4.01  Operation of a letter of credit often involves three independent but interlocking stages. Typically, it begins when the beneficiary presents a set of documents to the bank with which the credit is expressed to be available for honour¹ or negotiation.² Then, a nominated bank, having acted on its nomination and taken up the beneficiary’s presentation, tenders the documents to the issuing bank for reimbursement of the sum it has paid under the credit. The last phase of the process entails the issuing bank’s delivery of the documents, usually against a trust receipt, or on the basis of a security arrangement executed in its favour to its customer, to the applicant on whose instructions the facility has been established.

4.02  At each of the initial two stages, it is common general knowledge among bankers and merchants routinely involved in letter of credit transactions that it is normally the presenting beneficiary’s or nominated bank’s responsibility to put the documents before the presentee bank to enable it to examine them to determine if they qualify as a complying presentation³ entitling the beneficiary or nominated bank to the amount of the credit. Methods of determining whether the documents thereby tendered, both in terms of their form and contents, are what the credit calls for will be discussed in later chapters; as will the documents handed by the issuing bank to the applicant.⁴

4.03  As a prelude to the discussion, it is intended in this chapter to consider the circumstances in which the beneficiary or nominated bank can legitimately be treated as having fulfilled its responsibility to make a presentation requiring examination for conformity. Notably, a bank is ordinarily under no obligation to examine documents not properly placed in its hands to (p. 100) verify if they are prepared in accordance with the stipulations in the credit.⁵ If the documents have been delivered neither to the bank nor its branch or an intermediary bank acting as its agent, they are in principle not regarded as having come home to the bank; they are deemed not tendered at all.⁶ In the event that a presentee issuing or nominated bank honours a presentation, for instance, outside the period of time prescribed in the credit, its right to claim reimbursement from, respectively, the applicant or nominating bank for the sum it advanced against the tender will almost invariably not arise.

4.04  Essentially, then, under a credit, the requirements for tendering documents are distinct from those as to the manner in which the documents presented need to be drawn up. More specifically, whether a presenting beneficiary⁷ or nominated bank⁸ has duly handed documents to the presentee bank pursuant to the individual letters of credit, involves ascertaining (i) the bank to which documents are to be presented, (ii) the delivery of documents through specified channels, and (iii) the time within which the documents must be tendered under the credit. These have variously featured in litigation in the Anglo-American courts in recent times, leaving serious legal problems in their wake.

4.05  In banking practice, as articulated in the successive editions of the UCP, branches of a bank in different countries are considered separate banks in the same way that Standard Chartered Bank is separate from Bank of India, Sonali Bank, or Zenith Bank; but can a presentation of documents to a branch of an issuing bank properly be taken as a tender to the issuer when both those banks are in the same country? If it is not, what are the beneficiary’s rights when the branch holds on to the documents until the validity period of the credit runs out? Some commentators⁹ are of the opinion that a beneficiary is within his right to bypass a nominated bank and present documents directly to the issuer. To what extent can he do so? May a presenter personally make a presentation to the issuer under a credit which stipulates submission by airmail? Is a set of documents tendered within time if received at the mailroom of the presentee bank on the last day of the period for presentation but after banking hours? In addition, fierce debate about the position of the parties when documents are lost in transit to the issuing bank or confirming bank, especially in situations where the presenting party is a nominated bank rather than the beneficiary, keeps recurring in letter of credit seminars and training or educational programmes for bankers¹⁰ and in practitioner literature in the field.¹¹ To facilitate the ensuing discussion in this chapter, we shall examine the issues presented in turn in their respective classes of contexts.

4.06  It is perhaps necessary to point out at the outset that, in general, only the beneficiary of a credit or his agent can tender documents for honour or negotiation under a credit. In cases where a credit specifies two or more persons as the ‘Beneficiary’, either of the named persons may make the presentation.¹² But, if the expression ‘Beneficiaries’ is used rather than ‘Beneficiary’, the presentation has to indicate on its face that it is being made jointly by the designated beneficiaries; if it does not so indicate, the presentee bank is within its right to decline it as being non-complying with the credit.¹³

4.07  The same is also true of a situation in which the beneficiary of a credit is dead, in liquidation, or receivership. The party who succeeds to the rights and obligations of the beneficiary as executor, liquidator, or receiver by operation of the personal law¹⁴ of the beneficiary, can of course, present documents to realize the facility, but in doing so it has to signify its status by means of, for example, a covering letter or a prior notice in order not to mislead the presentee issuing or nominated bank to its detriment; otherwise, the presentee bank may refuse to recognize the presentation.¹⁵

4.08  The bank at whose counter the beneficiary has to tender documents is the one with which the credit, by its terms, is available. That bank,¹⁶ as we saw in Chapter 1, is usually in the beneficiary’s locality and in a pre-existing banking relationship with either the beneficiary or the issuer of the credit. Normally, the credit will state that the bank is authorized to honour or negotiate the presentation, and also indicate if it is restricted to that bank or not. But, occasionally, it may be unclear about the matter, with the result that the beneficiary, or his bank to which the documents are presented, is left in a quandary over whether the availability of the credit is restricted to some other bank or unrestricted.

4.09  There is high authority that in such a case the presenter or presentee bank may adopt what appears to him a reasonable interpretation of the language employed and to hold the issuer of the credit to that interpretation, even though a court upon a proper construction will prefer (p. 102) some other meaning, provided in so doing it acts reasonably in the circumstances,¹⁷ as, for instance, where it is wholly unfeasible to seek clarification on the matter because of serious supervening technical difficulties against a background of a fast approaching credit expiry date.¹⁸ Moreover, in some situations the issuing bank’s conduct vis-à-vis the presenting beneficiary or presentee bank may give rise to an estoppel, precluding it from denying the right of the beneficiary to tender the documents as he did, or the authority of the presentee bank to take them up from him.¹⁹

4.10  In marked contrast to the foregoing context of an unclear credit as to the bank authorized to receive or honour a tender of documents, is the case of a letter of credit clearly restricted to a given bank at a stated location (e.g. the head office) in the central business district of the beneficiary’s country, but owing to the size of the country it happens that the beneficiary’s residence is hundreds of kilometres (or miles) away from that location. Can the beneficiary present documents for negotiation to a branch of the bank operating in his locality? To put the matter from the converse perspective, suppose this branch in, say, the Malaysian state of Sarawak, as against the head office in Kuala Lumpur (Federal Territory), negotiates the presentation and forwards the documents to the issuing bank in, say, Hong Kong for reimbursement. So far as concerns the subject under consideration, is the issuer entitled to claim that the negotiation under the credit was unauthorized and decline liability to the Sarawak bank?²⁰

4.11  In the two supposed cases, it might be argued that since by virtue of Article 3 of the UCP 600, branches of a bank in different countries are considered to be separate banks, branches of a bank in the same country are separate banks. Moreover, the beneficiary of a credit available in an extremely remote location is normally in a position to request an amendment to the credit so as to substitute the specific branch more accessible to him for the inaccessible head office as the nominated bank. If, prior to effecting shipment of the goods financed by the credit, he has neglected to utilize the opportunity to bargain for terms he can satisfy, the law should accordingly oblige him to face the consequences of his omission.

