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Part II Proper Performance under the Operative Credit, 9 Procedures for Handling a Non-complying Presentation

From: Letters of Credit: The Law and Practice of Compliance

Ebenezer Adodo

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Letters of credit and damages — Letters of indemnity and damages

(p. 239) Procedures for Handling a Non-complying Presentation

A. Introduction

9.01  In this chapter, we are concerned with the methods by which a presentee bank, on its own initiative or at the request of a presenting beneficiary or nominated bank, may deal with a faulty tender of documents, and then the various ways it has to comply with the requirements of Article 16 (c) to (e) of the UCP 600 as to furnishing a rejection notice if it ultimately decides on dishonour of the documents, and finally management of the dishonoured documents post service of the notice. The subjects comprise the last of the three contexts (identified in the introductory paragraph to Chapter 1) in which the courts commonly require strict performance of obligations and responsibilities in a letter of credit transaction. As is the case with the sometimes harsh consequences of non-observance of the obligation to establish a credit in exact accordance with the sales contract or business arrangement the facility is intended to finance, or non-fulfilment of the beneficiary’s or nominated bank’s responsibility to comply strictly with the terms and conditions of a credit by not making a proper presentation in seeking encashment of a credit from the bank with which the credit is available, an apparently innocuous slip by a presentee bank in adhering to the provisions of Article 16 is typically fatal to its claim that the documents presented to it are faulty and unacceptable for payment.

9.02  A direct consequence of the bank1 being obliged to take up an otherwise discrepant set of documents is that it would almost inevitably not be entitled to reimbursement against its promisor counterparty. This often leaves it in the worst possible situation, since it could only recoup its losses usually by looking to whatever sum it is able to realize from the goods, if any, represented by the documents. Since strict observance of the Article is the best means of avoiding such difficulty, the succeeding discussion should be accorded special attention by a bank that has concluded examination of documents presented to it for honour or negotiation and decided to reject them on account of their irregularity, and also by the presenting beneficiary or nominated bank seeking to invoke a provision of the Article as an argument of last resort when its presentation is indeed incontestably discrepant.

(p. 240) B. Bank’s Task upon Verifying that a Presentation is in Good Order

9.03  Normally, the critical moment for the bank to take care not to fall foul of Article 16 (c) to (e) is the fifth banking day following the day2 on which the documents are tendered to it by a beneficiary or a nominated bank for payment. During the intervening period (i.e. the time between day one and day five, both days inclusive), the bank will have examined the presentation reasonably carefully to verify whether, on its face, it perfectly satisfies the terms and conditions of the credit. The outcome of the examination is invariably either that the presentation is complying, or it is not.

9.04  If it is facially in compliance with the credit, the immediate tasks before it, to be performed almost simultaneously, are:3 first, to effect payment to the presenter against the tender in accordance with the mode of availability4 of the credit involved, which may take the form of cash payment,5 or acceptance of the accompanying draft,6 or making out an advice note under which it undertakes to pay the sum on the credit on a specified future date,7 or advancing a discounted amount of the credit;8 and second, to forward the documents to its promisor counterparty (who may be the applicant, the issuing bank, confirming bank, or a bank nominated to act on behalf of the issuing bank) in order to become entitled to reimbursement of what it paid out.

C. Courses of Action Open to the Presentee Bank if the Tender is Faulty

9.05  The converse case where a presentation does not conform to the credit typically presents the bank with three alternative courses of action. The first, occasionally resorted to mainly by a confirming bank9 in favour of a beneficiary with whom it has solid pre-existing banker-customer relations or at the behest of his banker, is to call to the beneficiary’s attention the particular aspect in which the tender does not conform precisely to the credit and, upon reaching a mutual agreement, honour or negotiate the presentation against a letter of indemnity or guarantee, or under reserve. Such an arrangement enabling the beneficiary to get paid is especially employed when it is unlikely that he can rectify the alleged discrepancies and re-submit the documents before the credit expires, or when they both consider that, in the circumstances which have arisen, it will take a substantial length of time to effect the rectification.(p. 241)

9.06  Having made payment, the confirming bank will transmit the documents to its promisor counterparty, the issuing bank, in hopes that it will accept them upon the applicant’s authorization. A payment in that form, as Parker J. at first instance and Sir John Donaldson M.R. and Kerr L.J. in the Court of Appeal taught us in Banque de L’Indochine et de Suez S.A. v J.H. Rayner (Mincing Lane) Ltd,10 is, to some extent, a bank loan: the beneficiary is bound to repay the money with interest on demand if the issuing bank, on its own initiative or on the applicant’s instructions, rejects the documents on valid grounds of non-conformity which include at least one of the discrepancies originally identified by the confirming bank; if that earlier spotted deviation is established in an action to be legally unjustified, the confirming bank can neither claim repayment from the beneficiary nor reimbursement from the issuing bank; even when it is justified, the beneficiary might have, in the meantime, found himself in serious financial difficulties or, in the worst case scenario, gone into liquidation. It is perhaps owing to such reasons that not many confirming banks are wont to take up a non-complying tender of documents on an indemnity or under reserve.

9.07  Unlike a nominated bank’s honouring or negotiating an apparently irregular tender of documents under reserve or against a letter of indemnity or guarantee, a presentee issuing bank may, at the request of the presenting beneficiary or bank, receive a presentation ‘for collection’ or ‘on approval basis’. What a presentation11 so made together with the accompanying direction entails often tends to be misunderstood in academic literature. For example, Ali Malek and David Quest in their book Jack: Documentary Credits12 viewed the words ‘documents presented on collection basis’, or its variant ‘documents tendered on approval basis’, thus contained in the relevant transmittal advice as ambiguous and considered that they must therefore take their meaning from the context of the particular case. In their opinion, the presentation is either under the letter of credit and therefore subject to the UCP, or for collection, in which case the Uniform Rules for Collection, URC 522, will apply, depending on the circumstances surrounding the tender.

9.08  But the asserted ambiguity does not seem to be necessarily justified. So is the misapprehension, in the light of existing judicial decisions. More specifically, in consonance with prevailing banking practice as established by expert evidence in individual litigations, English,13 American,14 (p. 242) and Singapore15 courts have uniformly recognized the essential character of the technical language in the indicated situation16 to mean: (i) that in the absence of a clear expression of an intention to subject themselves to the URC 522, the parties, including their reciprocal rights and liabilities as well as the conformity of the presentation, are governed by the UCP; (ii) the presenting party is urging the presentee issuing bank to refrain from exercising its right to reject the non-complying presentation immediately after inspection, and instead to approach its customer, the applicant, for a waiver of the non-conformity in question; (iii) the presenting party waives its strict legal right to demand the presentee bank’s examination of the documents tendered within the five-day timeframe; (iv) if the presentee issuing bank ultimately decides to refuse payment on the ground of the applicant’s unwillingness to relinquish his insistence on strictly conforming presentation and authorizes acceptance of the documents, it automatically becomes liable to notify its decision to the presenting party in strict accordance with the requirements of Article 16 (c)–(e) and, as will be explained more fully a little later, loses its right to withhold payment on the ground of deficiencies in the documents by reason of Article 16 (f) if it fails to furnish the requisite notice; and (v) if the presentation is in the end accepted, that act of acceptance constitutes an implicit amendment or variation of the credit, valid not from the time the documents were originally taken up for collection, but from the very day the acceptance is communicated to the presenting party.17 (The last point mentioned also applies mutatis mutandis to a presumably non-conforming presentation honoured or negotiated under reserve or against a letter of indemnity or guaranty.)

9.09  This, then, is the legal position when documents are presented or received on a collection or approval basis. Rather than agree to have a presentation handled for collection or under reserve, however, the option most commonly adopted by a presentee issuing or nominated bank is to notify its promisor counterparty of the irregularities uncovered and inquire whether to honour or negotiate the documents despite the non-compliance of the presentation. Much of this topic has been covered in a section of an earlier chapter18 relating to the right of a presentee issuing or nominated bank to refer any discrepancy it uncovers to its counterparty for a waiver, including the nature of its liability should the right be abused.

9.10  As was noted there, in the majority of cases, particularly those under which the applicant’s or issuing bank’s business expectations in relation to ensuring the consummation of the credit remain positively as they were at the time of establishment of the facility, the request for permission to make payment regardless of the noted deficiencies will be granted; the waiver of the non-compliance in substance means that the irregularities never existed. Accordingly, payment is effected, and the paying bank is reimbursed in the usual way.

9.11  It needs to be added, however, that, in other cases, sometimes against a background of supervening financial troubles or of the market posting extremely poor return on goods of the kind covered by the credit, the applicant or issuing bank will flatly deny the authorization sought with a curt telex message, such as ‘Do not pay; the discrepancies are not acceptable (p. 243) to us’. There are, however, situations where the requesting bank will receive no response as to whether it should take up the documents, notwithstanding their deficiencies, and the instant day is the fifth banking day since the documents had been tendered to the requesting bank. In either event, upon failing to hear from the promisor counterparty or upon receipt of an advice of the sort indicated, only one course is clearly open to the requesting/presentee bank: Refuse to pay the credit and reject the documents.

D. Requisites for an Effective Rejection Notice

9.12  In order for the decision to decline payment to be a legally effective answer to a potential claim by the presenting beneficiary or nominated bank for wrongful dishonour of the presentation, the presentee bank is obligated, presumably insofar as the credit incorporates the UCP 600, to comply with the requirements of Article 16 (c); the sanction for failure to comply therewith is laid down in Article 16 (f).They both may conveniently be particularized in numbered clauses to facilitate subsequent reference to them in their individual contexts.

9.13  Clause 1: The presentee bank, having reached a decision to dishonour the presentation, must give a single notice to that effect to the presenter.19 Clause 2: The notice must state: (a) that the bank is refusing to make payment;20 (b) each discrepancy on which the refusal is based;21 and (c) that the bank is: (i) holding the documents pending further instructions from the presenter;22 or (ii) holding the documents until it receives a waiver from the applicant and agrees to accept it,23 or receives further instructions from the presenter prior to agreeing to accept a waiver;24 or (iii) returning the documents;25 or (iv) acting in accordance with instructions previously received from the presenter.26 Clause 3: The notice must be given by telecommunication or, if that is not possible, by other expeditious means no later than the close of the fifth banking day following the day of presentation.27 Clause 4: Once the bank has provided a notice in accordance with clauses 1 to 3 above, it may return the documents to the presenter at any time.28 And finally the preclusion rule: Clause 5: If a rejecting issuing bank or confirming bank fails to act in accordance with the foregoing clauses, it shall be precluded from asserting non-compliance of the documents tendered.29

9.14  These clauses supersede sub-articles (d) and (e) of the erstwhile Article 14 of UCP 500, which had gained notoriety for being the most litigation prone portion of the code throughout their lifetime, and about whose workings the ICC Banking Commission entertained an endless stream of queries30 from letter of credit practitioners all over the world throughout (p. 244) their lifetime. In an apparently deliberate attempt to prevent a repetition of that costly and sad experience, the new clauses seem couched in much simpler language, so they can become more user-friendly. Presumably in line with these objectives, the clauses have done away with the requirement that a rejection notice be communicated ‘without delay’, a requirement which had been constantly included in the UCP since the 1962 Revision.

9.15  Nevertheless, it would be a mistake to be greatly optimistic about the possibility that the practical operation of the current initiatives by letter of credit practitioners is incapable of generating as many serious queries, controversies, and litigation as did the old regime. Any given dispute which involves ascertaining the conformity of a rejection notice with the new clauses under reference is likely to necessitate determination of one or more of the following issues of principle.

