International business transactions

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  complying presentation means a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice
  

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  UCP allocates the risk of unexpected events, in almost all cases, away from the bank
  
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  Art 34 Disclaimer on Effectiveness of Documents
  
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  Art 35 Disclaimer on the Transmission of Messages
  
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  Art 36 Force Majeure
  
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    If a force majeure event keeps a bank closed past the expiry date for a L/C, the beneficiary or holder bears that risk, not the bank
    
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  Art 37 Disclaimer for Acts of an Instructed Party
  
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    The UCP shields banks from liability for the conduct of their correspondent banks in L/C transactions, ,even if the first bank selected the defaulting bank for the task
    

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  UCC Art 5 applies to all documentary L/Cs, whether commercial or standby
  
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  Many standby L/Cs follow commercial L/Cs and incorporate the UCP to govern the rights and obligations under the credit
  
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  However, in 1998, the ICC issued a new set of rules called the International Standby Practices (ISP98), designed specifically to cover standby L/Cs (and demand guarantees)
  
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  Companies using standby L/Cs have to make a choice regarding whether they want their standbys made subject to the ISP98 or the UCP600
  
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    ISP v. UCP see page 367 and handout that follows
    

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  there is no provision of the UCP addressing fraud allegations
  
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    look to the applicable letter of credit law to determine if an allegation that the beneficiary is engaging in fraud suffices to stop a L/C bank from honoring a conforming presentation under the L/C
    
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      i.e. whether fraud is an exception to the independence principle
      
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  Two possible situations are especially important
  
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    Fraudulent or forged documents being presented under the L/C
    
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    Fraud with respect to the underlying commercial transaction
    
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  In US, see UCC §5-109 (formerly 5-114)
  
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    This is starting point for any analysis of a fraud allegation with respect to L/Cs
    
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    p 380
    
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    See also Fall 2006 exam answer to Q2
    
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  Because standby L/Cs are generally drawn upon in the midst of serious underlying difficulties among the parties, they are involved in much of the case law considering the extent to which an allegation of fraud will justify an injunction against payment
  
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