4.12  Importantly, however, the ICC Banking Commission traditionally eschews such a hard-line approach to letter of credit problems and is firmly of the opinion that, so far as generally accepted international banking practice goes, ‘Branches of the same bank in the same country are considered to be the same bank. If a letter of credit is stated to be available with Bank (p. 103) X, Branch Y in Country Z, then the documents may be negotiated by that particular branch or any other branch of that bank in Country Z’.²¹

4.13  In this practical view of the matter, it would seem to follow that when a credit is issued with the issuing bank, the presenter can tender documents at any branch of the bank so long as the branch and the issuer are in the same country.

4.14  An important question, however, arises as to the parties’ rights against the issuing bank if the branch sits on the documents presented to it until the expiry of the credit, and afterwards advises the presenting beneficiary or nominated bank that it has no intention of honouring the presentation.

4.15  Ordinarily, in accordance with the banking practice identified by the ICC Banking Commission, the branch may be considered authorized to honour or negotiate the tender. Notably, however, there is no privity of contract between the branch and the presenter; and an authority to perform an act does not usually create an obligation to perform the act. It is therefore suggested that the branch is not to be held liable to accept the documents by reason only of acting in the manner mentioned, save that in a particular case the presentee branch’s conduct may found a claim in tort.²² On the other hand, the issuer can fend off a potential suit by the presenter where the credit specifically requires the presentation to be made to it for honour. Once it is clear on the face of the instrument that the issuer’s address is expressly stipulated as the place of presentation, then any tender to the branch, albeit in the same country, will constitute a failure to strictly comply with the stipulation, relieving it of its obligation to honour the credit. It deserves noting that if an issuer is insolvent, the requirement to tender documents at the issuer’s address may become irrelevant if the liquidator or receiver advises the beneficiary or nominated bank to remit the documents to it at a different location.²³

4.16  A very instructive, but difficult decision is International-Matex Tank Terminals-Illinois v Chemical Bank.²⁴ The credit in dispute had been issued by Chemical Bank in Michigan for the benefit of the Illinois claimant, Matex, as security for certain monthly payments in respect of a fuel storage tank it leased to Torco Race Fuels, and contained an engagement clause which runs: ‘We hereby engage with you that documents drawn in compliance with the terms and conditions of this letter of credit will be duly honoured by us upon presentation at Chemical Bank, 823 Riverview Drive, Benton Harbour, Michigan’. Torco fell into numerous defaults on its rental agreement. Matex became annoyed with its endless excuses and sought to realize the credit by presenting via FedEx courier to Chemical Bank’s branch at Marshall Downtown, Michigan, documents consisting of an unpaid invoice and its statement attesting that the sum is due and owing. No payment being forthcoming and the credit having expired on its terms, Matex launched litigation against the issuing bank.(p. 104)

4.17  Chief Judge Paul Maloney, after expatiating on the rule imposing an obligation on a presenting party under a letter of credit to comply strictly with the requirements of the credit when tendering documents for acceptance, had little difficulty accepting the defendant issuer’s submission that Matex, the presenter, failed to send the documents to the location expressly prescribed in the credit.

4.18  At all events, they could not have disputed it, since the matter is well covered by Revised Article 5.²⁵ But counsel strenuously urged that the tender was handed in at the Marshall branch attentioned to Timothy Walling, a vice-president of Chemical Bank based there as opposed to Benton Harbour stated in the credit, because an employee at the latter office instructed it to do so. Rather than give serious attention to the legal substance of this allegation, the judge said that ‘whether or not Chemical actually made the request was immaterial’ to the unambiguous terms of the issuer’s engagement embodied in the credit, particularly the requirement as to the location of presentation, adding: ‘If Matex wanted a legally enforceable right to present draw requests at the [issuer’s] Marshall Office it could and should have negotiated the inclusion of such a term in the [credit]’.

4.19  The judge’s offhand rejection of the beneficiary’s contentions leaves much to be desired. Crucially, at the heart of the issue before the court for resolution was whether the place of delivery of the documents allegedly proposed by the issuer and implicitly accepted by the beneficiary’s conduct in tendering his documents in compliance with the request, effectively amended the related term of the credit; and if it did not, whether the circumstances are of such a character as to bring the case within the well-known doctrine of estoppel in pais, a substantive rule of justice currently universally applicable in Anglo-American courts, including that of Michigan involved in the instant case.

4.20  Regarding amendment, Article 9 (a) (i) of the UCP 500²⁶ (now Article 10 (a) of the UCP 600) incorporated into the credit in the Chemical Bank case is very clear on the position: the unconfirmed credit in dispute can only be amended by the ‘agreement of the issuing bank (Chemical Bank) and the beneficiary (Matex)’. Of course, the agreement need not be express to make it binding; it may be implied: a party’s tacit concurrence in an amendment suggested by the counterparty is sufficient. So understood, in International-Matex, assuming that the request averred is legitimately attributable to Chemical Bank, there is no reason why it should not be treated as proposing an amendment, and the submission of the draw documents at Marshall Downtown in compliance with the issuer’s wish as constituting an implicit acceptance of the proposed change. Likewise, a presentation at the original place, Benton Harbour, would be an implied rejection. As a result, performance of the original term is no longer a condition of the issuer’s promise to honour a tender by the presenting beneficiary or nominated bank. This analysis would appear to be a reasonable reading of Article 9 (now Article 10, UCP 600).