9.16  When is the notice envisaged by cll. 1–4 to be treated as given? Is it the time of the sending or of the presenter receiving it? Is a notice to be regarded as being in breach of cl. 1 read with cl. 2 (a) if it contains no express statement of refusal to honour a presentation? The ICC Banking Commission has advised that by virtue of cl. 2 (b) ‘invoice not as per LC’ or ‘conflicting data between certificate of analysis and bill of lading’ listed in a rejection notice as a ground of dishonour is not sufficiently specific and, therefore, ineffective. Would a court be justified in characterizing such a view of cl. 2(b) as overly hyper-technical and wrong? Could the rule established by cl. 2(b) read with cl. 5 be legitimately regarded as essentially a replacement for the doctrines of estoppel and waiver? What counts as sufficient advice of the fate of dishonoured documents under cl. 2 (c) (i)(iv) listing four options, one of which, the UCP 600 Drafting Group says,31 ‘must be contained in a notice of rejection’? Since cl. 4 leaves the time for returning rejected documents at the rejecting bank’s discretion, what is the position if the bank says in the requisite notice of rejection that it is holding the dishonoured documents pending further instructions from the presenter, and the instructions are subsequently issued, or that it is returning the documents, but in either case the documents only come to the presenter’s possession several weeks or months later? What is the effect of cl. 2 (c) (ii), first sentence? In particular, is it open to a rejecting issuing bank who advises that it is contacting the applicant for a waiver of the discrepancies discovered to refuse to accept the waiver? Must a non-compliance other than a documentary discrepancy, such as a failure to adhere to the manner and time of tendering documents specified in a credit, be communicated within the five banking day timeframe? What about the applicant’s position? Consistently with its previous versions, none of the requirements of Article 16 impose a duty on him to inspect documents tendered to him by the issuing bank and object promptly to any discrepancy in the documents, with the result that several weeks or months after the presentation or even for the first time upon being sued, he can raise any irregularity in the documents as a ground for declining to reimburse the bank. To what extent could, or should he, be permitted to do this as a matter of principle?

9.17  The foregoing issues will be considered one after another in later sections. First, we shall clear up the time the notice contemplated in cll. 1–4 should in law be taken as given to a presenting party.(p. 245)

(1)  The point in time when a rejection notice is presumed given

9.18  This is probably a small point, but it can (albeit so far it has not) arise in an action on a letter of credit. Dicta directly covering it are not known to the writer; nevertheless, recourse can of course be had to decisions in related branches of sale of goods contracts, though they were principally handed down in the light of all the relevant terms of the individual contracts in dispute.

9.19  Now, cl. 1, along with cl. 3, says in pertinent part: notice of refusal of documents presented must be given to the presenting beneficiary or nominated by telecommunication or, if that is not possible, by other expeditious means no later than the close of the fifth banking day following the day of the presentation. Other than the simple, if rare, case of a face-to-face communication of rejection of the tender at a meeting between a staff member of the dishonouring bank’s letter of credit department and the presenter on that day, there might be some differences of opinion as to whether the notice envisaged by the clauses read together is to be deemed given at the moment of its dispatch, or when it arrives at the presenter’s automated mail collecting machine.

9.20  Fundamentally, determining the preferable alternative, hinges on what could reasonably be imputed to the clauses. In making an inquiry of the sort in litigations involving sale of goods transactions, the courts32 draw a critical distinction between a contractual stipulation saying, ‘Notice (of a specified kind) shall be given by the Seller to his Buyer not later than (a stated business day)’ and that saying ‘Notice ... shall be given by the Seller to his Buyer by telecommunication within ... days from date of bill of lading’. While the former is regarded as importing a requirement of receipt,33 the prescription of rapid means of transmission in the latter case clearly indicates the parties’ attachment of preponderant importance to the time of the giving of the notice instead of when it is received.34

9.21  Employing this approach, cl. 1 which, taken in isolation, seems to require the notice to reach the presenter to be valid, must take its colour from cl. 3 putting emphasis on dispatch of the notice, rather than on its receipt. It would therefore follow that a rejection notice from a dishonouring bank in, say, the United States or England, to a presenter in, say, Southeast Asia, is conforming so long as it is proved to have been sent any time during the bank’s banking days prior to midnight of the fifth day deadline, so it would be immaterial that it was received by the presenter after the five-day time limit has passed by his local time, or, in the worst case scenario, that the notice never in fact got home to him.35 It is probably hardly necessary to (p. 246) add that the onus of proof lies on the bank claiming it gave a rejection notice in an entirely timely fashion.

9.22  A further point worth noting relates to the means of giving the requisite notice. As is apparent from cl. 3, the rejecting bank is entitled to use any form of telecommunication (e.g. telephone, fax, telex, or SWIFT). It also has the right to utilize other reasonably expeditious means such as DHL, UPS, FedEx, or EMS Speed-post; however, it can do so if, and only if, employing electronic channels is, in the circumstances, futile or not feasible. Second, a rejecting bank would be well-advised to employ the telephone to pass a rejection in exceptional situations where the presenter is not reachable by any of the other electronic methods, since under the latter mode the message will normally be in writing and timed, and the answer-back will also record delivery, all of which will pre-empt potential dispute as to whether the message was ever sent, when it was sent (which is of particular relevance in the case instanced above involving a substantial time difference between the parties), and what were its contents.36

9.23  Having disposed of the point as to the moment when a rejection notice is presumed given to a presenting nominated bank or beneficiary, we turn now to the matters outlined earlier.

(2)  Materiality of a statement communicating refusal of payment

9.24  Clause 1 of Article 16 requirements in the passage supplied earlier obligate a presentee bank who has decided to dishonour the documents in its hands to give the presenting beneficiary or nominated bank a ‘notice to that effect’. Clause 2 (a), in contrast, says the ‘notice must state that the rejecting bank is refusing’ to make payment. On the surface, the difference between these clauses might seem slight; but closely perused, the scope of divergence is critical. The question which arises for consideration is purely an issue of construction, namely, whether a notice that satisfies cl. 1 but does not literally comply with cl. 2 (a) should nevertheless be regarded as effectively communicating a decision to decline payment.

9.25  Being essentially a question of construction, the solution must depend upon the proper meaning to be placed on cl. 1 read with cl. 2 (a). The inquiry can, quite legitimately, be reduced to a choice of stripping the former of its literal character in a manner that will bring it into accord with the latter or insisting on compliance with its absolute wording, in which case cl. 1 would become invariably meaningless. A prefatory remark is perhaps the much cherished, long-standing maxim Qui haeret in litera, haeret in cortice, meaning ‘He who clings to the letter, clings to the dry and barren shell, and misses the truth and substance of the matter’. This philosophy considerably sums up the prevailing judicial attitude in Anglo-American jurisdictions to the construction of terms in commercial contracts, including the provisions of the UCP such as the instant clauses.

9.26  The approach is generally against literalism. Absolute intent is not to be imputed to seemingly absolute contractual provisions unless that is the sense which the contracting parties desire to ascribe to them. Dicta of the highest authority in this regard are aplenty. In Antaios Compania Naviera SA v Salen Rederierna,37 Lord Diplock, with the concurrence of his colleagues38 participating in the case, said that if the application of the ‘words in a commercial (p. 247) contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense’. Explaining the rationale behind this hard-headed way of looking at commercial documents, Lord Steyn in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd,39 and also in Sirius International Insurance Co v FAI General Insurance Ltd.,40 observed: ‘In determining the meaning of a commercial contract ... the law ... generally favours a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the [reasonable expectations] of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretation and undue emphasis on niceties of language’.

9.27  Applying these principles to the issue at hand, the starting point is to figure out the common commercial purpose of cl. 1 and cl. 2 (a). Once this is accomplished, the manner in which both clauses should be understood and are presumably intended to operate will become clear.

9.28  The 1951 Revision, pursuant to the third paragraph of its Article 10, was the first version of the UCP to specifically impose an obligation on a presentee issuing bank which has decided on dishonour of a tender of documents pursuant to a letter of credit to give ‘notice to that effect’ to the presenting bank. This stipulation in the course of its operation suffered two shortcomings: first, the issuing bank did not need to furnish a presenting beneficiary with the notice, whereas traditionally he, not the presenting bank, is the primary promisee of the credit, the very person for whose benefit the facility comes into existence;41 and second, a presentee confirming bank had no responsibility whatsoever to notify its refusal of a presentation to a presenter, even though a confirmer and an issuer owe exactly the same payment undertakings.

9.29  However, the mentioned paragraph was materially reproduced in the 1962, 1974, 1983, and 1993 Revisions—with the last two respectively introducing appropriate amendments42 to take account of the previous deficiencies—and currently forms cl. 1 under the UCP 600 (cl. 2 (a), in contrast, is wholly a newcomer in the code).

9.30  A chance to get an authoritative exposition of the import of cl. 1 was originally afforded by The Royan in the Court of Appeal.43 In that case, the wording of an Egyptian issuing bank’s rejection telex sent to a nominated bank in London under a credit made subject to the UCP 290 (1974 edition) pertinently read: ‘Please consider these documents at your disposal until we receive our Principal’s [i.e. applicant’s] instructions concerning the discrepancies mentioned in your schedules’. Rejecting the argument that the notice did not unmistakably convey dishonour of the documents as required by Article 8 (e)—relevantly corresponding to cl. 1—owing to the qualifying words ‘until we receive our Principal’s instructions’, (p. 248) Lloyd L.J., delivering the leading judgment, said: ‘It was certainly not the way the telex was understood by Sumitomo [the recipient nominated bank]. For in [the latter’s] telex to [the beneficiary’s bank] they informed it that [the issuing bank] had refused to accept the documents due to some discrepancy ... The effect of [the issuer’s] telex...was that the documents were being held unconditionally at the disposal of the sellers. The reference to “until we receive our Principal’s instructions” was no doubt reflecting the hope that the buyers and sellers might come to some agreement, either by amending the credit or by tendering fresh sanitary certificates. I cannot read that expression of hope as meaning that the documents were not at the disposal of the sellers’.

9.31  Lloyd L.J.’s ruling enunciates a number of important principles for determining conformity of a notice with cl. 1. First, the expression ‘must give notice to that effect’ is satisfied by a notice which communicates the fact of a presentee bank’s rejection of a presentation. Thus, a notice containing, for example, a statement ‘We have determined that the draw documents on their face are not in compliance with the terms of our Letter of Credit No ... due to the following discrepancies: ...’44 without an express assertion that the bank is refusing to make payment is perfectly sufficient to provide the requisite information. Accordingly, the particular language employed is immaterial if it unambiguously conveys the actuality of dishonour.

9.32  Second, a notice is taken to be effectively bearing that data if it leaves a reasonable presenting party, occupying the position of the instant presenter with knowledge of any relevant communication by him in reaction to the presentee bank’s notice advising discrepancies found in the documents, in no doubt that the issuer of the message has decided against honouring the documents tendered. The burden of showing that a particular telex or SWIFT advice is of the indicated character is of course on the presentee/rejecting bank who seeks to persuade the court to accept it as such. In considering whether the responsibility is discharged in the individual case, the impression had by the presenter in question upon receipt of the advice should be taken into account.

9.33  Thirdly and lastly, the mere fact that a notice says the documents will be released to the applicant upon his waiving the discrepancies is not in itself a plausible ground for the presenter believing the presentee bank is not dishonouring the documents.45 Certainly, however, he is entitled to hold such opinion where the documents are with the applicant rather than the presentee as of the time of the advice.

9.34  The significance of these conclusions distilled from The Royan is worth underscoring by looking briefly at the relatively recent cases of Total Energy Asia Ltd v Standard Chartered Bank (Hong Kong) Ltd,46 and Voest-Alpine Trading USA Corp. v Bank of China.47 It is proposed to deal with these decisions seriatim.

