Microsoft Word 04chapte doc
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| * The UCP position Article e) of the UCP states The description of the goods in the commercial invoice must correspond with the description in the credit. In all other documents, the goods maybe described in general terms not inconsistent with the description of the goods in the credit This standard reflects the standard as expressed in English cases. In Midland Bank Ltd. v Seymour, Devlin J stated “… it is sufficient that the description should be contained in the set of documents as a whole and that the documents should each one be valid in itself and 62 116 F. Supp. 233 (1953), at 240. each be consistent with the other, and accordingly, it would not matter for this purpose whether the description in the bill of lading is or is not negatived by the clause in the bill of lading, since the description is sufficiently contained in the invoice, which is one of the documents.” 63 Devlin J further stated that if the terms of the letter of credit require that the bill of lading contain a certain description, then such bill must contain that description, and it is not for the bank to ask what legal value such a description might have. 64 * The UCC position §5-108 of the UCC has placed on banks the duty to examine documents with care so as to ascertain that on their face they appear to be strictly in compliance with the terms of the credit. It further expressly provides that banks are presumed not to have assumed any liability with respect to knowledge or lack of knowledge of any usage of any particular trade. The banks are, however, supposed to observe general banking usage, performing a banking rather than a trade function. (c) Substantial compliance In some rare situations, however, a question has been raised whether beneficiaries should be denied payment when they have, 63 Midland Bank Ltd. v Seymour, op. cit, at 155. 64 Ibid. in good conscience, made substantial, although not literal performance, for instance, where the document contained a typing error. There therefore exist two theories. One is that the strict rule can sometimes lead to harsh results because the seller is not the issuer of the documents and therefore it is difficult for it to comply with all the terms of the credit. On the other hand, it is believed that insistence by banks on word for word strict compliance finds its justification and necessity, and grants to the parties maximum security combined with maximum efficiency. It is further claimed that although the standard of strict compliance gives maximum protection to the bank and to the applicant, the latter needs to have all guarantees that the goods are acceptable because it pays before being able to seethe goods Word for word strict compliance undoubtedly provides considerable protection to the banks because banks are recognized as service providers operational only in the financial sector, therefore neither familiar with commercial practices nor the language. 66 Courts have also developed a substantial compliance rule under which a document should be accepted, despite discrepancies, when such discrepancies are not misleading and when the inherent compliance is apparent. The concept of substantial compliance was inspired by the desire to promote the equity principle under which a document is deemed to comply with the letter of credit requirements even if it does not conform in every 65 Dolan, op. cit, at 6.03 [1]. 66 Ibid, at 6.03 [3]. formal respect. In other words, the bank is allowed to look beyond mere technical discrepancies in order to ascertain if the documents delivered comply with the letter of credit in every material respect, thus not limiting its intervention to the mere formal inquiry. 67 Download 302.29 Kb. Share with your friends:
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