4.21  Exceptionally, however, the credit in hand expressly states: ‘This [letter of credit] may be changed or modified without the written consent of the party sought to be bound by such (p. 105) change or modification’.²⁷ A clause of this kind is sometimes inserted in a credit by an issuer who is perhaps unusually anxious that its own customer, the applicant at whose instance it issued the facility, and the beneficiary, might conspire to enlarge its commitment under the credit; or to plug what it considers, rightly or wrongly, a gap in Article 9 of the uniform rules of banking practice. Whatever the motive for its inclusion in the instrument, the court will not, in general, refuse to enforce such a contractual clause prohibiting modification or variation except by written agreement executed by the parties,²⁸ regardless of whether the result of enforcement would be harsh or provide a party to the contract with a means to escape from the transaction on a technicality.²⁹

4.22  At the same time, what should not be ignored is the essential ground of the presenter’s (Matex) argument before the court, albeit in fairness the counsel erroneously and confusedly bundled it up with the fundamentally different and certainly inapplicable concept of ‘good faith and fair dealing obligation’ implied in every American contract.³⁰ It implicates considerations of estoppel by representation. Under this rule, if a person (‘representor’), by words or conduct, makes an unequivocal representation of fact to another (‘representee’) which he intends to affect the relations between them in a certain manner and to be acted on in that sense by that other person, and this person then takes him at his word and acts on it, he will not be allowed to depart from the representation if the departure will unfairly and unjustly place that person in a position of material disadvantage.³¹

4.23  As is obvious, the principle, related to the present context, only applies in exceptional circumstances, namely, where estopping a representor from going back on his representation will prevent unfairness and serve the ends of justice; where it would be inequitable for the representor to insist that his strict legal right to require a presentation at the place stated in the credit has not been properly satisfied; that the documents submitted by the representee never reached his hands before the instrument expired. Essentially, then, the effect of the precept is not to afford the representee beneficiary or nominated bank a right to sue on the issuer’s denial of his representation; nor can the issuer bring an action against the presenter for sending the documents to an address not contemplated by the credit. Instead, the presenter could only use it defensively as a shield and not as a sword, in that it operates to prevent the representor issuer from availing itself of a defence (i.e. the right to insist on submission of the documents (p. 106) to it at the stipulated location) to which, without the representation, it would have been entitled.³²

4.24  Applying the foregoing to the facts of the International-Matex case, was there an estoppel operating against the issuer, Chemical Bank, so as to debar it from asserting that Matex’s delivery of the documents at the Marshall Downtown branch rather than at Benton Harbour was not permitted? With the evidence properly regarded, the only element which could stand in the way of the doctrine coming into play concerns the extent, if any, to which the alleged representation is binding on the issuer. Presumably, the employee (Miss Velvet Smith) lacked actual authority to request the presenter to deliver the draw documents to the issuer’s branch.

4.25  But the matter cannot stop there: what about apparent or ostensible authority? It may well be that she had no such authority initially or that limitations placed on it were known to the present beneficiary, Matex;³³ but later events seem to establish ratification of that probably unauthorized initial act. As appears from the evidence found by Chief Judge Paul Maloney, an email correspondence authored by the issuer’s vice-president advising Matex of the status of the documents tendered read, inter alia, ‘the documents are in [Chemical Bank’s] Letter of Credit department; they are processing them. I’ll check on timing for you’.

4.26  While difference of opinion might occur about the determination of whether this correspondence viewed within its material surrounding circumstances creates an estoppel in favour of the presenter, it seems plain that the judge’s omission to at least consider the matter one way or other is a serious error. It is, therefore, submitted that the omission undermines the Chemical Bank decision as a precedent and ought not to be followed in future cases.

4.27  Further support for this suggestion is provided by the judge’s ultimate ruling. Although the court found that Matex’s presentation was not made at the Benton Harbour address specified in the credit,³⁴ he nevertheless ultimately decided that the issuer, albeit located there, had an obligation by virtue of Article 16 (d) of the UCP 600³⁵ to notify Matex that the tender had not been made at the requisite place; and having neglected to do so, it is deemed under Article 16 (f) to have accepted the documents.³⁶

4.28  This reasoning appears problematic. In any such case as the present, it would seem that the logical consequence of the court’s finding of non-compliance with the credit necessarily implies that the documents have not been handed to the issuer (i.e. there is no presentation offered to it) because the tender to the Marshall branch is not a tender to the issuer at Benton Harbour: the bank branches are distinct from each other; and also because there is nothing in (p. 107) the dealings between the parties preventing the issuer from insisting upon compliance with the stipulation in the credit in respect of where the documents must be tendered. If this analysis is correct, then, why should the issuer be regarded in the instant Chemical Bank case as having accepted documents considered presented to a bank not expressly or impliedly authorized by the issuer to receive them?

4.29  Putting aside, for examination in a later chapter,³⁷ the circumstances in which a presentee issuing bank may be denied the right to rely on a material discrepancy in documents as a ground for refusing to honour its payment of reimbursement undertaking, two points must be made here. First, once an estoppel is established in the particular case, no issue ought to arise as to the conformity of the presentation, for, in consequence of the estoppel doctrine, the documents are in the hands of the issuer; and, while in its possession, if it omits to examine them to determine their regularity before the credit expires, that is its affair. In that event, the preclusion rule in Article 16 (f) will naturally swing into operation, of course so long as the documents are not affected by a fraud to the knowledge of the presenter at the time of tendering them.³⁸

4.30  The other point is that the law would be doing a considerable disservice to the utility and reliability of letters of credit as payment instruments if a presentee issuer of the sort in the Chemical Bank case can request delivery of documents at its branch and, upon the making of the presentation to that place and call for remittance of the sum on the credit, turn round after the time stated in the credit for tendering documents has run out and say in opposition to the call: ‘The terms of the letter of credit require you to tender your documents to us and not to our branch office. We regret to inform you that we are under no obligation to effect payment. Have a nice day!’

4.31  It remains in this section to examine briefly the position of a beneficiary that skips the nominated bank and tenders documents straight to the issuing bank. As noted earlier, the party to whom the beneficiary has to make a presentation is the nominated bank, who is almost invariably in his country. Where such a bank is not designated in the credit, the place of tendering the documents is that of the issuing bank. Typically, however, the bank will be involved. The question arising for consideration is whether, in cases of this sort, it is at the beneficiary’s discretion to present the documents to the issuing bank directly or to the nominated bank.

4.32  A combined reading of the provisions of Article 6 (a)³⁹ and (d) (ii)⁴⁰ of the UCP 600 suggests that the beneficiary may elect to present his documents to the issuing bank without going through the bank specifically nominated in the credit.⁴¹ Although new in the uniform rules, (p. 108) the spirit of the clauses has been the ICC Banking Commission’s deep and abiding stance over the years. In its published official opinions, it enunciates that where the issuing bank has nominated another bank and documents are not forwarded to that nominated bank but are forwarded directly by the beneficiary to the issuing bank or through a third bank (i.e. the beneficiary’s own bank), the issuing bank must pay, provided that the documents constitute a complying presentation.⁴²

4.33  The ICC Banking Commission’s opinion is difficult to understand. Can a presentation to an issuing bank without having been tendered to the bank specifically nominated in the credit to collect the documents constitute a complying presentation? Fundamentally, the undertaking of the issuer under a credit is to ‘honour a complying presentation’. Article 2, UCP 600 provides: ‘a complying presentation means a presentation that is in accordance with (i) the terms and conditions of the credit, (ii) the applicable provisions of the UCP, and (iii) international standard banking practice’. Among these three criteria for establishing the conformity of a presentation, it has long been recognized by the courts as a matter of general contract law that the express stipulations in a credit carry overriding weight in the event of any irreconcilable conflict between the credit and the rules or banking practice.⁴³

4.34  On this basis, it is suggested that where a credit expressly requires the stipulated documents to be delivered to the issuing bank via a designated bank, the second sentence of Article 6 (a) will be ineffective insofar as it purports to entitle the beneficiary to bypass the nominated bank. Put another way, the stipulation by implication goes to exclude the operation of that clause to the credit, though Article 1 of the UCP requires explicit exclusion.

