Law and Practice of Documentary Letters of Credit

Peter Ellinger is Emeritus Professor of Law at the National University of Singapore, and a world-renowned expert on banking and financial law. He published his first book on the subject in 1974 and has since been the editor of the relevant chapter (No 23) in Benjamin's Sale of Goods. He has substantial experience with the drafting of bank documents respecting international trade, in the writing of opinions on issues arising in commerce and as an expert witness. Dora Neo is an Associate Professor at the National University of Singapore. She obtained her law degrees from Oxford and Harvard Universities. She has been teaching courses on letters of credit and has published on the subject.

... Professors Ellinger and Neo are to be congratulated on writing a text on a very specialized and technical area which succeeds in setting out both a detailed review of the broad range of legal issues that arise and a detailed discussion of the practical matters to be considered by banks in their review of credits and their accompanying documents. Steven Jeffery Banking and Finance Law Review Volume 26. 3

• 1. Documentary Credits in Practice I. Background II. Documentary Credits Distinguished from Similar Facilities A. Documentary Credits and Open Credits B. Letters of Credit with a 'Red Clause' C. Standby Credits and Performance Bonds III. Documentary Credits Classified A. Need for Classification B. Revocable and Irrevocable Credits C. Confirmed and Unconfirmed Credits D. Straight and Negotiation Credits E. Transferable and Non-Transferable Credits F. Revolving (Evergreen) Credits IV. Use of Bills of Exchange V. Review of a Transaction 2. The Uniform Customs and Other Sources of Law I. Applicable Sources II. The Uniform Customs and Practice for Documentary Credits (UCP): Their Development A. Their Background and History up to 1993 B. UCP 500 and Related Guidelines C. UCP 600 III. Legal Nature of the UCP A. The Legal Effect of the UCP B. Construction of the UCP C. Application of the UCP in Borderline Cases IV. Usages and Banking Practice A. Basic Principles B. Effect of Trade Usages on Documentary Credit Transactions C. Role of Banking Practice V. Statutes and Laws A. Scope B. Article 5 of the Uniform Commercial Code (USA) C. Statutory Provisions in Other Jurisdictions 3. The Documentary Credit Clause of the Underlying Contract I. Nature of Clause II. Time at which Credit must be Furnished III. Type of Credit to be Furnished IV. Waiver of Documentary Credit Clause V. Effect of Opening of Credit and its Dishonour 4. Contract between Applicant and Issuing Bank I. General Aspects of Legal Relationship A. Opening the Credit B. Vicarious Performance-Use of Correspondent Banks C. Nature of Relationship II. Issuing Bank's Obligations A. Issue and Honour Credit B. The Issuing Bank's Mandate C. Autonomy of Credits D. Non-Conforming Presentation: Duty Not to Honour E. Issuing Bank's Duty of Care III. Disclaimers and Exclusions of Liability A. The UCP Provisions B. Effectiveness of Disclaimer Regarding Acts of an Instructed Party C. Deemed Compliance Clause IV. Applicant's Obligations A. Reimbursement for Amounts Payable under the Credit B. Commission and Other Charges C. Arrangements for Payment by the Applicant V. Documents as the Issuing Bank's Security A. Pledge of Bills of Lading B. Trust Receipts 5. Issuing Bank's and Confirming Bank's Contract with Beneficiary I. Nature and Content of Agreement between Issuing Bank and Beneficiary A. Form and Content B. When Does a Binding Contract Arise? C. Consideration D. Contracts (Rights of Third Parties) Act E. Amendment F. Enforceability of Contract II. Obligations of Issuing Bank and Confirming Bank A. General Introduction B. UCP 600 Article 7: Issuing Bank's Undertaking C. UCP 600 Article 8: Confirming Bank's Undertaking D. Autonomy and the Fraud Exception III. Complying Presentation by Beneficiary A. Presentment of Stipulated Documents: Documentary Compliance B. Bank's Duty to Examine, Honour or Reject C. Bank Precluded from Claiming Non-Complying Presentation D. Time and Place of Presentation IV. Bank's Liability towards Beneficiary A. Wrongful Dishonour B. Late Payment C. Defences for Non-Payment D. Set-off E. Competition between Issuing Bank and Assignee of Proceeds of Credit V. Bank's Right of Recourse against Beneficiary A. Complying Presentation B. Non-Complying Presentation C. Bills of Exchange D. Fraud and Misrepresentation 6. Autonomy and the Fraud Exception I. Autonomy Principle II. Statement and Scope of the Fraud Exception A. Decision in United City Merchants B. Scope of the Fraud Exception III. Effect of Fraud A. Bank's Refusal to Honour B. Is a Bank Entitled to Reimbursement? C. Will Court Grant Injunction to Stop Payment? D. Bank's Recourse Against Beneficiary IV. Extension of the Fraud Exception: Other Exceptions to the Autonomy Principle? A. General B. Nullity Exception 7. The Correspondent Bank I. General Introduction A. Roles of Correspondent Bank B. Overview of Correspondent Bank's Legal Position C. Correspondent Issuer II. The Advising Bank A. Role of Advising Bank B. Provisions of the UCP III. The Nominated Bank A. Who is a Nominated Bank? B. No Duty to Honour or Negotiate C. Rights and Liabilities of Nominated Bank D. Prepayment of Deferred Payment Credit or Acceptance Credit E. Negotiating Bank F. Correspondent Bank and Beneficiary: Payment under Reserve IV. The Confirming Bank A. General B. Confirming Bank's Rights and Obligations C. Silent Confirmations V. Recourse by and Against the Correspondent Bank A. Issuing Bank's Recourse