VERBAL ADVICE OF PAYMENT OF COLLECTION

[vobrien]

VERBAL ADVICE OF PAYMENT OF COLLECTION


Interested in you views.

A Remitting Bank in Country X sent a cheque for a large amount of money on collection to a Collecting Bank in Country Y. The cheque was sent under a Collection Instruction subject to URC 522.

The collection instruction included instruction to advise fate by telephone/Facsimile.

An interesting point is that the Collection Instruction stated that any telephone communications would be recorded for protection of all parties.

A person in the remitting bank phoned the collecting bank and spoke to a staff member in the Collecting Bank.

The staff member in the Collecting Bank verbally stated on the telephone that the cheque ‘Would be Paid’

However, it transpired within a few days that the cheque would not be paid

Opinions as to whether a verbal ‘would be paid’ answer over the telephone would have any binding obligation on the Collecting Bank to remit funds in settlement of the collection welcomed.

Many thanks

Vin

[KimChristensen]

Dear Vin,

Guess this would be better posted at some ”lawyers forum”

Anyway … being a non-lawyer my view would be that:

1) It would most likely be necessary to have more on the phone conversation.

E.g. the “would be paid” statement was said in the context

a) that the cheque had already been delivered to the drawee, or

b) that the collecting bank had been in contact with the drawee who had indicated payment.


2) It would be nice to see the collection instruction.


In general I would find it hard to imagine that the collecting bank are obligated if they have not delivered the cheque to the drawee.

Best regards
Kim

[KhalidI]

Dear Vin,
As Kim said this would be best answered by lawyers, but as a layman dealing with URC only I feel there is a strong case for binding the collecting bank here. The collection order clearly stated that “fate be advised by telephone/facsimile. I would think that in terms of URC sub art 4(b) item 10 this may be construed as the “form of payment advice”.
Best Regards
Khalid

[JudithAutié]

Good heavens, what lax instructions from the remitting bank. After all, the person who replied on the telephone could have been the cleaning staff with no authority to give any sort of opinion or undertaking.

The French say "les mots s'envolent, les écrits restent" -- words fly away, writings remain. -- even if the phone conversation is recorded.

Judith

[NigelHolt]

Vin,

Couple of thoughts:

1. I would imagine it would be a question of what the applicable law has to say on the matter, but I would have thought that a court would regard the answer as ‘binding’.

2. Nonetheless, I would have thought that in order to have rights against the collecting bank the remitting bank would have to have suffered some harm as a direct result of the collecting bank’s answer, e.g. it credited proceeds to the principal because of the answer it received and is now unable to recover them either legally or because of the financial position of the principal.

Regards, Jeremy

[DanielD]

I am just told that "a verbal promise like this might be enforceable if it can be shown that it was intended to be legally binding when made. (Kleinwort Benson v Malaysian Mining Corporation (1989) 1 All ER 785.
Daniel

[vobrien]

Thanks for such fast and practical replies..

Yes, this is more of a law question than application of the URC.

The fact that the telephone conversation was recorded and the collection order stated telephone conversations would be recorded adds an interesting dimension.

Further comments welcomed.

Many thanks
Vin

[PavelA]

Even if we take it as a proven fact that a person in the collecting bank gave a verbal advice of payment, it would be quite reckless for a remitting bank or any other party to assume that ‘person’ had a mandate or authority to authorise payment, particularly if a large amount of money was involved.

Paul

[DanielD]

It has happened in a bank in Switzerland, an brand new clerk gave a wrong answer to a customer. It was held that the bank was responsible for its staff and so the answer was valid.
Daniel