4.35  An illustrative case is Kredietbank NV v Sinotani Pacific Pte Ltd.⁴⁴ An unconfirmed letter of credit issued subject to the UCP 500 by a Chinese bank in favour of a Singapore beneficiary required that the documents ‘must be presented to Royal Bank of Canada Singapore branch (RBC), which holds special arrangements for ... document forwarding’. Despite this clause, the beneficiary ignored RBC and instead presented the documents to his own bank for onward transmission to the issuing bank in China. Chan Seng Onn J.C. ruled: the presentation was irregular for neglecting to adhere to that requirement; and the non-compliance relieved the issuing bank of its obligation to accept the documents.⁴⁵(p. 109)

4.36  It merits noting, however, that the beneficiary is always at liberty to tender his documents to the issuing bank where the nominated has declined to take up or negotiate the presentation; but the hurdle he may need to overcome, discussed subsequently in this chapter, is that he has to make certain that the documents reach the issuer before the time for presentation under the credit runs out. Admittedly, an instance in which such would be unnecessary is where it can reasonably be inferred from the credit and the material circumstances of the case that the nominated bank accepts as an agent of the issuer rather than in its own right, so that the initial tender should be treated as a presentation to the latter, its principal.⁴⁶

4.37  We have seen the possible consequences attendant upon the beneficiary’s submission of documents without using the nominated bank. Would the position be different if a credit requires presentation to the issuer by airmail but the beneficiary or the nominated bank personally tenders the documents to it? Is the issuer entitled to rely on this as justifying its dishonour of the tender? Strictly speaking, the answer must be in the affirmative if the relevant term of the credit expressly stipulates for the delivery of the documents by the indicated medium.

4.38  However, it may be objected that with regard to the rule of practice requiring a notice of rejection of discrepant documents to be given ‘by telecommunication or, if that is not possible, by other expeditious means’ the courts have considered effective a communication of the notice inter praesentes (i.e. face to face) even though telecommunication in the circumstances was not impossible.⁴⁷ Using this as an analogy, a presentation by the beneficiary or nominated bank in person should be a sufficient substitute for, and indeed better than, one made by airmail or courier. Moreover, it could hardly cause any prejudice to the issuer or the applicant, on whose account the credit has been established. But the difficulty with this objection is that what counts as acceptable compliance with a requirement of a credit fundamentally depends both on what can properly be regarded as the essential meaning of the particular requirement in question and on the act asserted to be in accordance with it. It is thus entirely a matter of proper construction.

4.39  Bearing that in mind, we turn now to examine if the delivery of documents in the form intimated is such as letter of credit law and practice would compel the presentee to take up. According to Rule 3.01 of the ISP98, a credit ‘should indicate the person to whom’ and the ‘medium in which presentation’ is to be made. If so indicated, ‘presentation must be so made (p. 110) in order to comply’.⁴⁸ There is no precise equivalent of that provision in the UCP; Article 2 of the current version merely requires a presentation to comply with the terms of a credit. This might be thought to raise the chance of a presenter tendering documents himself instead of airmailing them succeeding on its claim as being perfectly regular.

4.40  case from Hong Kong. This possibility came on for decision in the Hong Kong case of Udharam Rupchand Sons (HK) Ltd v Mercantile Bank Ltd.⁴⁹ The defendant Hong Kong bank opened a letter of credit to assist its customer, the claimant, in purchasing a quantity of assorted ladies clothing from a certain Thai-based exporter (the beneficiary). The credit, among other documents called for, contained the clause: ‘All documents are to be despatched in two sets by consecutive Airmails to the Issuing Bank’. In due course, the beneficiary shipped worthless goods, presented apparently conforming but forged documents under the credits to the nominated banks in Thailand, and obtained payment. Upon receipt of the documents from those banks, the issuing bank effected reimbursement and debited the customer’s account with the sum. The fraud that had been perpetrated then came to light. In his efforts to extricate himself from liability to the issuing bank, the customer brought an action challenging the debit, and argued that the presentation honoured by that bank violated the credit because, instead of it being via airmail, it had been made by the Thai banks to a certain Hong Kong finance company who subsequently forwarded it to the issuing bank.

4.41  It was strenuously argued that the special condition was included in the credit solely on the initiative of the issuer; hence if anyone should complain about the non-compliance, it was the issuer and not the customer. And what is more, the customer plainly wanted to fasten upon a pure technicality to get rid of his reimbursement obligation under the credit. Rhind J. expressed considerable sympathy for the issuing bank, but felt ‘constrained by the law’s policy of requiring strict compliance with the terms of letters of credit’ to enter judgment for the customer.⁵⁰

4.42  The judge, it is suggested, was justified in coming to that conclusion. Certainly, the courts are generally slow to accept technical defences to a claim for payment or reimbursement in letters of credit litigation. This stance, it will be observed in many of the ensuing chapters, is perhaps primarily why the instruments continue to survive as a means of oiling various aspects of the wheels of business transactions. But where the sales contract underlying a credit is substantially unperformed or not performed at all, there is no legitimate ground for preventing the claimant buyer from availing himself of any valid technical defence.(p. 111)

4.43  Overall, had the submission as to who was entitled to deprecate the Thai bank’s omission to tender the documents by airmail be upheld, in a great deal of cases one could very easily face significant difficulty ascertaining which party, issuer, or customer owns such a requirement as appeared in the instant letter of credit. Expert evidence might have to be entertained to resolve it with all its concomitant expenses and lengthy trial. But this would surely be undesirable for the litigants.

4.44  The period of time specified in a credit for the performance of a particular act is considered probably the most important factor, fixing with certainty the relative rights and liabilities of the parties under the credit.⁵¹ A presentation must strictly comply with the time stipulated in the credit, otherwise the banker to whom it is made is not entitled to honour or negotiate it. If it nevertheless advances any sum to the presenter, its right to be reimbursed will normally be lost. And, unlike the preceding situation where a claimant presentee may be denied a technical defence, an untimely presentation is a breach which goes to the root of the credit: it is a violation of a fundamental provision rendering the presentation liable to dishonour regardless of the status of performance of the underlying transaction.