9.35  Stone J. in the High Court of Hong Kong in Total Energy was concerned with the validity of a rejection notice given partly in writing and partly orally in purported compliance with Article 14 (ii) of UCP 500 (now cll. 2 (b), 2 (b) (ii) and (iii) of Article 16, UCP 600), a (p. 249) point covered a little later. However, in deciding in favour of the rejecting confirming bank against the presenting beneficiary, the judge said: ‘It is clear on the face of Article 14 (d) (the equivalent of Article 16) that there is a requirement that the notice should state that the documents are being refused’.48 This observation, standing alone, self-evidently ascribes to the sub-article a stricter intent than what is justified by the material words ‘must give notice to the effect that the tender is rejected’. But a later section of the court’s judgment made up for that disappointing pronouncement, in that although the notice contained no words of rejection, the presenting bank clearly understood the actual words used in the event that transpired ‘as evincing a clear and unequivocal rejection of the presentation’.49

9.36  Thus regarded, Total Energy is consistent with, and reinforces the correctness of, The Royan and, accordingly, the propositions we have advanced. Against this is to be contrasted Voest-Alpine. There, the defendant rejecting bank, Bank of China, sent the claimant beneficiary’s bank, Texas Commerce Bank, a rejection telex on 11 August 1995 before the expiry of the applicable deadline in the following terms: ‘Upon checking a.m. (aforementioned) documents, we note the following discrepancies: ... We are contacting the applicant for acceptance of the relative discrepancies. Holding documents at your risk and disposal’. Four days later, 15 August, Texas Commerce Bank reacted angrily with a fax message stating ‘the discrepancies were not an adequate basis to refuse to pay the LC’ and requested that payment be effected forthwith. After quoting the requirements of Article 14 (d), Vanessa Gilmore J. in the Texas Southern District Court concluded:

The article requires that if a bank wishes to reject a presentation of documents, it must give notice to that effect. Here, the Bank of China’s notice is deficient because nowhere does it state that it is actually rejecting the documents or refusing to honour the letter of credit or any word to that effect ... A notice of refusal, by its own terms must actually convey refusal, as specified in Article 14 (d) (i). This omission is compounded by the statement that the Bank of China would contact the applicant to determine if it would waive the discrepancies. As Plaintiff’s expert [witness], Professor James Byrne, testified, within the framework of Article 14, this additional piece of information holds open the possibility of acceptance upon waiver of the discrepancies by [the applicant] and indicates that the Bank of China has not refused the documents.50

9.37  The Fifth Circuit Court of Appeals affirmed51 the district court’s decision. Both rulings are questionable. While the third sentence in the passage accurately captures the requirement of the sub-article (i.e. cl. 1), it is strange that a notice which the judge considered to have failed to ‘actually convey refusal’ of the documents and a mere status report was perfectly treated by its recipient, Texas Commerce Bank, as communicating exactly the opposite connotation, having regard to the fax of 15 August to Bank of China. And the recipient’s undoubted knowledge of the rejection was wholly unaffected by the rejecting bank’s indication that it was approaching the applicant for a waiver of the discrepancies it had uncovered. Evidently, it is such an approach as the Voest-Alpine courts adopted that continues in practice to attract a variety of pejorative labels to the strict compliance doctrine in the letters of credit field, and should be deplored.(p. 250)

9.38  Similarly regrettable is the evident conflict between cl. 2 (a) and cl. 1, inasmuch as it appears to require a notice of dishonour to state the obvious. However, considering the uniform stance taken by the decisions just reviewed, namely, that a notice is good if it conveys the fact of rejection, the commercial substance of both the clauses must be this: the presenting nominated bank or beneficiary should be given to understand in a notice that his presentation is not accepted. If this is correct, then, in accordance with the modern standard of construing terms of commercial contracts laid down by the authorities intimated above—and, it is submitted, apparently applied in the Royan—it is hard to see the necessity for cl. 2 (a) insistence on literalism. Clearly, it is most unlikely that this provision, wholly a newcomer in the UCP through its inclusion in the latest edition, is designed to castrate cl. 1 that has been in existence, as we have seen, for well over half a century. If it were meant to do so, cl. 1 would not be included in this Revision at all. The presumption must therefore be against a desire by the UCP 600 drafters to get rid of it.

9.39  On the whole, business common sense recoils at the idea that cl. 2 (a) is to be taken as insisting on a statement of refusal of payment in a notice. On the other hand, it might be thought that the same cannot be said of cl. 2 (b) which obligates the rejecting bank to state in the notice each discrepancy in respect of which it refuses to honour a presentation, so nothing short of explicit listing of the deficiency found in the documents is mandated by the sub-clause. Whether or not such thinking is unduly literalistic and untenable comprises the focus of the next section, to which we now turn.

(3)  The extent of the obligation to communicate discrepancies

9.40  A primary commercial reason why a rejection notice ‘must state all the discrepancies’ which form the basis of the presentee bank’s decision to reject a presentation under a letter of credit is common knowledge among reasonably experienced banks in the letters of credit world.52 A properly communicated set of discrepancies detected in a tender typically offers the presenter a chance to revise the documents concerned and re-tender them to the rejecting bank for acceptance before the relevant deadline stipulated in the credit involved. Were that opportunity to be unavailable in this era, where the rejection rate of first time non-conforming presentation is routinely put at 70–75% worldwide, letters of credit instruments would be shorn of their utility and attraction to the potential beneficiary.

9.41  Yet, some may argue that the benefit of identification of the deficiencies in the notice is not self-evident if the presenter in question is a nominated bank rather than the beneficiary who originally procured the documents from sundry sources and is far more acquainted with the contents therein. But it must not be forgotten that that bank is ordinarily in the same locality as the beneficiary. Leaving aside exceptional cases involving a large-scale fraud, including the beneficiary’s disappearance soon after receiving payment against documents presented to a nominated bank, a presenting nominated bank whose presentation is dishonoured by a presentee issuing bank on the grounds of certain irregularities uncovered in the documents is ordinarily in a good position to personally approach the beneficiary in order to fix the problem.

9.42  When the underlying justification for the UCP insistence on a notice of refusal conveying the discrepancies in a dishonoured presentation is so appreciated, the question of what amounts (p. 251) to fulfilment of the obligation imposed and therefore compliance with cl. 2 (b) should be relatively easy to tackle. To start with, a rejection notice must not leave the recipient presenter speculating about the discrepancy in the documents occasioning refusal of a presentation. Upon its receipt, he should not be in the dark about the ground for dishonour of his presentation. So, a telex advising that ‘documents rejected for various inconsistencies and discrepancies’ is insufficiently precise and defective.53 Thus, the crucial test for determining whether a particular communication alleged to have failed to identify the irregularities in the documents and consequently being ineffective is: Did the presenter reading the message entertain a reasonable understanding as to the document(s) said to render the presentation non-complying with the terms of the credit and the nature of the discrepancy involved?

9.43  Proper application of this test requires a distinction to be made between two classes of cases. One comprise those (discussed earlier) in which a rejection notice is sent against a background of: (i) a presentation received with a transmittal letter by the presenting nominated bank drawing the presentee bank’s attention to certain imperfections (e.g. bills of lading taken to the issuing bank’s order, instead of the applicant’s, misspelling of ‘Soran’ as ‘Sofan’, ‘Jun’ as ‘Jin’, and so forth) in the tender; or (ii) a set of facially faulty documents taken up by the presentee under reserve, or a letter of guarantee, or an indemnity, or on collection or approval basis. The other group consists of the more common, run-of-the-mill cases of a dishonouring telex devoid of such pre-existing features or arrangements.

9.44  In the individual contexts of the former sort, both the respective dishonouring bank and presenting party are acutely aware of the discrepancies in the documents. Seeing that in matters of this nature preponderating weight must be attached to substance over form, in answering the question posed above, it is suggested that construing the telex advice should give serious consideration to the background knowledge. Consequently, if the transmitted telex communicates rejection of the documents and also indicates the documents are being held pending further instructions from the presenter, it would be wrong in principle and at variance with business common sense standards of construction of contractual documents enunciated by the authorities intimated previously, to consider the telex not to be in accordance with cl. 2 (b) simply because it omits to set out what is already the subject of mutual knowledge between the parties.

9.45  As to the category of cases where the presentation being rejected is unburdened by any such special underlying circumstances as have been mentioned, the information contained in the message communicated is the decisive consideration. Nevertheless, the applicable benchmark for judging whether the discrepancies are sufficiently described in the notice is that of a reasonable presenting beneficiary or nominated bank; there is little or no room for literalism. This is apparently borne out by the reasoning of the East District Court of Michigan in Toyota Tsusho Corp. v Comerica Bank,54 but the ultimate decision is clearly unsatisfactory.

9.46  At the centre of the dispute was a credit opened by a Michigan bank to finance a San Francisco entity’s purchase of a large consignment of CD-Rom drives from a Japanese corporation, Toyotsu, which called for certain drafts drawn at time, invoice, and ‘Airway bills consigned to Media Vision Inc dated not later than 7/02/94 marked “Freight Prepaid”’. A telex advising (p. 252) rejection of a set of presented airway bills bearing dates substantially beyond the stipulated time materially stated ‘Documents rejected ... due to late shipment’. Gilmore J. pointed out that a notice is, in general, ineffective unless it identifies the asserted faulty document or ‘in some way make[s] reference to the non-conforming aspect of the document’.55 He then denied the issuing bank’s reliance on the dishonouring telex, holding ‘it is clear that the telex did not sufficiently communicate to Toyotsu (the presenting beneficiary) that the draws were rejected because the airway bills dated after February 7 were presented’.56 It is hard to see how the judge could so conclude when the expression ‘late shipment’ as appeared in the telex is unquestionably impossible to be supposed to refer to any document other than the airway bills, the only transport documents in the presentation.

9.47  Significantly, the judge’s view of this rejection notice would seem to be consistent with the UCP 600 Drafting Group’s opinion, by which wording such as ‘invoice not as per LC terms’ is not adequately specific as to the problem with that invoice.57 But such stances should be deprecated. How can it be seriously argued that the presenter receiving notice carrying information of this sort will nevertheless encounter real difficulty in knowing the source and character of the irregularity in the rejected documents? Moreover, the opinion including the court’s conclusion ignores the fact that the discrepancies found in documents are nowadays often so technical and complicated that the only way the document checker could conveniently call attention to them via the prescribed mode of telecommunication (e.g. telex, SWIFT, fax, or telephone) would be to state ‘invoice not as per LC terms’, ‘conflicting data between certificate of weight and bill of lading’, ‘bills of lading not in compliance with LC’, or ‘language of certificate of default does not comply with the requirements of the LC’.

9.48  Instructively, the last of those expressions communicated by telephone was the very wording the Seventh Circuit Court of Appeals treated as sufficient in Occidental Fire & Casualty Co of North Carolina v Continental Bank N.A.58 Such must be the approach of a reasonable business person which, as already noted, is typically hostile to placing undue accent on the niceties of the language used in a notice of refusal of a presentation. And what is more, the cardinal rule which presumes bankers to be incompetent in analysing technical trade terminologies in the documents tendered to them should not be forgotten. Asking a rejecting bank to expressly describe technical discrepancies uncovered on pain of forfeiting its right to demand strictly conforming presentation is patently out of line with that rule and undesirable.

(4)  Theoretical basis of the single notice of discrepancies rule

9.49  Another vitally important facet of cl. 2 (b) worth considering is whether the clause read with the cl. 5 preclusion of reliance on any discrepancy not set forth in a proper rejection notice is effectively a replacement for the equitable doctrines of estoppel and waiver.59 Before dealing with the matter, some threshold observations on the material portion of the provisions may be useful.(p. 253)

9.50  The cl. 2 (b) requirement of a single notice specifying all60 the documentary discrepancies justifying a presentee bank’s dishonour of a presentation differs from the corresponding previous clause ‘must give notice’61 by the addition of the italicized words. The reform introduced is doubtless intended to explicitly articulate the code’s disapproval of the notion, occasionally entertained by some banks and judges,62 that a subsequent notice of a deficiency sent within the five-day timeframe and received by the presenter just one day after the initial notice was received is permitted under the UCP scheme. Notably, cl. 2 (b) is decisively reinforced by cl. 5, which precludes the dishonouring bank from adducing63 any discrepancy not listed in the original notice as a ground for its declining to honour the documents tendered to it.

9.51  The bank is not allowed, in the language in which Singapore courts64 are wont to put it, to get a second bite at the cherry; it stands or falls on the merits of the grounds stated in the first notice. Crucially, however, a telex, fax, or SWIFT advice that does no more than elucidate a previous notice in response to a presenter’s (or its solicitor’s) request for clarification is not treated as another notice adducing additional irregularities in the documents.65 Whether a particular telex message or other communication is merely an explanatory reply or not depends on the full text in the individual case. It should perhaps be pointed out that if the message transmitted partly clarifies an earlier notice and partly raises fresh defects as a reason for rejection of the documents, so much as concerns the latter information is to be ignored, and the former accepted.

