credit the money into his bank account like autopay arrangement, which we use to pay monthly bills for electricity, telephone, gas, supermarket, credit cards and the like.
In our workshops, we call the direct pay standby as "autopay standby" to make non banker participants understand more clearly the difference between these two kinds of standbys. As a trainer, it is our job to create innovative, simple and user-friendly terms to make the theoretical concepts readily understood by the laymen users. Being a photographer, we can make use of the right part of our brain (for creativity) for such purposes.
http://www.tolee.com
[edited 1/7/02 7:52:13 PM]
If you rent the whole Empire State building, the owner may need you to open a direct pay standby to make sure that he does not need to chase you monthly for the rents. One thing good is that he does not need to worry about payment dishonour. He just sits back and relaxes and the bank would credit the money into his bank account like autopay arrangement, which we use to pay monthly bills for electricity, telephone, gas, supermarket, credit cards and the like.
In our workshops, we call the direct pay standby as "autopay standby" to make non banker participants understand more clearly the difference between these two kinds of standbys. As a trainer, it is our job to create innovative, simple and user-friendly terms to make the theoretical concepts readily understood by the laymen users. Being a photographer, we can make use of the right part of our brain (for creativity) for such purposes.
http://www.tolee.com
[edited 1/7/02 7:52:13 PM]
Direct Pay Standby
T.O.,
I apologise if I have misunderstood, but you seem to be suggesting that the beneficiary does not have to make demand under a direct payment standby and that payment(s) is/are automatic without any action by the beneficiary. This conflicts with my own understanding of a direct pay standby. I would observe that on page 3 of ‘The Official Commentary on the ISP’ by Prof J.E. Byrne, published by the IIBLP (1998), it is stated:
‘7. Direct Pay Standbys
……
The standby letter of credit is AN UNDERTAKING TO PAY AGAINST THE PRESENTATION OF DOCUMENTS regardless of whether those documents are the result of a default or a regular* payment.’
* I believe in the American sense of the word, meaning ‘normal’ or ‘usual’, as opposed to the English sense of the word, meaning ‘periodic’.
Should I have not 'got the picture' correctly, I am sure I can rely on you to say so in your usual amicable and conciliatory manner.
Regards, Jeremy
I apologise if I have misunderstood, but you seem to be suggesting that the beneficiary does not have to make demand under a direct payment standby and that payment(s) is/are automatic without any action by the beneficiary. This conflicts with my own understanding of a direct pay standby. I would observe that on page 3 of ‘The Official Commentary on the ISP’ by Prof J.E. Byrne, published by the IIBLP (1998), it is stated:
‘7. Direct Pay Standbys
……
The standby letter of credit is AN UNDERTAKING TO PAY AGAINST THE PRESENTATION OF DOCUMENTS regardless of whether those documents are the result of a default or a regular* payment.’
* I believe in the American sense of the word, meaning ‘normal’ or ‘usual’, as opposed to the English sense of the word, meaning ‘periodic’.
Should I have not 'got the picture' correctly, I am sure I can rely on you to say so in your usual amicable and conciliatory manner.
Regards, Jeremy
Direct Pay Standby
Jeremy,
OUR MEMORY HAS FAILED US
Thank you very much for pointing out that direct pay standbys still need presentation, same as that autopay also needs instructions from the payor to pay certain sums of money to certain parties at certain fixed periods of time. However, for an autopay, an one-off standing instruction is enough whereas in direct pay standby, one may need fresh presentation each time.
We have already corrected that passage. In fact, we have already read that part of the book you have quoted but memory may fail us sometimes.
In the Discussion Forum as well as in our workshops, we would apology for our mistakes promptly and would not defend ourselves. To err is human and to forgive is divine.
THERE MAYBE A NEED FOR AUTOPAY STANDBY
Maybe we may have an autopay standby before we land on the Mars as this may be more favourable to the power beneficiary, for example, the owner of the Empire State Building (the tallest building in Manhattan in 2002? Sorry no time to check for this fact). But by that itme both you and we should have retired.
Here comes our lateral thinking again - how about asking the power beneficiary to present 24 pre-signed and post dated payment demands and/or drafts in the first presentation against a 24 month direct pay standby to enable the true "sit back and relax" "autopay" standby?
WE ARE PREPARED FOR THE MISTAKES
Time for sharing some Chinese words of wisdom here: "The more one talks, the more mistakes one would make". When we decide to join the Discussion Forum, we are fully prepared for this since we are one of the most active participants in the Discussion Forum.