4.45  As a preliminary matter, it should be pointed out that the time prescribed in a credit for tendering documents is usually denoted as the expiry date for the presentation of the documents, or the last date for presentation upon shipment of the goods purchased (compliance with the latter is normally to be verified by the bill of lading). But where no expiry date for presentation is stated in a credit, the cut-off date set for honour or for negotiation (if the credit is available by negotiation) will be taken as the last day for presentation to be made under the credit.⁵² However, if the last day for presentation falls on a day when the presentee bank is closed for reasons other than strikes, lockouts, or acts of God,⁵³ the time for presentation is deemed extended to the next banking day on which the bank resumes business.⁵⁴(p. 112)

4.46  Such extension of an expiry date is, however, inapplicable to a latest date for shipment or the last day of the period of time specified for shipment. For the purposes of determining whether a presentation complies with the latest date for shipment spelt out in the credit, regard should be had to the date of shipment indicated in any of the set of transport documents tendered.⁵⁵ If such date is found to be later than the expiry date, the document would be stale and thus non-conforming.⁵⁶

4.47  Finally, clause (e) of Article 6 tidies up the old Article 42 (b) and provides that ‘a presentation by or on behalf of the beneficiary must be made on or before the expiry date’. This is an important clarification. Unlike the erstwhile provision, it makes clear that the deadline for presenting documents for payment under a credit only applies as between the beneficiary and the issuer or nominated bank; it does not apply to a presentation made by the nominated bank to the issuing bank, and a fortiori to a tender by the issuer to the applicant. Thus understood, in the context of a negotiation credit, for instance, the expiry date for presentation is the date by which the nominated bank has to negotiate the beneficiary’s conforming documents. Following negotiation, the nominated bank is, however, to present the documents to the issuer (or some other nominated bank if any) within a reasonable time.

4.48  Where a nominated bank accepts a presentation on an extended expiry date pursuant to Article 29 (a), it has to provide the issuing or confirming bank, when forwarding the documents to either bank, with a statement in the transmittal letter or schedule to that effect.⁵⁷ ‘To that effect’ is employed advisedly, because an assertion in a covering letter such as ‘documents presented by the beneficiary in due time’ or ‘all terms and conditions of the credit complied with’ suffices, even if the assertion does not refer to Article 29 (a).⁵⁸ However, failure to include a statement of the sort mentioned in a presentation made by the nominated bank, furnishes no ground on which the presentee issuing or confirming bank can reject the tender.⁵⁹ At the very most, the omission entitles it to give the presenting nominated bank a notice fixing a reasonable time within which it must hand in the statement. Upon receipt of such a notice, a reasonably diligent nominated bank typically complies with the request promptly, and a less industrious one will readily give the statement when it confronts a solicitor’s letter of demand. As a result, breach of Article 29 (a) can hardly occur in letter of credit operations.

4.49  Basically, for a presentation by the beneficiary, as distinguished from a nominated bank, to be considered timely it must be made not only prior to the expiry date, but also during the hours in which the presentee bank is regularly open to the public to transact letters of credit (p. 113) business.⁶⁰ Where a set of documents is tendered on the last banking day of the period for presentation, no question arises as to ascertaining timeliness of the tender if the specific time of day when the credit expires is stipulated, for example, if the deadline for presentation is 5 p.m., 31 August, a tender after that hour would not satisfy it. But in cases without such specificity (which are by no means infrequent in practice), the decision of the Court of Appeals of Kansas in Carter Petroleum Products Inc v Brotherhood Bank & Trust Co⁶¹ is illustrative of the type of difficulties that may occur.

4.50  In this case, a letter of credit made subject to the 1993 Revision of the UCP stated that ‘all the sight draft(s) drawn under and in compliance with the terms of this credit will be duly honoured on delivery of documents as specified if presented at this office in Shawnee, Kansas not later than June 26, 2002’. The beneficiary arrived at the issuing bank just after 5 p.m. on Wednesday 26 June 2002 to present the stipulated documents. At the time, the lobby doors were locked, but after he knocked on the door, an employee of the bank admitted him into the lobby and led him to the assistant vice-president of the bank, who received the presentation and stamped it with a notation, ‘Received at 5.05 p.m.’. Two days later, the bank dishonoured mainly on the basis that the presentation was received after their regular banking hours on the day the letter of credit expired. Green P.J. speaking for the Court of Appeals⁶² accepted that under Article 45 of the UCP, banks are under no obligation to accept presentation of documents outside their banking hours, but held that in the circumstances the presentation complied with the requirements as to time and place of presentment set for in the credit.

4.51  Two reasons explain why the court concluded as they did. First, it was established that although the lobby was usually closed at 5 p.m. on Wednesdays, the drive-through window at the bank was regularly open for business until 7 p.m. on such days, with the result that the beneficiary could have delivered the documents to the drive-through teller had the lobby doors not been opened for him. Second, and more importantly, other than the date, the credit did not indicate any particular time of the banking hours as to when a request for payment under it must be presented to the bank. This omission gave rise to an ambiguity, which must as a matter of ordinary principle be construed reasonably.⁶³ In that sense, insofar as the bank was still open for business, it cannot complain that it was ordered to accept the documents as having been delivered in time.

4.52  A slightly similar problem arises when an issuing or confirming bank’s mail unit receives documents from a beneficiary after the bank’s business hours (say, at 1.45 p.m. on a Saturday with 9 a.m.–1 p.m. as operating hours) on the expiry date of the credit or the last day for presentation, and in the morning of the next banking day forwards the documents to the bank’s letter of credit department. The delivery of the documents at the hour mentioned prima (p. 114) facie discharges the bank from its obligation to honour the credit. But should the bank, by reason of the acts of its officers in the mail room, be taken to have taken up the presentation?

4.53  It is of course well settled that, by virtue of Article 33 of the UCP 600, the ‘bank has no obligation to accept a presentation outside of its banking hours’. However, it may accept or decline the documents presented to it after closing time.⁶⁴ Typically, the beneficiary would wish to assert that the bank has elected to accept the documents. Such a claim is likely to succeed either on the basis of waiver or some kind of estoppel; otherwise it would be doomed to failure.