9.52  These, then, are the preliminary aspects of the issue at hand. It is generally accepted in Anglo-American jurisdictions that cl. 2 (b) together with cl. 5 forms an independent, self-contained exception to the common law rule which lays down that if a contracting party refuses to perform his contractual obligations on a stated ground, but afterwards discovers another ground which in fact existed at the time of the refusal, he is entitled to abandon the initial ground if it proves to be invalid and rely on the latter.66 In principle, therefore, parties (p. 254) to a letter of credit incorporating the UCP are to be regarded as having mutually contracted not to subject themselves to the rule.67

9.53  Such contracting out is traditionally sanctioned by the doctrine of freedom of contract, and is to be enforced according to its terms by the courts, so far as none of the very limited exceptions (e.g. public policy or illegality) directs otherwise. Over the years, the equivalent versions of cl. 2 (b) along with cl. 5 in the 1983 and 1993 Revisions have, quite rightly, been commonly treated by the courts as establishing a strict preclusion rule,68 no exceptions to the clauses being recognized.69 In doing so, these clauses were distinguished from the related provisions of the earlier three revisions, which directed a rejecting issuing bank to communicate the discrepancies forming the ground for its refusal of a presentation, but made no provision as to what should be the sanction if the directive was not complied with, a gap in the event filled in by the application of the equitable doctrines of estoppel and waiver.70

9.54  In that sense, it is perfectly legitimate to consider the equitable doctrines to be inapplicable to cases now falling under cl. 2 (b) and cl. 5. Strictly regarded in conceptual terms, however, the clauses only establish a rule of an express contractual waiver in circumstances where the general law of implied waiver would have held sway previously; in particular, there remains special kinds of cases to which they are inappropriate, and in which the success of the presenting party alleging, no doubt sometimes regarded as waiver in common parlance, will depend on its satisfying the essential requirements of the principle of estoppel.

9.55  This can be illustrated by looking at the ways in which, as far as is pertinent to the present context, estoppel and waiver doctrines are typically applied. Typically, these principles produce identical legal consequences, in that the party against whom a waiver or an estoppel is successfully asserted would be unable to insist on his implied contractual rights. A presentee bank who seeks to take advantage of a discrepancy discovered after advising the presenting beneficiary or nominated bank of its dishonour of a presentation, by virtue of the sub-clauses, is regarded in conventional language as estopped from doing so, or that it has waived the discrepancy.

9.56  That the same conduct lends itself to being so viewed is unsurprising: All through the ages, for instance, in contract for the sale of goods cases, a field largely bound up with the mechanisms of letters of credit, some judges may consider the substance of a person’s conduct or the words he communicates by means of a telex or its like to his counterparty in the course of (p. 255) the working out of a particular transaction as constituting a waiver of his strict legal rights, but others may well be indifferent to whether the conduct or words are described as estoppel or waiver.71 While the effect of precluding reliance on a later uncovered discrepancy may innocuously be indiscriminately so designated, it would be inaccurate to similarly characterize the essential conditions for arriving at that result.

9.57  It has been noted in an earlier section72 of this book that by the principle of estoppel, if a presentee bank by conduct or words makes a clear and unequivocal representation to a presenting nominated bank or beneficiary, and the latter alters its position in reliance on the representation, the representor bank cannot afterwards disown what it had represented when to do so would be unfair and inequitable.

9.58  An instance73 exemplifying such preclusion is where an employee in the trade finance section of a presentee issuing or confirming bank by telephone, telex, or a fax message, advises a beneficiary to forward his documents to it, despite the employee’s knowledge that the validity of the credit or the prescribed period of presentation of documents will have expired by the time he receives the documents. If the beneficiary acts on the advice as requested, the issuer or confirmer, upon receipt of the documents, will be barred from asserting the untimeliness of the presentation as respects the terms of the credit to refuse payment. (This type of case may, alternatively, be viewed as giving rise by implication to an amendment of the credit within the provisions of Article 10 (c), UCP 600, a point discussed previously.74 )

9.59  A further example is afforded by Crocker Commercial Services Inc v Countryside Bank.75 In tendering to an issuing bank, three days prior to the expiry of a letter of credit, a set of documents consisting of a draft, an invoice, and a signed statement certifying that the funds drawn were due and owing from the applicant for the credit, the beneficiary, in most courteous business language, asked of the bank, ‘If you have any questions, please retain all the documents and place an urgent telephone call to the undersigned at (312) 853-3460’.

9.60  The bank examined the documents the day following their submission, determined the invoice to be non-complying for failing to bear a certain designation contained in the credit, and, for that reason, decided to refuse payment there and then. Two days after the credit lapsed, it notified its dishonour of the tender to the beneficiary. Considering how the bank (p. 256) stood by silently and permitted the credit to run out, as well as the fact that the beneficiary was in a position to cure the alleged discrepancy had it been referred to him, and to re-tender the invoice well before the specified deadline arrived, Shadur J. said it was clear that ‘[a]ll the classic components of estoppel are present’.76 He accordingly found in favour of the claimant beneficiary.

9.61  Undoubtedly, the bank did not expressly promise to place the ‘telephone call’ should there be a need for it. However, the subtext of the judge’s reasoning is that the bank’s conduct in not making any objection to the request unmistakably led the beneficiary to reasonably believe it had consented to do so; otherwise he would most likely have called in to inquire if the eventuality he contemplated had occurred before the credit ran out. Quite independently of the element of implied consent, to stand by with a list of the detected discrepancies in its hands rather than communicate them to the beneficiary sufficiently created circumstances which the law would count as founding an estoppel against the rejecting bank. To put it another way, a presentee bank has to notify the deficiencies it identified in a presentation to a presenter reasonably promptly, and should not wait until the fifth banking day articulated in cl. 3,77 especially when the irregularities are, on the face of it, curable. If it neglects to act, then it must live with the consequences of its inaction.

9.62  This conclusion is reinforced by U.S. Industries Inc v Second New Haven Bank.78 There, a beneficiary tendered to an issuing bank certain drafts and a certificate on the morning of the expiry date of a letter of credit. A couple of hours after the presentation, the beneficiary inquired about the regularity of the documents. In response, a responsible officer in the issuer’s letter of credit department said: ‘There does not appear to be any problems’. However, two days after the credit had come to an end, the bank denied payment on the ground of a discrepancy in the documents. Daly J. in the Federal District Court of Connecticut emphasized that the beneficiary, based on the issuer’s assurance, reasonably assumed that the tender was in good order. Having thus relied on that conduct to its detriment, the beneficiary’s claim for payment succeeded, the issuing bank being estopped from asserting any defence it might have had concerning non-conformity of the documents. Notably, it was the singular circumstance of the ‘assurance’ which founded the estoppel against the issuing bank. Had it brought the discrepancy to the beneficiary’s attention prior to the expiration of the credit, the claim of preclusion against it would have been unsustainable.

9.63  Reasonable reliance by a presenting beneficiary or nominated bank to its prejudice on the act or words of a presentee bank is an essential factor in establishing an estoppel. In the various cases just considered, compliance of the dishonouring bank’s notice of rejection with the related requirements of cl. 2 (b) was irrelevant to the matter for decision. Accordingly, the judge, in determining the beneficiary’s claim, was in principle quite entitled to feel obliged to ascertain whether or not the bank’s conduct gave rise to estoppel, which in the event he said it did. The result is that in strict legal terms cl. 2 (b) read with cl. 5 is to be understood in the sense of waiver rather than estoppel. It becomes necessary, then, to look at the particular contexts in which the sub-clauses operate as a species of the doctrine of waiver.(p. 257)

9.64  Waiver, as we noted in Chapter 1 while discussing the circumstances in which a person may in law be considered to have expressly or impliedly dispensed with his right to reject a letter of credit which does not conform to the underlying sales agreement or contract for the provision of certain technical services, means generally an intentional relinquishment of a known right.79 There can thus be no waiver unless the person in question knows of the existence of a given legal right and intentionally abandons it. Furthermore, a party, upon knowing of a breach of a contractual term, normally has to decide between two mutually exclusive rights, i.e. approbate or reprobate; the decision in either event is usually to be made without unreasonable delay, unless the individual contract imposes a clear-cut time limit.

9.65  In letters of credit law and practice, a presentee bank’s knowledge of its right to reject a non-complying tender of documents is presumed. On the other hand, the right is considered intentionally relinquished where a presentee issuing or confirming bank knowingly or inadvertently accepts80 a set of non-complying documents and makes payment, as noted previously, by cash, or by engaging to remit the sum at the maturity date named in the credit. That act of payment constitutes an unequivocal waiver of whatever discrepancies there may be in the documents. The waiver is binding and irrevocable: an assertion that it is entitled to reclaim the money paid out, or that it should not be called to discharge the engagement assumed because it mistakenly honoured the presentation would be groundless and unavailing.81

9.66  Similarly, an issuer’s or confirmer’s unconditional, categorical acceptance of an untimely tender is an implicit waiver of the non-conformity as to the relevant deadline for taking up documents under the credit,82 as is any discrepancy not included in an otherwise effective notice of rejection.

9.67  Plainly, therefore, cl. 2 (b) together with cl. 5 does not lay down a rule which can in a strict legal sense be classified as a substitute for both the estoppel and waiver doctrines, as some83 have considered it to be. Cases in which the clauses are materially doing so, and therefore require a presenting party to show it acted on the presentee’s representation (p. 258) and suffered damage on account of the reliance in order to be entitled to the benefit of the rule, must inevitably be standing the clauses on their head, and should not be followed.

(5)  Regularity of an advice on the fate of dishonoured documents

9.68  Under the preceding regime, the UCP 500, a rejection notice must advise on the fate of the dishonoured documents. This entailed stating that the rejecting bank is holding the rejected documents at the disposal of, or is returning them to, the presenting beneficiary or nominated bank. A long series of decisions84 dealing with the proper ways in which such a bank could comply with this requirement adopted the quite unexceptional view that a notice was conforming therewith insofar as it made it clear that the bank itself was dispatching the documents, or that it was waiting for the presenting party to come for them; and in either case it must be obvious on the face of the notice that there were no conditions attached to its restoring the documents to the presenter’s possession.

9.69  What amounts to a conditional holding of documents rendering a notice defective was restrictively interpreted in a manner which, it is submitted,85 could not be reconciled with business common sense, reason, or principle: a notice stating ‘Please advise your disposal instructions’ was considered conditional and therefore faulty if it additionally indicated that the rejecting bank was in correspondence with the applicant for a waiver of the discrepancies detected and would release (not that it had released, but would release) the documents to him upon his accepting the deficiencies.

9.70  In substance, that commercially restrictive and patently regrettable approach is now implicitly invalidated by option (ii) (first sentence) under cl. 2 (c) of Article 16, UCP 600. A notice of rejection is entitled to select this or one of the other four options provided, i.e. those in cl. 2 (c) (i), (ii) (second sentence), (iii), and (iv).

9.71  The various options have been set out above and need to be rehearsed here. But one problem respecting adherence to the sub-clauses merits close scrutiny. Following the already noted (p. 259) requirement of the previous edition of the UCP, reaching back, in relation to a rejecting issuing bank, to 1951,86 it has become a common practice among several English, American, Southeast Asian, and African issuing banks to give a rejection notice in which a presenting nominated bank or beneficiary is advised of the disposition of the dishonoured documents with words such as ‘We hold the documents at your risk and responsibility’, or ‘Please consider these documents at your disposal’, or ‘We are holding the documents at your disposal and risk’, or ‘The documents are at your risk for your disposal’. Would it be right to consider a notice faulty for selecting none of the new options in cl. 2 (c) (i)–(iv), but such a time-honoured formula?

9.72  An answer in the negative might somewhat imply that all potential rejecting banks will go like clockwork and abandon the intimated established patterns of advising the fate of rejected documents any time soon. Such an inference is surely far-fetched. In point of fact, a survey by the writer of some current rejection templates abundantly reveals that a number of banks appear likely to continue using the expressions in the foreseeable future. And it will probably take legislation to make them terminate the practice overnight; the UCP, which cannot and does not pretend to be anything but standard terms and conditions taking effect to the extent permitted by the particular credit incorporating it, is hopelessly ill-suited to bring about the result. In any event, there is nothing in cl. 2 (b) along with sub-cl. 2 (c) (i), (ii) and (iv) which inherently runs counter to the settled standard of practice. Moreover, the code drafters have not seriously pressed a different argument, seeing that the essential objective of the UCP scheme is to uphold, and not to abolish, such reasonably widespread habits involving credit operations.

9.73  Crucially, the equivalent clause in the earlier revisions of the UCP,87 stating that a rejection ‘notice must state that the documents are being held at the disposal of, or being returned to, the presenter’, has been construed by the English Court of Appeal88 and Chao Hick Tin J. in the Singapore High Court89 as ‘requir[ing] no precise form of words to be used’; it is sufficient for that purpose if a given notice in the particular circumstances makes it abundantly clear that the bank which issued the notice is unconditionally retaining the documents for the presenting beneficiary or nominated bank. This judicial view of the clause has stood unchallenged for almost twenty-three years.

