SBLC (subject to UCP 600 or ISP98) issued for USD 10,000.
L/C allowed partial drawings.
It contains a auto-renewal clause, which states, among others, ...upon receipt by you of our non-renewal notice, you may draw the FULL amount hereunder by means of your demand.
My concern is with the word "FULL" in the aforementioned clause. If there is any partial drawing of USD 5000 before issuing a non-renewal notice, can a beneficiary claim for full amount (i.e. USD 10,000) in the event of issuance of non-renewal notice because of above clause? If so then our total obligation will stand USD 5,000 + USD 10,000
Shall appreciate your comments on it.
Regards,
Shahed
[edited 6/3/2015 4:03:01 PM]
Standby L/C
Standby L/C
I try to discourage providing in the text of a standby the effects of sending a non-extension notice other than on the expiration date. The underlying obligation should facilitate a drawing on the basis of whatever default or other statement is required to demand payment under the credit and indicate whether the LC proceeds may or must be used to discharge an underlying payment obligation or to provide cash collateral.
I think everyone in the standby business knows that "full amount hereunder" is intended to mean "up to the full amount then available under the credit". We are used to seeing explicit text to overcome a "credit overdrawn" (or "credit expired") defense. Strangers to the business might see it or want to see it otherwise and try to exploit law and practice rules construing ambiguous LC text against the issuer (and the applicant). So, you have reason to worry.
This topic is well covered in the recently published ISP98 Form 2 (Model Standby Providing for Extension and Incorporating Annexed Form of Payment Demand with Alternative Non-Extension Statement), which is freely available at www.iiblp.org.
Regards, Jim Barnes
I think everyone in the standby business knows that "full amount hereunder" is intended to mean "up to the full amount then available under the credit". We are used to seeing explicit text to overcome a "credit overdrawn" (or "credit expired") defense. Strangers to the business might see it or want to see it otherwise and try to exploit law and practice rules construing ambiguous LC text against the issuer (and the applicant). So, you have reason to worry.
This topic is well covered in the recently published ISP98 Form 2 (Model Standby Providing for Extension and Incorporating Annexed Form of Payment Demand with Alternative Non-Extension Statement), which is freely available at www.iiblp.org.
Regards, Jim Barnes