Jeremy, we would like to buy you a dinner for pointing out our mistake, if we happen to meet in 2002. Otherwise you may have to present (UCP meaning) yourself to claim for the standby dinner invitation.
http://www.tolee.com
[edited 1/9/02 3:55:00 AM]
OUR MEMORY HAS FAILED US
Thank you very much for pointing out that direct pay standbys still need presentation, same as that autopay also needs instructions from the payor to pay certain sums of money to certain parties at certain fixed periods of time. However, for an autopay, an one-off standing instruction is enough whereas in direct pay standby, one may need fresh presentation each time.
We have already corrected that passage. In fact, we have already read that part of the book you have quoted but memory may fail us sometimes.
In the Discussion Forum as well as in our workshops, we would apology for our mistakes promptly and would not defend ourselves. To err is human and to forgive is divine.
THERE MAYBE A NEED FOR AUTOPAY STANDBY
Maybe we may have an autopay standby before we land on the Mars as this may be more favourable to the power beneficiary, for example, the owner of the Empire State Building (the tallest building in Manhattan in 2002? Sorry no time to check for this fact). But by that itme both you and we should have retired.
Here comes our lateral thinking again - how about asking the power beneficiary to present 24 pre-signed and post dated payment demands and/or drafts in the first presentation against a 24 month direct pay standby to enable the true "sit back and relax" "autopay" standby?
WE ARE PREPARED FOR THE MISTAKES
Time for sharing some Chinese words of wisdom here: "The more one talks, the more mistakes one would make". When we decide to join the Discussion Forum, we are fully prepared for this since we are one of the most active participants in the Discussion Forum.
Jeremy, we would like to buy you a dinner for pointing out our mistake, if we happen to meet in 2002. Otherwise you may have to present (UCP meaning) yourself to claim for the standby dinner invitation.
http://www.tolee.com
[edited 1/9/02 3:55:00 AM]
Direct Pay Standby
T.O.,
Thank you for your cordial response and dinner invitation. I regret I am pessimistic we will be able to meet in 2002, as I believe it is unlikely I will be attending any of the ICC Banking Commission meetings. The only international trip I currently have planned is the IIBLP organised Annual Survey in Amsterdam; if attending I imagine you’ll go for one of the Far East venues. Perhaps 2003 will be different.
Regards, Jeremy
Thank you for your cordial response and dinner invitation. I regret I am pessimistic we will be able to meet in 2002, as I believe it is unlikely I will be attending any of the ICC Banking Commission meetings. The only international trip I currently have planned is the IIBLP organised Annual Survey in Amsterdam; if attending I imagine you’ll go for one of the Far East venues. Perhaps 2003 will be different.
Regards, Jeremy
Direct Pay Standby
Jeremy,
WORK LIKE A HORSE IN THE YEAR OF THE HORSE
Frankly at the present moment I don't know which Annual Survey I would be on this year as works are piling up for DC case hearings and lots of requests for in-house eUCP workshops from banks in 2002. So you should not be surprised if I appear suddenly in Amsterdam or not appearing in any of the Annual Surveys at all.
Time is a a luxury item that belongs only to my customers, or clients, just to please you. 2002 is the year of the Horse according to the Chinese Classic Calendar and I have to run like a horse, from one country to another. No complaints! when the economy is bad these days.
You may earn interest for the deferred dinner undertaking. Does that also mean a breakfast?
T. O.
http://www.tolee.com
[edited 1/9/02 1:34:38 AM]
WORK LIKE A HORSE IN THE YEAR OF THE HORSE
Frankly at the present moment I don't know which Annual Survey I would be on this year as works are piling up for DC case hearings and lots of requests for in-house eUCP workshops from banks in 2002. So you should not be surprised if I appear suddenly in Amsterdam or not appearing in any of the Annual Surveys at all.
Time is a a luxury item that belongs only to my customers, or clients, just to please you. 2002 is the year of the Horse according to the Chinese Classic Calendar and I have to run like a horse, from one country to another. No complaints! when the economy is bad these days.
You may earn interest for the deferred dinner undertaking. Does that also mean a breakfast?
T. O.
http://www.tolee.com
[edited 1/9/02 1:34:38 AM]
-
khalilhamad
- Posts: 9
- Joined: Fri Apr 05, 2019 5:21 pm
Direct Pay Standby
hello to all.
It may be of relevance to mention that because of direct pay standby, (not being a default standby), the ISP98 has retained a rule relating to Issuer approaching the applicant for a waiver of discrepancy(ies).
It may be of relevance to mention that because of direct pay standby, (not being a default standby), the ISP98 has retained a rule relating to Issuer approaching the applicant for a waiver of discrepancy(ies).