9.74  On the basis of these considerations, it is suggested that a presenting bank or beneficiary would be outside its right to regard as legally ineffective a rejection notice which bears the old formula; or a notice which is not carrying such a formula or the exact wording of the option picked from the sub-clauses under focus, but unequivocally conveying the message that the documents are available for collection by the presenting party without precondition.90

(p. 260) E. Effect of the Disposal Statement in a Rejection Notice

9.75  This section is the final of the three matters outlined earlier as forming the focus of this chapter. To recall, by virtue of the various sub-clauses under cl. 2 (c), a rejecting bank is required to state in its rejection notice how it will dispose of the documents following its dishonour of them and service of the notice. The disposal statement typically entails selecting one of the five options mentioned in the preceding discussion. In this section we are concerned with a situation where the statement settles on option cl. 2 (c) (i) (i.e. the bank advises that it is holding the documents pending further instructions from the presenter); or option cl. 2 (c) (ii), second sentence (i.e. the bank advises that it is holding the documents until it receives further instructions from the presenter prior to the rejecting bank agreeing to accept the applicant’s waiver of the discrepancies); or option cl. 2 (c) (iii) (i.e. the bank advises that it is returning the documents); and the presenter so advised alleges that the disposal statement is a contractual advice imposing an obligation on the bank to return the documents or to act in accordance with the presenter’s instructions to restore the documents in a reasonably diligent and prompt manner, and that a breach of the obligation directly engages the preclusion rule in cl. 5.

(1)  Background principles as to prevailing mercantile customs

9.76  Consideration of the effect of the disposal statement instanced, merits a brief glimpse into some background mercantile practice which the courts have recognized and applied in a multitude of cases for nearly 150 years. Under the principle emerging therefrom, a drawee bank (or buyer) to whom has been tendered for acceptance a set of shipping documents (usually a bill of lading, an insurance policy, and invoice91) accompanied by certain bills of exchange (drafts) drawn at sight or usance pursuant to a contract of sale of goods is not to retain the documents if it declines to accept the draft, but to send back all the documents comprising the tender to the party from which the presentation came with all reasonable dispatch from the date of refusal of the acceptance.92 Typically, the refusing drawee is the indorsee of the annexed bill of lading, so it would need to re-indorse the bill back to that forwarding party in order to re-invest in him the rights of suit thereunder.93

9.77  Key practical considerations induce the law to set its face resolutely against the retention. Now, the bill of lading, as we noted in Chapter 7, is the symbol of the property in the goods it covers; and normally embodies the seller’s jus disponendi, his power to dispose of the goods as he thinks fit if the draft drawn for the purchase price is not paid or accepted by the drawee; until acceptance, all the incidents of property in the goods are vested in the seller, even if, as is sometimes the case, the relative bill of lading is indorsed by the seller to the drawee bank or its order.(p. 261)

9.78  The general course of the transaction when documents are presented to the drawee bank (or buyer) is for it to accept and return the draft to the presenting party in a simultaneous exchange for the bill of lading, which then vests in it the right to take delivery of the goods by reason of the acceptance of the draft;94 on the other hand, the draft, upon reaching home, may be discounted by the seller with his bank or a forfaiter for cash or kept until maturity as his financial circumstances necessitate. Just as it would commercially be imprudent for it to return the drafts carrying its acceptance together with the bill of lading inasmuch as it has not taken leave of its business senses, it could not sit on the one without accepting the other.

9.79  More specifically, refusing to accept the draft while remaining possessed of the bill of lading places the seller in the difficult situation of having neither an accepted bill of exchange which he can discount or use as he considers proper, nor the bill of lading which will enable him to resell the cargo it represents to another person in the same market or elsewhere. In practice, such retention of documents can, and often will, found an action in tort for conversion,95 or, as we have seen in a related context, give rise to a waiver of whatever deficiencies there might be in the documents. Either way, much the same amount of damages are usually recoverable damages, namely, the amount of the unaccepted draft, interest, plus costs of the litigation.96

9.80  Primarily, and in a technical sense, a refusing drawee vis-à-vis a tendering seller under a contract of sale occupies a position closely analogous to that of a rejecting bank vis-à-vis a presenting party under a letter of credit so far as concerns, at the very least, the hardship which the respective presenter might suffer by reason of unjustified withholding of tendered but unaccepted documents. On principle, then, the mercantile rule of practice under which the refusing drawee in the former context is to hand back the rejected documents or runs the risk of an action for damages at the suit of the presenter also applies directly to the corresponding parties in credit transactions. Nevertheless, after several half-hearted attempts in four editions, the UCP, in its 1993 Revision, adopted the mercantile precept, albeit in a form which provided the rejecting bank with the choice, to be exercised in its rejection notice, of advising that it is holding the rejected documents at the presenter’s disposal, or that it is returning them to him. These two options under the old Article 14 (i) are now respectively in sub-cll. (i) and (iii) of cl. 2 (c); three other options have, as already noted in the previous section dealing with the mode of proper advice on the fate of dishonoured documents, been added, but they are not pertinent for present purposes, except the second sentence of sub-cl. (ii), which is at any rate relevantly of the same effect as sub-cl. (i).

(2)  Fortis Bank v. Indian Overseas Bank case

9.81  Where a rejecting bank decides on sub-cl. (i) option, it states in its notice that it is holding the documents pending further instructions from the presenter; if it chooses to go by sub-cl. (iii), it advises that it is returning the documents to the presenter. The legal meaning and effect of such notifications was at the centre of the litigation in Fortis Bank v Indian Overseas Bank.97 The defendant, an Indian issuing bank (IUO), wished to reject certain sets of documents it had individually received and determined to be non-conforming presentations pursuant to five letters of credit incorporating the UCP 600. The rejection notices it sent separately (p. 262) under the credits to the respective claimant presenters (Fortis, a Belgian nominated bank and Stemcor, the beneficiary of the facilities)98 stated it was ‘returning the documents’. In respect of one notice which said the bank was ‘holding the documents’, Fortis subsequently instructed the rejecting bank to ‘endorse the bills of lading to Fortis’s order and return them with the other documents to our office via urgent courier’. As it turned out, several weeks passed before the rejecting bank returned the documents to the presenters.

9.82  In the ensuing action, the claimant claimed to be entitled to treat the time taken by the bank to restore the documents as being in breach of sub-cll. (i) and (iii) of cl. 2 (c), and accordingly triggered the preclusionary sanction in cl. 5. Of course the bank could only be liable if the clauses read together obligated it to send back the documents and to use a much shorter amount of time in carrying out the exercise. The claim thus raised two99 main issues for determination by Hamblen J. in the Commercial Court of the Queen’s Bench Division.

9.83  First, according to cl. 5 of Article 16, if a rejecting issuing or confirming bank ‘fails to act in accordance with the provisions of this article, it shall be precluded from claiming that the documents do not constitute a complying presentation’. The language of the clause is markedly different from that of the corresponding preclusion provision in Article 14 (e) of the UCP 500, which expressly required that a rejecting issuing or confirming bank that omitted to hold the documents at the disposal of, or return them to, the presenter, should be barred from dishonouring the documents on the ground of their deficiency. The issue arising was, does the variance in the wording connote an intention on the part of cl. 5 to depart substantively from the erstwhile regime, consequently enabling the instant rejecting bank to say, ‘cl. 5 has no application to the breach alleged against me’?

9.84  Second, assuming the answer to that question is in the negative, and, as happened in the present case, a rejecting bank makes in its rejection notice the disposal statement contemplated by sub-cl. (i), or is requested by the presenter to return the documents which it has advised that it is holding under a sub-cl. (iii) notice, within what period of time following the receipt of the notice, or the transmission of the request, should the documents be expected to arrive at the presenter’s office, so that if, upon the expiry of that time, they are still to be received, the rejecting bank would be deemed to have violated the respective clauses, and as a result engage the preclusionary sanction in cl. 5?

9.85  As a preliminary matter, resolution of the two issues, the judge quite correctly observed, involves the further and vital question of the correct construction to be put on the clauses. In order to accomplish the task, it must be recognized that the provisions are part of an international code of standard rules settled by banks and business professionals routinely participating in letter of credit operations. As such, they have to be construed in a manner which accords with the ‘reasonable expectations of experienced market practitioners’.100

9.86  This basically entails the ascertainment of the meaning which the clauses would convey to a reasonable bank having all the relevant background which would reasonably be available to (p. 263) both the rejecting bank and the presenter at the time of the contract.101 In determining their true import, the courts typically draw a distinction between clauses which are complete, manifestly free from syntactic error or ambiguity necessitating a choice between different possible meanings or reconciliation of apparent inconsistencies among themselves, and those which are not. In the latter class of case, the judge’s role is to resolve the ambiguities or inconsistencies in the way in which a reasonable bank would have made sense out of the syntactic cacophony.

9.87  Where the clauses are clear and sufficiently unambiguous, they must usually be applied without adding a term from outside; fundamentally, however, if a clause, albeit apparently complete in itself, does not expressly say what is to happen should an event of a certain description occur, a sequence of modern decisions102 of the highest authority affords practical guidance on what term can be read into the clause by a process of implication to cover the deliberate or inadvertent silence of the clauses. So far as is relevant, there are two103 types of such a term, namely, a term which essentially articulates an established practice, custom, or usage; and a term necessary to give business efficacy to the contract between the parties, which term the parties omit to expressly include in the clauses because it goes without saying.

9.88  We move now to the application of the foregoing precepts to the issues Hamblen J. had to decide.

(a)  Existence in Article 16 (c) (iii) of a duty to return the documents

9.89  This branch of the matters in dispute concerns the question whether there is indeed a substantive difference between the preclusionary provision of cl. 5 and its predecessor or, alternatively, whether a rejecting bank that says in its notice that it is holding dishonoured documents pending further instructions from the presenter pursuant to sub-cl. (i), or that it is returning the documents under sub-cll. (iii), has an obligation, following the transmission of the notice, to send the documents upon the presenter’s request, or to return the documents as it has said it is going to do. Hamblen J. approached the question from two alternative perspectives, by applying general principles of construction, and by employing the process of implication.

9.90  In relation to construction, the judge said: ‘If one asks what sub-cll. (i) and (iii) read as a whole against the relevant background would be reasonably understood to mean, the answer is that it would be understood to require not merely that the issuing bank should make (p. 264) a disposal statement, but that it should also act in accordance with the statement it has made’.104 He identified the relevant background, which must have been reasonably available to the parties, as the potentially serious hardship the presenter suffers when the rejecting bank says it is returning (or is instructed to return) the dishonoured documents but does not do so, or only does so after considerable delay. In particular, where, as in the present instant case, the documents included bills of lading comprising the presenter’s rights and security interest in the goods shipped, or where the presenter could have rectified the discrepancies which originally occasioned the dishonour of the presentation and re-tendered the documents before the expiry of the letter of credit, the likely consequences of accepting the rejecting bank’s contention that it has no obligation to comply with its statement of disposal is almost too scary to imagine. The judge accordingly concluded that the bank was obligated under sub-cll. (i) and (iii) and cl. 5 to return the documents following a return notice or the presenter’s instructions to return the documents.

9.91  On the other hand, Hamblen J. noted that if that conclusion could only be arrived at by implication, he was convinced that such implication must be made on the ground of necessity105 or established banking practice,106 for ‘unless there is such an obligation there is no contractual means of ensuring’ the bank’s compliance with what it says in its notice it will do.107

9.92  Both the conclusions are unquestionably unassailable, but the court’s handling of the material adduced by the claimant presenters to prove the existence of the bank’s obligation invites comments. Now, there was some debate about what evidence was admissible108 to discover the meaning which a reasonable bank would ascribe to the clauses. In this connection, it is of great significance that the rejecting bank involved in the instant case was an issuing bank, as opposed to a confirming bank. With regard to it, as noted previously, effectively in consonance with mercantile law and custom reaching back over a century, the long-established international banking practice expressed in the individual preclusionary clause of the 1974,109 1983,110 and 1993111 Revisions, had been that a rejecting issuing bank who fails to return rejected documents after it has given the requisite rejection notice or abide by the presenter’s instructions to hand back the documents would be precluded from relying on the discrepancies in the presentation to dishonour the credit.