Against Correspondent Bank B. Correspondent Bank's Recourse Against Beneficiary VI. Applicant's Extra-contractual Options Against Correspondent Bank A. No Privity of Contract B. Contracts (Rights of Third Parties) Act (CRTPA) C. An Action in Tort 8. The Reimbursing Bank I. Practice II. Relationship of Reimbursing Bank and Issuing Bank III. Relationship of Reimbursing Bank and Claiming Bank IV. The Reimbursement Claim V. Exemption Clauses 9. The Beneficiary's Bank I. Current Practice II. Relationship of the Beneficiary with his Bank A. Collection and Negotiation Distinguished B. Silent Confirmations C. Bank's Right of Recourse against the Beneficiary III. The Rights of the Beneficiary's Bank Against the Issuing Bank IV. Clashes, Priorities and Set-off A. Meaning of Terms B. Clashes C. Priorities D. Set-off E. Position where the Beneficiary's Bank is a Nominated Bank 10. Tender of Documents: General Principles of Documentary Compliance I. Introduction II. Examination of Documents A. The Bank's Duty of Examine Documents B. The Principle of Strict Compliance C. Consistency of Documents; Data in Documents not to be in Conflict D. Original Documents; Copies of Documents; Signatures E. Alterations and Corrections to Documents F. Language G. Limits of Drawing on Credit, Quantities,Unit Price and Partial Shipments H. Dates Stipulated in the Credit and Dates on Documents I. Non-Documentary Conditions III. Time for Examination and Rejection of Discrepant Documents; Rejection Notice; Waiver A. The Time Allowed for Examination and Rejection of Documents B. Rejection Notice: Contents and Means of Communication C. Preclusionary Effect of Not Acting in Accordance with Article 16 11. Compliance with Specific Documents I. Introduction II. The Commercial Invoice A. UCP 500 B. UCP 600 III. Transport Documents A. Marine or Ocean Bills of Lading (UCP 500) B. Bills of Lading (UCP 600) C. Non-Negotiable Sea Waybills D. Charterparty Bill of Lading E. Multimodal Transport Documents F. Air Transport Documents G. Road, Rail or Inland Waterway Transport Documents H. Courier and Post Receipts I. Transport Documents Issued by Freight Forwarders IV. Certain Issues Common to Transport Documents A. Deck Carriage B. Freight C. Consignor of Goods/Beneficiary of Credit D. 'Clean' Transport Documents E. Terms and Conditions of Carriage F. Vessels Propelled by Sail Only G. Partial Drawings or Shipments H. 'Stale' Transport Documents I. Attestation or Certification of Weight V. Insurance Documents (UCP 500) A. Type of Insurance Cover B. All Risks Insurance Cover C. Form of Insurance Documents and Originals D. Commencement of Cover E. Amount of Insurance Cover F. Excess (Deductible) VI. Insurance Documents (UCP 600) A. Introduction B. Signature by Proxies C. Originals D. Cover Notes E. Pre-signing F. Amount of Coverage VII. Unspecified Documents (UCP 500) A. Issuers and Data Content B. Ambiguous Instructions C. Consistency D. Dates E. Drafts VIII. Unspecified Documents (UCP 600) A. 'Not Conflict With' 12. Transfer and Assignment of the Proceeds of a Letter of Credit I. Transfer, Back-to-back Credit, Transfer of Drawing Rights and Assignment of Proceeds Distinguished II. Transfer of Letter of Credit A. The Practice and the Duty of Confidentiality B. Legal Nature of Transfer C. The Regime of Article 38 of UCP 600 III. Back-to-Back Credits A. The Practical Distinction between Transferable and Back-to-Back credits B. The Position of the Issuing Bank's Correspondent IV. Assignment of Proceeds A. Object of an Assignment of Proceeds B. The Assignee's Drawing Rights 13. Independent Guarantees: Performance Bonds, Standby Credits and Similar Undertakings I. Introduction and Context A. Extension of Commercial Credit Principles: Independent Guarantees B. Independent Guarantees Contrasted with Traditional Common Law Guarantees C. Historical and Geographical Origins D. Standby Credits Compared with Independent Guarantees Generally E. Interchangeable Usage? F. Importance of Contractual Terms G. Uses of Independent Guarantees and Standby Credits H. Comparison with Commercial Credits II. Parties and Contracts III. Contract between Issuer and Beneficiary A. Introduction: Balance of Power B. Construing the Bank's Undertaking: Conditional Upon Proof of Applicant's Default? C. Scope of Guarantee: Which Underlying Obligations are Secured? D. Autonomy and the Fraud Exception E. Requirements of a Valid Demand F. Excessive Payment: No Recovery by Issuing Bank IV. Contract between Applicant and Beneficiary A. Control against Unmeritorious Calls B. Final Accounting between the Parties V. Counter-guarantees VI. Standard Rules for Independent Guarantees and Standby Credits A. The UCP B. The ISP 98 C. ICC Uniform Rules for Demand Guarantees (URDG) D. UN Convention on Independent Guarantees and Stand-by Letters of Credit (1995) 14. The Conflict of Laws relating to Letters of Credit I. Introduction II. Letters of Credit in the Conflict of Laws A. The Nature of Letter of Credit Transactions B. The Role of the UCP C. The Role of the Autonomy Principle III. Jurisdiction A. European Law B. Common Law IV. Choice of Law A. Contract B. Substance and Procedure: Set-off, Time Bars, Injunctions, etc. C. Transfers, Assignments and Subrogation D. Enforceability of Debts E. Torts F. Restitution G. Equitable Claims V. Conclusion 15. Documentary Credits and the Expert Witness I. Practice and Law II. Expert Evidence in Banking Law A. When Relevant B. The Basic Principles C. The Expert's Role D. The Court's Powers E. Who is an Expert? F. Form of Expert's Report G. Single Joint Expert III. The Expert in Letter of Credit Cases