4.54  It becomes important to ask: Can the mere receipt of the presentation in the mail room in the case instanced amount to an intention on the part of the bank to waive compliance with the stipulation in the credit as to the time of presentation? The published opinion of the ICC Banking Commission on the point is that it does.⁶⁵ It is submitted that the Commission’s opinion, though usually entitled to great weight, is in this context unsustainable. In principle, there is a strong presumption against an issuer’s abandonment of its right to reject an untimely presentation without the customer’s assent. For this reason, judges generally view an allegation by a presenting beneficiary or nominated bank of waiver of such non-conformity with a wary eye.⁶⁶ Claims that a bank has waived strict compliance with the deadline for submission of documents, without more, is not a matter the ICC Banking Commission can approach lightly, with the ill-conceived notion that the receipt of a tender by the mail room, a security guard, or even the letter of credit or trade department after regular business hours implies the bank’s acceptance of it.

4.55  It can safely be assumed that should the matter arise for decision, the court should not infer waiver or estoppel from the receipt unless in the circumstances of the particular case it finds the bank’s or its customer’s conduct objectionable, as for instance where either party refuses to return the documents notwithstanding the presenter’s entreaties, or where it uses the documents to take delivery of the goods. It should equally be accepted that in the Carter case, had the court been persuaded that the presentation was non-conforming with the stipulation in the credit as to time, the beneficiary’s claim against the dishonouring issuing bank would probably have been dismissed.

4.56  The same principles apply in respect of an action by a nominated bank seeking reimbursement from the issuing bank. The basic rule indicated previously in this section is that a nominated bank claiming to be entitled to reimbursement has to establish that it honoured or negotiated the beneficiary’s presentation before the lifespan of the credit or the stipulated negotiation period expired. Because conformity with time is of the essence of the transaction, if the relevant deadline is 5 p.m., a negotiation which occurs at 5.10 p.m. would be unauthorized and, lacking countervailing circumstances, confers no right of reimbursement (p. 115) on the negotiating bank against the nominating bank. In Liberty National Bank v Bank of America,⁶⁷ a credit stipulated that the beneficiary’s ‘drafts must be negotiated on or before March 31, 1955’. Additionally, the credit was to expire on that date, but the claimant nominated bank honoured the tendered documents including drafts drawn on April 11. The Tenth Circuit dismissed the bank’s claim for reimbursement from the defendant issuing bank on the ground that there had been no proper compliance with the time fixed for negotiation.

4.57  But in Mizuho Corporate Bank Ltd v Woori Bank,⁶⁸ the court apparently overlooked this settled position and arrived at a very difficult conclusion. There, four letters of credit opened by the defendant issuing bank to finance the purchase of a certain quantity of gas oil and made subject to the UCP 500 contained the following clause: ‘Negotiation is only allowed ... after 51 days from Bill of Lading date but within validity of the letter of credit’. The plaintiff bank, which had confirmed the credits, negotiated the beneficiary’s documents prior to the fifty-first day. After the fifty-one days had elapsed, he sought reimbursement from the issuing bank, who denied liability under the credit. He then filed an application for a summary judgment for the amount of the credits in the High Court of Singapore.

His Honour concluded that ‘the breach of the 51 days clause did not entitle the [issuing bank] to refuse making payment to [the nominated bank]’.⁷¹ With respect, Vincent Leow J.’s judgment rests on tenuous ground. The problem with the court’s analysis started when he drew a distinction between a credit stating that negotiation must be done by a specific date, in which case a non-compliance will relieve the issuing bank from its reimbursement undertaking, and a credit that ‘merely imposed a moratorium’ during which negotiation must not take place, in which case a non-compliance will not have ‘draconian consequences’.⁷²

4.59  It is suggested that the distinction drawn was unnecessary. Essentially, the issuing bank’s reimbursement undertaking towards the plaintiff nominated bank as stated in paragraph (d) (p. 116) of Article 10⁷³ is conditional upon the nominated bank acting within the scope of its mandate conferred on it in the credit. Once it was found that the nominated bank had deviated from its instructions by failing to observe the ‘moratorium imposed’ in the instrument, it became clear that it had forfeited its right to claim reimbursement from the issuing bank—unless, of course, in the circumstances there is an extremely compelling reason to sustain the right.⁷⁴ The time for negotiation or presentation specified in a letter of credit is an essential stipulation; a nominated bank can only disregard it at its peril. Consequently, the decision in Woori Bank is difficult to justify in principle and hard to reconcile with the settled existing authorities laid out earlier in this subsection.

4.60  Difficulties similar to those we have just considered are sometimes encountered in cases where a credit calls for a transport document such as a bill of lading.⁷⁵ Under Article 14 (c) of the UCP 600, a presentation including one or more particular types of original transport documents must be made ‘not later than 21 calendar days after the date of shipment’. This replaces without any significant changes⁷⁶ the old Article 43 (a) of the UCP 500.⁷⁷ Now, very often, credits calling for bills of lading will normally indicate the expiry date for shipment and negotiation. What is the position if a presentation containing a bill of lading is made after twenty-one days of shipment but before the last day set for negotiation? Is the presentation conforming as to time? This issue was considered, among other questions, by Goh Joon Seng J. at first instance and by the Court of Appeal in Union Bank of Switzerland v Indian Bank.⁷⁸ Its resolution is worth perusing.

Clearly, the courts proceeded on the premise that the twenty-one-day time limit set forth in the UCP is intended to operate independently of the deadline for negotiation set in the credit. It is suggested that this assumption is fundamentally mistaken. It is true that no expiry date for presentation of the stipulated documents was set in the credit. But at the same time it could hardly have been in doubt that in the absence of that date, the expiry time for negotiation was to be taken as the period beyond which a presentation of documents under the credit would be ineffective. Thus, contrary to the view taken by Goh Joon Seng J. in Indian Bank that ‘[n]o date for presentation of documents was stipulated’ in the credit, the 31 October 1985 deadline for negotiation ought to have been considered the expiry date for presentation of documents under the facility. In holding as he did, the deadline in the credit as to negotiation in effect becomes ‘Documents should be negotiated within 21 days from the bill of lading date or within the expiry date for negotiation, whichever is earlier’.

4.62  That result evidently runs counter to the ostensible intention of the credit and is unfair to the presenting nominated bank seeking reimbursement. It has to be stressed that, turning to Article 43 (a), a close reading of its provision reveals that in a credit calling for a transport document, the deadline for presentation is the expiry date for honour or negotiation. It is only in default of this date in a credit that the twenty-one-day time limit will apply. In this connection, the ICC Banking Commission has provided the very helpful explanation that the twenty-one days fixed in the UCP is ‘only a “fall back” date’ in that it applies exclusively where a credit fails to stipulate a specific number of days within which negotiation, honour, or presentation must take place.⁸²

4.63  This clarification was echoed eight years later in the United States Court of Appeals for the Fifth Circuit decision in Heritage Bank v Redcom Laboratories Inc.⁸³ The credit involved was opened to finance the purchase of certain electronics from Redcom Laboratories and made subject to the UCP 500. Whilst 3 February 1999 was stated as the expiry date of the credit, no cut-off date for presentation of documents was specified. The goods were shipped on 27 March 1998, and the documents, which included a bill of lading bearing that shipment date, were tendered on 24 April, the succeeding month. The Fifth Circuit concluded that (p. 118) the tender was in breach of the ‘twenty-one day default rule’ contained in Article 43 (a).⁸⁴ Obviously, were a time limit for presentation indicated in the credit, the sub-article would have been ignored as inapplicable.