9.93  It was undisputed that that established banking practice had never caused particular problems or unhappiness in the international banking community concerned with letter of credit operations; nor had there been any expression of disapproval of it in academic literature in the field; rather, it was generally accepted by banks all over the world. More importantly, the expert testimony of Mr Gary Collyer, at the instance of the claimant presenters, was that the new wording of cl. 5 was not designed by draftsmen, the UCP 600 Drafting Group (of which he was the chairman), to break with the old international standard banking practice prescribing forfeiture of the rejecting bank’s right upon its failure to act in accordance with (p. 265) its statement of disposal made in the rejection notice, but simply for cosmetic reasons so as to make the text neater and tidier than those of its corresponding predecessor. Otherwise, it would certainly have counted as a major substantive change and be so set forth by the Drafting Group’s Commentary on UCP 600.112 The upshot of the expert evidence was that, with regard to a rejecting issuing bank, cl. 5 is coterminous with its predecessors dating from the 1974 Revision.

9.94  Hamblen J., however, did ‘not consider to be admissible’113 the evidence as to what Mr Collyer and his colleagues might have sought to achieve by their omission from cl. 5 of the words bearing on the rejecting bank’s penalty if it fails to return the documents or comply with the presenter’s request to return them. He also regarded the commentary as having no ‘evidential status’,114 by reason only that it had yet to receive official approval from the ICC Banking Commission,115 a body whose opinion the courts have repeatedly emphasized is entitled to be accorded persuasive weight.116

9.95  Admittedly, issues of construction and implication are sometimes of such a nature as to render unnecessary the calling of expert evidence to assist the court in disposing of them. But the ones in the instant case do not seem to fall into that category. The judge’s offhand treatment of the expert evidence on the ambit of cl. 5 is thus to be regretted, and highly unlikely to enjoy wide acceptance among bankers and academic commentators alike. Moreover, it cannot be overemphasized that the UCP is in substance a code of banking practice drafted by non-lawyers; accordingly, expert evidence on what a particular rule of practice such as cl. 5 imports deserves the court’s consideration, and should normally be refused only if it finds that the evidence provides no real insight into the provision or is so plainly wrong and commercially implausible that it cannot be right.

9.96  It is remarkably reassuring therefore that Hamblen J.’s ultimate conclusion explicitly accepted117 the evidence as to the fact that cl. 5 is the same old preclusion rule, albeit now slightly repackaged to make it a little more felicitous than before, fashioned by experienced bankers in line with an overarching mercantile custom to protect presenters’ legitimate expectations that the rejecting issuing bank, which advises by notice that ‘it is returning the documents’, will actually do as it has advised; and also expect that, where the banks says ‘We are holding the documents pending further instructions from you’, and the contemplated instructions are given, they would be complied with. If, as argued by the defendant rejecting bank in the instant litigation, the new cl. 5 is to be understood as abandoning the long-established and recognized international banking practice requiring the bank to adhere to the disposal statement it has made in its rejection notice, the effect would be to resurrect the rule of practice which originated with the 1951 Revision (UCP 151), but discarded (p. 266) undoubtedly as unsound by the 1974 edition of the code. Surely, the result contended for is counterproductive and unacceptable.

(b)  The time within which to effect return of the documents

9.97  We have just seen that there is an implied contractual obligation on the rejecting issuing (or a confirming) bank to return rejected documents to the presenter if the cl. 2 (c) (i) option applies, or to comply with the presenter’s request for the documents if cl. 2 (c) (ii), second sentence, or cl. 2 (c) (iii) applies. The bank’s failure to perform the obligation constitutes a breach of the respective sub-clause as well as cl. 5 and triggers preclusion. The element of performance generates an important question (the second of the two issues for decision in the Fortis Bank litigation) identified earlier: Within what time is the obligation to be performed? Relevantly, the obligation is considered discharged only when the documents arrive at the designated office of the presenter in the same way that the presenter’s documents are treated as presented only when they reach the hands of the presentee bank—a topic fully examined in Chapter 2.

9.98  In addressing the question, the main thrust of the claimant presenters’ submission before Hamblen J. was that if a rejecting bank states in the rejection notice that it is returning the dishonoured documents, or is requested by the presenter to send back the documents, it must be implied that the bank has to do so within a reasonable period of time. An implication of a term into the clauses is necessary to give business efficacy to the parties’ transaction. So, the whole question was reduced to whether the suggested term as to time limit is to be implied. Answering the question in the affirmative, the judge said that whatever the scope of the expression ‘a reasonable time’ may be, the present rejecting bank’s return of the documents after a number of weeks following its rejection notice constituted a breach of its obligation and attracted the preclusion in cl. 5.

9.99  Leaving aside for the moment what the expression means, the principal question in relation to a notice selecting sub-cl. (i) or (ii) options was not one of implication, but of the true construction of cl. 4 which expressly provides that the rejecting bank is entitled to ‘return the documents to the presenter at any time’.

9.100  Since the instant decision did not consider the meaning of that wording, it behoves us to do so here. Taken broadly, ‘any time’ has a substantial element of uncertainty; it is susceptible of different constructions. Read literally, the time is at the bank’s discretion: it ‘may’ use several weeks, months, or even years. But understood in a restrictive sense, it means a reasonable time. Making a choice between the two, in principle,118 requires asking what meaning the wording ‘any time’ would convey to a reasonable business person having all the background knowledge which would reasonably have been available to the rejecting bank and the presenter at the time of their contract.

9.101  The relevant background information is much the same as intimated earlier, especially the fact that by mercantile custom woven into the fabric of the UCP as international banking practice, a presentee bank that refuses to accept a draft has to return it together with the accompanying documents to the presenting party with reasonable promptness; delay in doing so could give rise to very serious consequences. It is clearly unrealistic to expect that (p. 267) a reasonable bank with full knowledge of that commercial background will hesitate for a moment in concluding that ‘any time’ must mean a reasonable time.

9.102  But what does ‘a reasonable time’ signify? On this expression, the evidence119 of the standard banking practice adduced by the expert witnesses on both sides and approvingly alluded to by Hamblen J.120 is that the return of, or fulfilment of the request to send back, the documents should occur within two banking days, since it ‘simply involves the gathering together of the documents and their despatch by expeditious means’121 such as courier or hand delivery through banking channels. ‘Gathering together of the documents and their despatch’ is not to be taken literally. In the case of a dishonoured presentation which includes bills of lading indorsed to the rejecting bank, this bank has to re-indorse the bills back to the presenting nominated bank or beneficiary so as to re-vest in that party the right of suit under the bills. (If it returns the documents un-indorsed, the presenter’s usual course of action is to tender the bills to the shipowner for replacement with a fresh set of bills of lading, commonly known as switch-bills of lading.)

9.103  Notwithstanding the foregoing evidence as to the length of a reasonable time, it is suggested that ‘reasonable time’ can vary from two to eight or even ten business days in exceptional circumstances, as for example where local political conditions, weather, or long public holidays interfere with the bank’s operation (a situation which is covered by Article 36 in any event) or the courier pick-up times.

9.104  If our construction of the bank’s right to ‘return the documents to the presenter at any time’ as meaning ‘a reasonable time’ is correct, then the particular provision of Article 16 the bank violated is cl. 4, while a failure to send the documents the bank says in its sub-cl. (iii) notice that it is returning, constitutes non-observance of that sub-clause. Both acts are also breaches of cl. 5. With that, it is proposed that the ICC Banking Commission might want to issue a policy statement122 explaining cl. 4. The clause currently reads ‘e. A nominated bank acting on its nomination, a confirming bank if any, or the issuing bank may, after providing notice required by sub-article 16 (c) (iii) (a) or (b), return the documents to the presenter at any time’. That wording could properly be explained as meaning, ‘e. A nominated bank acting on its nomination, a confirming bank, if any, or the issuing bank, after providing notice under sub-article 16 (c), has to return the documents to the presenter with reasonable promptness’. The benefit of such an explanation is threefold: it will tackle the shortcomings in cl. 4 and avoid the need to clarify that the preclusion provision, cl. 5, is not in substance different from the old Article 14 (e). It will also leave the Commission less worried about the risk of the courts outside England reaching a conclusion which conflicts with the Fortis Bank decision examined above.

F. Conclusion

9.105  A common thread running through the discussion in this chapter is the extremely delicate and complicated nature of determining a rejecting bank’s conformity to the requirements of Article 16 (c)–(f) of the UCP 600. Ideally, the requirements should have been drafted with felicitous choice of words, and so eliminate probably all the difficulties. But it would (p. 268) be unfair to put the blame on their drafters. It is fitting to recollect Lord Denning M.R.’s counsel: ‘Whenever a statute comes up for consideration it must be remembered that it is not within human powers to foresee the manifold sets of facts which may arise, and, even if it were, it is not possible to provide for them in terms free from all ambiguity. The English language is not an instrument of mathematical precision. Our literature would be much the poorer if it were’.123 If one substitutes ‘compliance with a clause in Article 16’ for ‘a statute’, his Lordship’s practical advice becomes directly applicable to the present context.

9.106  Once one is prepared to constantly bear in mind the draftsmen’s limitations, it would be very easy to make allowances accordingly. This requires a full appreciation of the prevailing approach to the construction of commercial instruments: Literalism has been abandoned; in its place is the standard of a reasonable business person. Words in business contractual documents are to be given the meaning which they would convey to such a person having all the background knowledge which would reasonably be available to the contracting parties at the time they made their bargain.

9.107  Ways in which this criterion of construction can best be utilized in ascertaining whether or not a rejecting bank is in breach of Article 16 requirements have been demonstrated in this chapter. As noted, particular application of the standard may vary considerably. For instance, a rejection notice is not invalid simply because it does not contain a statement of refusal of payment. What principle, along with perceived international banking practice demands, is communication of the fact of rejection of the presentation in question. The notice is sufficient so long as it would leave a reasonable business person in the position of the actual recipient presenter in no reasonable doubt that the rejecting has dishonoured the documents tendered. Similarly, discrepancies which are already a subject of common knowledge between the rejecting bank and the presenter need not be set forth in a notice, considering the impossibility of an honest reasonable recipient of such a notice complaining about not having been advised of the defects in the documents.

9.108  With situations of that sort might be contrasted cases in which a presenter pressed for some provision to be implied into Article 16 on the ground that it formed part of the foundation on which he contracted with the rejecting bank. A classic example of a case is the Fortis Bank decision, thoroughly examined in the preceding section. As argued, the provision should be read into the Article if it could be shown by expert evidence or otherwise to be an established rule of international banking practice, or that it went without saying and would give effect to the reasonable expectations of the parties. At all events, the proposed provision must not contradict any express clause of the Article.

9.109  Even though cases of application of the standard of construction can vary greatly, nevertheless, whether the matter in issue involves the construction of the requirements of Article 16 or a much wider consideration entailing the implication of a term into the Article, the essential approach to determining the rejecting bank’s liability and the presenting party’s rights is the same, and entails ordinarily asking only one question: what would a reasonably experienced and diligent bank, reading the requirements as a whole against the relevant background, understand them to mean? It is hoped that the courts will take account of this proposition when requested to determine the parties’ position in the individual cases as well as the arguments as to the mode of disposing of such class of question.


1  The bank intended here is an issuing bank, a confirming bank, and a correspondent bank designated in the credit to honour documents on behalf of the issuing bank.

2  Art 16 (d), UCP 600.

3  See generally Art 15 (a) to (c), UCP 600.

4  For the various modes of availability, see Art 6 (b), UCP 600.

5  I.e. under a credit available at sight.

6  I.e. under a credit available by acceptance of a bill of exchange.

7  I.e. under a credit available by deferred payment.

8  I.e. under a credit available by negotiation.

9  Some non-obligated nominated banks sometimes enter into an elaborately drawn agreement with the beneficiary to negotiate the latter’s presentation with recourse. But it is believed that such a special arrangement is wholly unnecessary, since a right of recourse is in general implied into a nominated negotiating bank’s purchase of documents, unless the credit under which the bank acts stipulates otherwise. If a bank negotiates with recourse under a credit of that type, the issuing or confirming bank is entitled to refuse to recognize the negotiation.

10  [1982] 2 Lloyd’s Rep 478 (col 2), aff’d [1983] 1 Lloyd’s Rep 228 at 239, per Sir Donaldson M.R.; at 234, per Kerr L.J. The third member of the court, Sir Sebag Shaw agreed with them (at 234).

