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Part I Setting Up a Letter of Credit Transaction, 1 Business Framework of the Credit Device »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
1.01 From very early times, mercantile custom and practice common to all legal systems evolved alternative methods of payment of the purchase price of goods in foreign sales transactions. In settling the provisions of a sales transaction contemplating, for example, large-scale, long-haul shipments, the seller can stipulate for an advance payment, due from the buyer upon closing the negotiations; or may content himself with selling the goods to the buyer on open account terms; or agree to employ a bill of exchange; or request the buyer to furnish a letter of credit...
Part II Proper Performance under the Operative Credit, 6 Conceptual Criteria for Identifying Conforming Documents »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
6.01 We saw in Chapter 4 that it is the beneficiary’s and a nominated bank’s responsibility under a letter of credit to ensure proper delivery of their documents to the issuing bank or the party named in the credit. Also the various ways in which to establish whether a particular presentation has duly reached the designated presentee bank, including the type of situations when that presentee bank can assert improper tendering of the documents as a reason to refuse to honour the submission. Chapter 5 dealt with the nature and scope of the presentee bank’s duty to...
Part I Setting Up a Letter of Credit Transaction, 3 Consequences of Failure to Issue a Conforming Credit »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
3.01 Issuance of a credit that complies in all material respects with the requirements of the underlying business arrangements is essential for either of the parties to the concluded deal, including their financier. If the credit conforms, no problem arises: the beneficiary has received the instrument he contracted for, and it is now his turn to do what he promised the other contracting party. But a credit may fail to conform for a number of reasons. The applicant’s instructions for its opening can deviate from the terms agreed with the beneficiary. The issuer may...
Part I Legal and Practical Challenges to Traditional Trade Finance, 5 Determining a Complying Presentation in Letter of Credit Transactions: A Principled Appraisal of Current Requirements and Challenges »
Ebenezer Adodo
From: Trade Finance: Technology, Innovation and Documentary Credits
Edited By: Christopher Hare, Dora Neo
This chapter explores frequently neglected aspects of the vexed question of complying presentation in letter of credits operations from the perspective of Anglo-American law and a pragmatic appreciation of the International Chamber of Commerce’s codes of banking practice. In particular, it considers the existence and extent of the classes of ICC print material permissible as an aid in ascertaining the proper legal meaning and effect of a clause in the UCP 600 that lacks sufficient clarity, or even worse, if the UCP clause in dispute makes no express provision on the point at issue. The discussion then evaluates the nature of a clause in a credit calling for a draft drawn on the applicant; the legal effect of an unstipulated document in a presentation under the credit; and the rights of the beneficiary when determining the bank to which to tender documents for payment.
General Introduction »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
A.01 Problems of compliance in letter of credit transactions fall into two broad categories. One contains cases in which a party contests proper issuance of a given credit. It includes instances1 where the opening of the credit fails to adhere to some pre-existing arrangements, and the party injured thereby wishes to know where he stands with the party who caused the failure. The other is of a much wider scope. It encompasses2 mostly disputes over the validity of a right to insist on payment of a specified sum following the presentation of a set of documents to a...
Part I Setting Up a Letter of Credit Transaction, Preliminary Material, Introduction to Part I »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
Part II Proper Performance under the Operative Credit, Preliminary Material, Introduction to Part II »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
Part III Contract Choice of Law Issues, Preliminary Material, Introduction to Part III »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
Part III Contract Choice of Law Issues, 10 The Law Applicable to Beneficiary’s Presentation for Payment »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
10.01 Consideration of the American courts’ approaches to the ascertainment of the governing law of the beneficiary’s claim for payment against documents tendered under a credit may conveniently begin with the choice of law provisions set forth in section 5-116 of Revised Article 5 that deals with letters of credit under the Uniform Commercial Code and is now statutorily operative throughout the country. Section 5-116 (a) and (b) contain the applicable choice of law precepts. They read as follows: Section 5-116 (a), ‘The liability of an issuer, nominated bank...
Part III Contract Choice of Law Issues, 11 Nominated Bank’s Right of Reimbursement »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
11.01 In Chapter 10, an examination was made of the Anglo-American courts’ mode of application of their contract choice of law rules to ascertain the law applicable to the beneficiary’s claim for payment under a letter of credit. The focus of this chapter is the manner in which they employ the rules to determine what law governs the right of reimbursement of a nominated bank that has honoured or negotiated a supposedly complying set of documents tendered to it. Consideration will also be given to the related issue of the lex situs of a debt incurred by an issuing...
Part I Setting Up a Letter of Credit Transaction, 2 Parties’ Roles in the Credit Opening Process »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
2.01 A party who has contracted to furnish his counterparty with a letter of credit as the means of payment of the purchase price under a sales agreement, or as security for the repayment of a contemplated loan pertaining to a defined technical project, will want to fulfil his promise. He would be disposed to fulfil it because provision of the required credit is usually a condition precedent to the obligation of the seller to ship the goods pursuant to the contract of sale1 or of the finance company2 to advance him the funds.3 Prompt delivery of the letter of...
Part II Proper Performance under the Operative Credit, 5 Presentee Bank’s Document Examination Duties »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
5.01 A bank to which a set of documents are presented for honour or negotiation under a letter of credit will typically examine them or set the checking process in motion to determine their regularity on the banking day following the day of presentation. During the short interval between its receipt of the presentation and the commencement of examination of the documents, a variety of factors often come into consideration; and tend to vary according to whether the presentee bank is an issuer, an obligated nominated bank,1 or a non-obligated nominated bank.2 The...
Part II Proper Performance under the Operative Credit, 4 Presenting Documents to Draw on the Credit »
From: Letters of Credit: The Law and Practice of ComplianceEbenezer Adodo
4.01 Operation of a letter of credit often involves three independent but interlocking stages. Typically, it begins when the beneficiary presents a set of documents to the bank with which the credit is expressed to be available for honour1 or negotiation.2 Then, a nominated bank, having acted on its nomination and taken up the beneficiary’s presentation, tenders the documents to the issuing bank for reimbursement of the sum it has paid under the credit. The last phase of the process entails the issuing bank’s delivery of the documents, usually against a trust...
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