4.64  It bears emphasizing that under the prevailing UCP 600 regime, there is no denying that Article 14 (c) read with Article 6 (a) (i) introduces no change in banking practice as previously set out in Article 43 (a) of the UCP 500 and Article 47 (a) of the UCP 400: the twenty-one-day period remains a default provision. The necessary inference to be drawn from the foregoing is that, in such cases as Indian Bank, to apply the twenty-one-day deadline in the code rather than the much longer deadline set for negotiation under the credit is to create an unwarranted advantage for a dishonouring party (such as the issuing bank in Indian Bank), that may be inclined to seek ways to escape from its reimbursement or payment undertaking towards the nominated bank or seller.

4.65  To expatiate a little further on the undesirable effect of seeing the twenty-one-day timeframe from the perspective we have rejected, take for example the nominated bank in the Indian Bank litigation. The courts said the bank only had up to 21 October 1985 to negotiate a presentation under the credit, whereas the legitimate cut-off date to do so was 31 October 1985. In practical terms, the presenting nominated bank was short-changed by ten days! As we shall see in the next section, if the court had correctly established the expiry date for presentation in the case, the ultimate result would probably have been different. It is therefore worth reiterating that in ascertaining whether a presentation is timely under a credit that requires the tender of an original transport document, it would be wrong to even look at Article 14 (c)’s twenty-one-day time limit when the credit has expressly stipulated an expiry date for honour, negotiation, or presentation in accordance with Article 6 (d) (i).

4.66  We discussed in the previous section the requirements of a timely tender of documents and the legal position when documents are handed to an issuing or nominated bank after its regular banking hours on the last day of the period stated in the credit for presentation. But what, if any, are the reciprocal rights and liabilities of the parties in a situation where documents have been transmitted but never reached the issuing bank’s hands? As noted earlier,⁸⁵ it is the beneficiary’s responsibility to ensure proper delivery of documents to the bank designated in the credit.

4.67  A beneficiary purporting to carry out that duty bears the risk of delay or loss of the documents while in transit to the bank. If, owing to such eventualities, he misses the deadline for presenting documents under the credit because the documents arrived after the expiry time at the issuing bank’s counters, his right to payment of the credit will certainly not arise,⁸⁶ the presentation being out of time. Presumably, he can recover damages for the loss suffered against the courier service provider, postal authorities, or his own bank (who acts as a non-nominated bank in the credit) which he employed to convey the documents, subject of (p. 119) course, to the contractual terms and conditions applicable to the relations between him and the courier company or the bank. On this analysis, it is obvious that the beneficiary’s right of recovery when his documents are missing or delayed in transit fall outside the scope of letter of credit law, since the potential defendant is neither a party to the credit nor subject to the legal principles governing credit operations.⁸⁷

4.68  We are thus concerned with the beneficiary and nominated bank qua presenter vis-à-vis the issuer or confirmer qua presentee. In practice, it may seem impossible to imagine serious disputes between parties to a letter of credit over their rights and responsibilities when documents are delayed or lost in transit. A beneficiary who has duly effected shipment would typically be minded, and in a position, to provide a set of replacement documents, including the so called switch-bill of lading. In two classes of case, however, difficult problems can occur.

4.69  A beneficiary makes a presentation to a nominated bank that elects, for some reason, not to honour or negotiate and instead (usually for a fee or commission) forwards the documents to the issuing bank, but due to their delay or loss in transit, the credit runs out without the beneficiary receiving payment of the purchase price of the goods shipped or the documents: if the validity of the credit is not extended, can the beneficiary collect damages from the nominated bank?

4.70  The nominated bank in case (1) determines that the presentation is in compliance with the terms of the credit and honours or negotiates it, and then transmits the documents to the issuing bank; suppose they are lost in transit, the negotiating bank is unable to obtain replacement documents because the beneficiary has perpetrated a fraud and disappeared with the money he received, is the bank entitled to reimbursement of the sum from the nominating issuer or confirmer, though it has prima facie made no successful presentation under the credit?

4.72  Applied to the cases instanced, the line of inquiry to be pursued in what follows is the nature and scope of the protection afforded by the first and second paragraphs of Article 35 to the nominated bank. It will be convenient to look at each context separately.(p. 120)

4.73  In common law, a nominated bank to which documents are remitted for onward transmission to the issuing or confirming bank, generally has a duty to exercise reasonable care and diligence in performing the requested task, and is vicariously liable for the breach of that duty by a party to whom it may delegate its performance.⁸⁸ Although the bank normally assigns execution of the job to a courier company, thereby constituting the latter a sub-agent of its principal, the beneficiary, this would in general be insufficient to create privity of contract between the beneficiary and the company; the sub-agent is answerable only to the nominated bank; and it will ordinarily not matter that its selection was upon the beneficiary’s recommendation.⁸⁹

4.74  Accordingly, the nominated bank’s liability is engaged when the beneficiary’s documents go missing in transit to the issuing bank. What the disclaimer in the material paragraph of Article 35 seeks to achieve is to safeguard it against that liability which would ordinarily be its own. In substance, it reallocates the liability for loss of documents while in transit from the nominated bank to the beneficiary, and from the issuing bank to its customer, the applicant.