11  This is to be distinguished from a rejection notice bearing the words ‘documents treated on collection basis’ or, as occurred in Merchants Bank of New York v Credit Suisse Bank, 585 F Supp 304 (SDNY 1984), where the issuing bank, in rejecting a presentation, wrote in the telex: ‘We refuse documents because of the following discrepancies—awb (airway bill) doesn’t mention airport of departure and airport of destination. Documents held at your disposal. Please authorize us to present the documents [to the applicant] on collection basis’. In such circumstances, the letter of credit is at an end, and the parties’ position will, in general, be determined by reference to the URC 522 (and, in the United States, to the Uniform Commercial Code, Revised Article 4—Bank Deposits and Collections, which has been adopted by the various state legislatures in the country; the last adoption is by the state of South Carolina, effective 1 July 2008).

12  Ali Malek and David Quest, Jack: Documentary Credits, 4th en. (Haywards Heath, West Sussex, England: Tottel, 2007) at para 5-86. See also Peter J Cresswell, et al., Encyclopedia of Banking Law, looseleaf supplement, 1997 at para 309.

13  Harlow & Jones v American Express Bank [1990] 2 Lloyd’s Rep 343, quite rightly distinguished in the Hong Kong case of Rudolph Robinson Steel Co v Nissho Iwa Hong Kong Corporation, HCA004232/1996 (judgment delivered on 20 April 1998).

14  Alaska Textile Co Inc v Lloyd Williams Fashions Inc., 777 F Supp 1139 at 1141 (SDNY 1991), aff’d 982 F 2d 813 (2d Cir 1992).

15  United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64, at para 45, discussed later.

16  This includes a notice in which an issuing bank advises the presenting party that it is holding defective documents for collection: United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64.

17  Cooperative Centrale Raiffeisen-Boerenleenbank BA v Sumitomo Bank Ltd, ‘The Royan’ [1988] 2 Lloyd’s Rep 250 at 254 (col 2), per Lloyd L.J. delivering the main judgment of the Court of Appeal, rvsg Gatehouse J. [1987] 1 Lloyd’s Rep 345 at 353 (col 1).

18  Ch 5, section D.

19  Art 16 (c), UCP 600.

20  Art 16 (c) (i), UCP 600.

21  Art 16 (c) (ii), UCP 600.

22  Art 16(c) (iii) (a), UCP 600.

23  Art 16(c) (iii) (b), first sentence, UCP 600.

24  Art 16 (c) (iii) (b), second sentence, UCP 600.

25  Art 16 (c) (iii) (c), UCP 600.

26  Art 16 (c) (iii) (d), UCP 600.

27  Art 16 (d), UCP 600.

28  Art 16 (e), UCP 600.

29  Art 16 (f), UCP 600.

30  UCP 600 Drafting Group, Commentary on UCP 600: Article-by-Article Analysis (Paris: International Chamber of Commerce, 2007) (ICC Publication No. 680) at 72, noting in the period mentioned in the text, Article 14 prompted ‘the most queries’.

31  UCP 600 Drafting Group, Commentary on UCP 600: Article-by-Article Analysis (Paris: International Chamber of Commerce, 2007) (ICC Publication No. 680) at 73.

32  Compare Bremer v Vanden [1978] 2 Lloyd’s Rep 109 (concerned with the fourth sentence of cl. 22 of the Grain & Feed Trade Association Ltd (GAFTA), which was construed by the House of Lords as insisting on the time of dispatch of the stipulated notice rather than when it is received: [1978] 2 Lloyd’s Rep 109 at 116 per Lord Wilberforce; at 118 per Viscount Dilhorne; at 129–130 per Lord Russell) with the Court of Appeal decision in Compagnie Continentale D’Importation v Universion Der Sozialischen Soviet Republiken (1930) 30 Ll L Rep 140 (a contract for the sale of goods on a London Corn Trade Association form stated that ‘Notice of appropriation ... shall be given by the shipper ... to his buyer within seven days from date of bill of lading’. Scrutton L.J. said ((1930) 30 Ll L Rep 140 at 141, col 1) the words mean that the mark-off time was when the notice arrived at the buyer’s hands, not when handed to a telecommunication machine operator who loses it in transit.

33  As occurred in Compagnie Continentale D’Importation v Universion Der Sozialischen Soviet Republiken (1930) 30 Ll L Rep 140.

34  As occurred in Bremer v Vanden [1978] 2 Lloyd’s Rep 109. See especially Lord Wilberforce’s judgment at 116, col 2.

35  If the notice is lost in transit, the bank sending it is protected under Art 35, UCP 600. Regarding the parties’ position in the event of presentation documents missing in transit, see Ch 4, section F.

36  Per Hirst J. in Rafsanjan Pistachio Producers Co-operative v Bank Leumi (UK) Plc [1992] 1 Lloyd’s Rep 513 at 531 (col 2).

37  [1985] 1 AC 191 at 201.

38  [1985] 1 AC 191 at 207, per Lord Keith; at 208 per Lord Scarman and Lord Roskill; and at 209 per Lord Brandon.

39  [1997] AC 749 at 771. See also in the same case, Lord Hoffmann at 773, esp at 776–780.

40  [2004] UKHL 54, [2004] 1 WLR 3251, at para 19.

41  This deficiency was corrected by Art 16 (d), 1983 Revision (providing that a rejection notice was to be given to the presenting beneficiary or nominated bank).

42  Art 16 (d), 1983 Revision (UCP 400). Under the 1993 Revision (UCP 500), a rejecting confirming bank who failed to give notice of rejection in accordance with Art 14 (d) (i) and (ii) was barred from asserting the non-conformity of the documents as a reason for denying payment. It is, however, strange that this provision took several decades to be included in the UCP.

43  Cooperative Centrale Raiffeisen-Boerenleenbank BA v Sumitomo Bank Ltd., ‘The Royan’ [1988] 2 Lloyd’s Rep 250.

44  A rejection notice of the sort mentioned is found in Occidental Fire & Casualty Co of North Carolina v Continental Bank NA, 918 F 2d 1312 at 1317 (2d Cir 1990).

45  See generally US Industries Inc v Second New Haven, 462 F Supp 662 (D Ct 1978).

46  [2007] 1 HKLD 871.

47  167 F Supp 2d 940 (SD Tex 2000).

48  Art 16 (d), 1983 Revision at para 43 (emphasis added).

49  Art 16 (d), 1983 Revision at para 79. See also para 84.

50  167 F Supp 2d 940 at 945 (SD Tex 2000).

51  288 F 3d 262, esp at 266 (5th Cir 2002).

52  See e.g. Case Studies in Documentary Credits (1989) Response to Case 53.

53  AG Guest with specialist editors, Benjamin’s Sale of Goods, 6th edn (London: Sweet & Maxwell, 2002 at para 23–155.

54  929 F Supp 1065 (ED Mich 1996).

55  929 F Supp 1065, 1076 (ED Mich 1996).

56  929 F Supp 1065, 1076 (ED Mich 1996).

57  UCP 600 Drafting Group, Commentary on UCP 600: Article-by-Article Analysis, ICC Publication No. 680 at 73.

58  918 F 2d 1312 at 1319 (7th Cir 1990), aff’g 725 F Supp 383 (ND Ill 1989).

59  For such a suggestion, see Official Comment 3 to section 5-108, Uniform Commercial Code—Revised Article 5; Toyota Tsusho Corp. v Comerica Bank, 929 F Supp 1065 at 1073 (ED Mich 1996) stating, unlike earlier versions of the UCP such as the UCP 151, 222, and 290, that Article 16 (e) is an estoppel provision.

60  The expression in Art 14 (d) (ii), UCP 500 is ‘state all discrepancies’, while cl. 2 (b) opts for ‘each of the discrepancies’. Substituting all with each does not seem to introduce anything of substance.

61  See e.g. Art 14 (d) (i), UCP 500; Art 16 (d), UCP 400.

62  See, for example, Toyota Tsusho Corp. v Comerica Bank, 929 F Supp 1065 at 1075 (ED Mich 1996).

63  Preclusion of reliance on a discrepancy not listed in a rejection dates from Art 16 (e), UCP 400; the related preclusion clause, Art 16 (e), in the preceding UCP 290, only applied to a rejecting issuing bank who failed to hold the dishonoured documents at the disposal of, or to return them to, the remitting bank. This explains Lord Goff’s dictum in Westpac Banking Corp. v South Carolina National Bank [1986] 1 Lloyd’s Rep 311 at 315 (PC), by which he noted that under the credit in question, which incorporated the UCP 290, the rejecting issuing bank was ‘fully entitled to’ adduce a discrepancy not initially communicated to the presenter to justify its refusal of payment.

64  Amixco Asia (Pte) Ltd v Bank Bumiputra Malaysia Bhd [1992] SGH 121, [1992] 2 SLR 943, at paras 31–34; United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64, at para 47, per Chao Hick Tin J.; Kumagai-Zenecon Construction Ltd v Arab Bank Plc [1997] SGHC 31, [1997] 2 SLR 805, at para 29, aff’d [1997] SGCA 41, [2997] 3 SLR 770.

65  Kumagai-Zenecon Construction Ltd v Arab Bank Ltd Plc [1997] 2 SLR 805 at paras 28–29; Toyota Tsusho Corp. v Comerica Bank, 929 F Supp 1965 at 1075-76 (ED Mich 1996). See also Total Energy Asia Ltd v Standard Chartered Bank (Hong Kong) Ltd [2007] 1 HKLD 871 at para 94, suggesting that a combination of faxed advice and a telephone call dealing with the same discrepancy would be acceptable.

66  Per Greer J. in Taylor v Oakes Roncoroni & Co (1922) 127 LT 267 at 269, and also in Skandinaviska Kreditaktiebolaget v Barclays Bank (1925) 22 Ll L Rep 523 at 525 (col 2). See also Universal Cargo Carriers Corp. v Citati [1957] 2 QB 401 at 443: ‘A rescission or repudiation, if given for a wrong reason or for no reason at all, can be supported if there are at the time facts in existence which would have provided a good reason’.

67  Amixco Asia (Pte) Ltd v Bank Bumiputra Malaysia Bhd [1992] SGH 121, [1992] 2 SLR 943 at para 31. See also Aldabe Fermin v Standard Chartered Bank [2010] SGHC 119, [2010] 3 SLR 722, at paras 51–56. cf. Westpac Banking Corp. v South Carolina National Bank [1986] 1 Lloyd’s Rep 311 at 315.

68  Labarge Pipe & Steel Co v First Bank, 550 F 3d 442 at 458–464 (5th Cir 2008); Hamilton Bank N.A. v Kookmin Bank, 245 F 3d 82 at 92 (2d Cir 2001); Toyota Tsusho Corp. v Comerica Bank, 929 F Supp 1065 at 1073–1075 (ED Mich 1996); Boston Hides & Fur Ltd v Sumitomo Bank Ltd., 870 F Supp 1153 (Dist Ct Mass 1994); Paramount Export Co v Asia Trust Bank Ltd., 193 Cal App 3d 1474 at 1482–1483 (1987); Breathless Associates v First Savings & Loan Association of Burkburnett, 654 F Supp 832 at 839 (ND Tex 1986); Banque de L’Union Haitienne SA v Manufacturers Hanover International Banking Corp., 787 F Supp 1416 at 1420–1425 (SD Fla 1991); Bank of Cochin v Manufacturers Hanover Trust Co, 808 F 2d 209 (2d Cir 1987); Banco do Brasil SA v City National Bank of Miami, 609 So 2d 689 at 691 (1992).

69  The Fifth Circuit Court of Appeal in Labarge Pipe & Steel Co v First Bank, 550 F 3d 442 at 458–463 (5th Cir 2008).

70  See, for example, in Philadelphia Gear Corp. v Central Bank, 717 F 2d 230 at 238 (Goldberg J. dissenting, at 241–242) (5th Cir 1983); the California Court of Appeal case of Paramount Export Co v Asia Trust Bank Ltd, 193 Cal App 3d 1474 at 1482–1483 (1987), and Pro-Fab Inc v Vipa Inc, 772 F 2d 847 at 855 (11th Cir 1985).

71  See e.g. Panchaud Freres S.A. v Etablissements General Grain Co. [1970] 1 Lloyd’s Rep 53, where a buyer took up a bill of lading which the accompanying certificate of quality indicated to be falsely dated, and then sought to reject the goods on account of that falsity. Lord Denning M.R. ([1970] 1 Lloyd’s Rep 53 at 57, col 2) said the buyer’s acceptance of the documents ‘is not a case of “waiver” strictly so called’, but a “case of estoppel by conduct”’. Winn L.J. ([1970] 1 Lloyd’s Rep 53 at 59, col 1) felt that ‘it does not seem possible in this case to say affirmatively that ... there was ... anything which could be described as an estoppel’. In V Berg & Son Ltd v Vanden [1977] 1 Lloyd’s Rep 499 at 502, Lord Denning M.R. intimated that Panchaud ‘is a case where there was a waiver by one person of his strict right—or an estoppel—or whatever you like to call it’. See also Bremer v Mackprang [1979] 1 Lloyd’s Rep 221: compare Lord Denning M.R.’s pronouncements ([1979] 1 Lloyd’s Rep 221 at 225–226, especially that Panchaud is ‘a most important decision on waiver’) with the dissenting judgment of Stephenson L.J. at 228–229. For a summary of the cases, see Procter & Gamble Philippine Manufacturing Corp. v Peter Cremer Gmbh & Co., The Manila [1983] 3 All ER 843, with Hirst J. regarding the buyer’s conduct in Panchaud as founding an estoppel, while Robert Goff J. in BP Exploration Co (Libya) Ltd v Hunt (No. 2) [1982] 1 All ER 925 at 946, thought that it ‘had nothing to do with estoppel’.

72  Ch 4, section C.

73  Chase Manhattan Bank v Equibank, 550 F 2d 882 (3d Cir 1977); Marino Industries Corp. v Chase Manhattan Bank N.A., 686 F 2d 112 at 116–118 (2d Cir 1982).

74  Ch 4, section C.

75  538 F Supp 1360 (ND Ill 1981).

76  538 F Supp 1360 at 1364 (ND Ill 1981).

77  For a fuller discussion of what the five-day timeframe entails, see Ch 5, section E.

78  462 F Supp 662 (D Ct 1978).

79  Per Lord Denning M.R. in Panchaud Freres S.A. v Etablissements General Grain Co. [1970] 1 Lloyd’s Rep 53 at 57 (col 1); Voest-Alpine International Corp. v Chase Manhattan Bank N.A., 707 F 2d 680 at 685 (2d Cir 1983); Moss v Old Colony Trust Co, 246 Mass 139 at 151 (1923).

80  Among the leading authorities are Voest-Alpine International Corp. v Chase Manhattan Bank N.A., 707 F 2d 680 (2d Cir 1983); Barclays Bank D.C.O. v Mercantile National Bank, 481 F 2d 1224 at 1236 (5th Cir 1973), emphasizing that when the bank says the documents tendered comply with the terms of a credit, it cannot thereafter deny the conformity after expiration of the credit.

81  It is perhaps needless to point out that no waiver can arise if the fraud exception as defined under the applicable law applies in the circumstances, for example, if the documents contain material information which is false to the knowledge of the presenting beneficiary or nominated bank: see e.g. Voest-Alpine International Corp. v Chase Manhattan Bank N.A., 707 F 2d 680 (2d Cir 1983), where the Second Circuit Court of Appeals (at 686) denied summary judgment in favour of the beneficiary on the ground that the persuasive allegation by the presentee confirming bank that the beneficiary knowingly submitted misdated bills of exchange required full trial.

82  cf. Standard Chartered Bank v Pakistan National Shipping Corp. (No. 2) [2000] 1 Lloyd’s Rep 218: the presentee confirming bank accepted a presentation after the expiration date of the letter of credit, but in forwarding the documents to the issuing bank, stated in the transmittal letter that the presentation was within the validity of the credit. Evans L.J., with whom Aldous and Ward L.JJ. agreed, qualifying ([2000] 1 Lloyd’s Rep 218 at para 31) Cresswell J.’s observations at the trial court ([1998] 1 Lloyd’s Rep 684), held (at pp 224–225) that on the authority of the House of Lords’ decision in Derry v Peek (1888) 14 App Cas 337, the confirming bank would have been liable for damages in tort for deceit at the suit of the issuing bank had the latter acted on the letter and honoured the tender.

83  See e.g., note 59.

84  Cooperative Centrale Raiffeisen-Boereleenbank BA. v Sumitomo Bank Ltd., ‘The Royan’ [1988] 2 Lloyd’s Rep 250 at 254, per Lloyd L.J. delivering the main judgment of the court. See also Bankers Trust Co v State Bank of India [1991] Lloyd’s Rep 587 at 601 (col 2), per Hirst J., aff’d [1991] 2 Lloyd’s Rep 443, esp at 452; United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 63, at para 45; Cooperatieve Centrale Raiffeisen-Boerenleenbank BA v Bank of China [2004] 3 HKC 119; Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm), [2002] 2 All ER 427; Total Energy Asia Ltd v Standard Chartered Bank (Hong Kong) Ltd [2007] 1 HKKLD 871.

85  cf. Cooperatieve Centrale Raiffeisen-Boerenleenbank BA v Bank of China [2004] 3 HKC 119, which followed Credit Industriel et Commercial v China Merchants Bank [2002] EWHC 973 (Comm), [2002] 2 All ER 427. The rejection telex in Credit Industriel and in Cooperatieve were, so far as material, respectively, ‘We refuse the documents according to Art 14 UCP 500. Should the disc (discrepancies) [be] accepted by the applicant, we shall release the docs to them without further notice to you unless yr instructions to the contrary received prior to our payment’, and ‘Please advise us your disposal instructions, if any. However, we will release the docs to applicant against payment/acceptance without further notice to you unless your advice to the contrary received by us prior to the payment/acceptance’. Both telexes were considered ineffective merely because ‘the documents ... were to be released to the applicant ... in the event of the applicant accepting the discrepancies’. David Steel J., in reaching that conclusion, distinguished The Royan. Since the documents were with the rejecting bank and not the applicant, there was no basis for drawing the distinction between the cases; accordingly, it is suggested that Credit Industriel and its progeny, Cooperatieve, were wrongly decided. For further discussion of the point, see Ebenezer Adodo, ‘Conformity of Presentation Documents and Rejection Notice in Letters of Credit Litigation: A Tale of Two Doctrines’ (2006) 36 HKLJ 309 at 332–336.

86  Third paragraph, Art 10, UCP 151 (1951 Revision); reproduced in the same form under Art 8 and Art 8 (e), Art 16 (d), UCP 222 (1962 Revision), UCP 290 (1974 Revision), UCP 400 (1983), respectively.

87  Third paragraph, Art 10, UCP 151 (1951 Revision).

88  The Royan [1988] 2 Lloyd’s Rep 250 at 254, per Lloyd L.J. delivering the main judgment of the court; Bankers Trust Co v State Bank of India [1991] Lloyd’s Rep 587 at 601, per Hirst J., aff’d [1991] 2 Lloyd’s Rep 443.

89  United Bank Ltd v Banque Nationale de Paris [1991] SGHC 78, [1992] 2 SLR 64 at paras 44–46.

90  Bankers Trust Co v State Bank of India [1991] 2 Lloyd’s Rep 443 at 452, CA.

91  C. Groom v Barber [1915] 1 KB 316 at 324; Biddell Bros. v E. Clemens Horts Co. [1911] 1 KB 214 AT 220; Johnson v Taylor Bros. & Co Ltd. [1920] AC 144 at 156, per Lord Atkinson.

92  See generally Shepherd v Harrison L.R., 5 HL 116; Mirabita v Imperial Ottoman Bank (1878) 3 Ex D 164; Ogg v Shuter (1875) 1 CPD 47.

93  Having regard to the related provisions of the Bills of Lading Act, Cap 384, 1994 Rev Edn, Laws of Singapore; Carriage of Goods by Sea Act 1992 (c 50), the UK. Decisions on the subject include UCO Bank v Golden Shore Transportation Pte Ltd. [2005] SGCA 42, [2006] 1 SLR (Reissue) 1, at para 30; Bandung Shipping Pte Ltd v Keppel Tatlee Bank Ltd. [2003] 1 SLR (Reissue) 295, [2003] 1 Lloyd’s Rep 619; East West Corporation v DKBS 1912 [2002] 2 Lloyd’s Rep 182, aff’d [2003] 1 Lloyd’s Rep 239; cf. The Aegean Sea [1998] 2 Lloyd’s Rep 39.

94  Mirabita v Imperial Ottoman Bank (1878) 3 Ex D 164 at 170.

95  Bansal Hemant Govindprasad v Central Bank of India [2003] SGCA 3, [2003] 2 SLR (Reissue) 33. See also UCO Bank v Golden Shore Transportation Pte Ltd. [2006] SGCA 42, [2006] 1 SLR (Reissue) 1.

96  Amixco Asia Pte Ltd v Bank Negara Indonesia 1946 [1991] SGCA 40, [1991] 2 SLR (Reissue) 713.

97  [2010] EWHC 84 (Comm), [2010] Bus LR 835.

98  A Belgian nominated bank as regards LC numbers 1, 2, and 3; and the beneficiary, an English company, as regards LC numbers 4 and 5.

99  [2010] EWHC 84 (Comm), [2010] Bus LR 835 at para 5 of the court’s judgment.

100  [2010] EWHC 84 (Comm), [2010] Bus LR 835 at para 41, citing Sir Thomas Bingham M.R.’s dictum in Glencore International AG v Bank of China [1996] 1 Lloyd’s Rep 135 at 148.

101  The time of the contract varies according to the presenter in question. Where it is the beneficiary, his receipt of the credit constitutes the issuance of the credit and commences their contractual relations: see generally Art 7 (b) and Art 8 (b), UCP 600. As regards a nominated bank, the time is when this bank honours the beneficiary’s presentation.

102  Attorney General of Belize v Belize Telecom Ltd [2009] UKPC 10, [2009] Bus LR 1316 at paras 16–27; Mediterranean Salvage & Towage Ltd v Seamar Trading & Commerce Inc., The ‘Reborn’ [2009] EWCA Civ 531, [2009] 2 Lloyd’s Rep 639 at paras 8 et seq.; Equitable Life Assurance Soceity v. Hyman [2002] 1 AC 408; Philips Electronique v British Sky Broadcasting Ltd. [1995] EMLR 472 at 480–482; Liverpool City Council v Irwin [1977] AC 239 at 253–254, per Lord Wilberforce; at 266, per Lord Edmund-Davies; Trollope & Colls Ltd v North West Metroplitan Regional Hospital Board [1973] 1 WLR 601 at 609, per Lord Pearson (HL). See also the earlier cases of Reigate v Union Mfg Co (Ramsbottom) Ltd [1918] 1 KB 592 at 605; In re Comptoir Commercial Anversois. Power, Son & Co. [1920] 1 KB 868 at 899; The Moorcock (1889) 14 PD 64 (CA); Hamlyn v Wood [1891] 2 QB 488 (CA).

103  A statute may require a given term to be interpolated into the contract; this is merely mentioned here for completeness.

104  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at para 70.

105  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at paras 59–68.

106  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at paras 64 and 66.

107  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at paras 59–68.

108  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at para 44.

109  Art 8 (f), UCP 290.

110  Art 16 (e), UCP 400.

111  Art 14 (e), UCP 500.

112  UCP 600 Drafting Group, Commentary on UCP 600: Article-by-Article Analysis (ICC Publication No. 680), esp at 72.

113  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at paras 44–45.

114  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at paras 44–45.

115  This is expressly acknowledged in the Introduction to UCP 600 Drafting Group, Commentary on UCP 600: Article-by-Article Analysis (ICC Publication No. 680).

116  For a discussion of the legal status of the ICC Banking Commission’s opinions, see Ch 3, section 3.2.1 and the authorities cited there. See also Credit Agricole Indosuez v Credit Suisse [2001] 1 All ER (Comm) 1088 at [24]; Michael Brindle and Raymond Cox (eds), Law of Bank Payments, 3rd edn (London: Sweet & Maxwell, 2004) at para 8-005.

117  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at paras 52 and 56.

118  Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 at 912–913, per Lord Hoffmann (HL); Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201.

119  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at paras 19–21.

120  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at para 76.

121  Fortis Bank v Indian Overseas Bank [2010] EWHC 84 (Comm), [2010] Bus LR 835 at para 79.

122  As opposed to an amendment which may, in the very nature of things, take several years to be effected.

123  Seaford Court Estates Ltd v Asher [1949] 2 KB 481 at 499.