4.75  It would appear that the confines of the reallocation are to be measured by reference to the Unfair Contract Terms Act,⁹⁰ which imposes certain limitations on the extent to which liability for breach of contract or for negligence can be avoided by means of contract terms, such as the disclaimer in Article 35. Provisions of the Act have been discussed earlier, but it will be convenient to rerun them briefly, to the extent relevant to the present situation. ‘Negligence’ is defined by section 1 (b) of the Act to mean ‘the breach of any common law duty to take reasonable care or exercise reasonable skill’ and diligence. Pursuant to section 2 (2), a person (e.g. a nominated banker to whom the forwarding of documents is entrusted) cannot rely on any contract term as excluding or restricting his liability for negligence except insofar as the term satisfies the requirement of reasonableness. However, the requirement of reasonableness is met if the term is a fair and reasonable one to include having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.⁹¹

4.76  A close perusal of the intimated paragraph of Article 35 suggests that its ostensible intention is to relieve the nominated bank of liability for missing or delayed delivery of transmitted documents caused not by its own negligence, but by persons such as couriers or postal operators over whose acts it has no control. The disclaimer satisfies the reasonableness test and is effective to excuse the nominated bank from liability to the beneficiary in that regard.(p. 121)

4.77  But it is a different matter altogether where the event which brought about the delay or loss is attributable to the bank’s carelessness, for example, because it sent the documents to the wrong branch of an issuing bank, or because it chose to post them whereas a reasonably diligent nominated bank in that situation would appreciate that they require the urgency of an overnight courier. So regarded, it is reasonable to conclude that nothing in Article 35 provides shelter to a nominated bank that carelessly fails to convey the beneficiary’s documents to the designated issuer or confirmer, should the failure result in financial loss to the beneficiary.

4.78  The second paragraph of Article 35 quoted above at para 4.71 has answered this question firmly in the affirmative. The clause says that an issuer or confirmer must honour a credit upon being advised typically via SWIFT or telex by a nominated bank that the beneficiary’s presentation complies with the requirements of the credit and has been forwarded to the issuer. Loss of the documents in transit is none of the nominated bank’s or beneficiary’s concern. That the bank advising compliance is possibly responsible for the eventuality which occurred is equally irrelevant.

4.79  Quite apart from such patently extraordinary results, the principal difficulty with the new provision consists in reconciling it with a pair of fundamental clauses in the UCP, namely: first, the issuer’s and confirmer’s undertakings under a credit are to ‘honour a complying presentation’;⁹² and second, when the beneficiary or a nominated bank makes a tender ‘at least one original of each document stipulated in the credit must be presented’.⁹³ These provisions speak for themselves. And there can be no room for doubt that they merely put in shorthand form common law principles which were widely recognized in the banking community to have been in existence several decades prior to the promulgation of the UCP in 1933. It is thus hard, perhaps impossible, to believe that the second paragraph of Article 35 is designed to render these established principles inapplicable in the event of documents being lost in transit.

4.80  It is of course an elementary proposition that a beneficiary cannot insist on payment simply on the basis that he considers it conclusive that his presentation to a nominated bank complies with the credit any more than the nominated bank can claim reimbursement simply because it is satisfied that the required documents are what it received and forwarded. A decision by a nominated bank, who acts for itself and in pursuance of its own business, that a presentation conforms to a credit is not and has never been treated by any court properly informed on the applicable principles of letters of credit law as binding upon the issuing or confirming bank. The issuer enjoys a separate and independent entitlement to a conforming presentation from the nominated bank. If the documents have previously been sent but are lost in transit, it can, as a concession to its customer, the applicant, call for replacement documents. Unless, and until, it receives such copies, there seems to be no good commercial reason why it should be compelled to discharge its reimbursement obligation against a mere (p. 122) advice by the nominated bank that it had seen and forwarded to the issuer conforming documents. The second paragraph of Article 35 of the UCP 600 cannot fairly be interpreted as compelling the issuer to do so.

4.81  Undoubtedly, Article 7 (c) says that ‘an issuing bank undertakes to reimburse a nominated bank that has honoured or negotiated a complying presentation and forwarded the documents to the issuing bank’. But the plain meaning of this sub-article must not be ignored. Under it, in order to be reimbursed, the nominated bank has to establish that it did honour or negotiate a complying presentation and dispatched the documents to the issuer. Proof of dispatch is a wholly different thing from proof of receipt or honouring of a complying presentation. If the nominated bank’s or beneficiary’s claim is not to be validated by at least replacement copies of the ill-fated documents, then by what means?

4.82  The requirements to be satisfied by a beneficiary or a nominated bank when presenting documents to draw on a credit and the manner in which the particular presenter may demonstrate compliance in the individual case have been the subject of this chapter. Requirements as to the place of presentation, mode of delivery and the time within which documents must be tendered were identified. As discussed, branches of an issuing bank in a given country are regarded as the same bank. So, a presentation can be made at any branch so long as the credit in question has not directed otherwise. However, in circumstances where a credit requires submission to a named branch, the presenting nominated bank or beneficiary can tender the documents to a different branch if requested to do so. Once delivery is effected in compliance with the request, the credit is deemed amended there and then, and the issuer will normally not be permitted afterwards to argue that an express requirement of the credit has not been complied with. In this connection, this chapter rejects as wrongly decided the International-Matex Terminals case, and considers that, on this point, the court ought to have held in favour of the presenting beneficiary.

4.83  Judges have also had the opportunity of determining compliance with the method of tendering documents to the issuing bank and as to the timeliness of the presentation. Unfortunately, there is a marked lack of uniformity in the respective conclusions reached. For example, Mizuho refused to see non-compliance with the negotiation period as entitling the issuer to deny its liability to reimburse the negotiating bank, whereas in cases such as Liberty National Bank & Trust Co of Oklahoma City the court held that the issuer ‘is clearly absolved from liability for the reason that negotiation took place after the date authorized for negotiation’. As discussed earlier, these differences in approach arise because hitherto the relevant principles in this area have been little explored in the literature; an important aim of this chapter has been to fill that gap as appropriate.

4.84  A related matter is the ways of looking at the bank’s position when a presentation is not made to it prior to the expiry of the credit. According to a view expressed obiter by GP Selvam J.C. in Amixco Asia (Pte) Ltd v Bank Bumiputra Malaysia Bhd,⁹⁴ ‘the bank need not examine the documents for conformity’. This is probably another way of putting the effect (p. 123) of Article 33 of the UCP 600, considered earlier at para 4.53. However, it is highly unlikely the judge’s dictum will justify the bank ignoring the documents rather than sending them back to the sending beneficiary simply because the presentation is untimely.

4.85  In banking practice, a presentee bank is generally held to the highest standards: it has to contact its customer, the party at whose instance it opened the letter of credit, for permission to process the presentation, notwithstanding its having been received out of time. Obtainment of the authorization, being a waiver of the untimeliness of the presentation, will then typically trigger the bank’s duty to carry out the task of checking whether the documents sufficiently answer the requirements of the credit. The standard of care and diligence involved in the performance of that duty will be discussed in Chapter 5. So will the manner of determining compliance with the timeframe for completing the examination process. In the meantime, it should be kept in mind that absent exceptional circumstances such as waiver or estoppel established against a presentee issuer or an obligated nominated bank (e.g. a nominated bank who has agreed pursuant to the terms of a credit to act on behalf of the issuer), a beneficiary or a nominated bank is not entitled to insist on acceptance of its presentation made otherwise than through the channels prescribed by the credit.