Microsoft Word 04chapte doc

manner Promoting such banking efficiency without at the same time imposing stringent standards in respect of banks reasonable care can result in legitimised negligence by the issuer in exercising its duty of care which should not be justifiable. The limitation of time for examination of documents under a) of the UCC could be said for the purpose of avoiding the possibility that the examiner (at the urging of the applicant or for fear that it will not be reimbursed) will take excessive time to search for defects. This preclusion clause is new to the UCC and taken from the provisions of the UCP. Does this rule suggest that in a case where the examiner does require more time for examination, the issuer can be excused for not checking all documents properly to identify discrepancies for reason of such time restriction If the issuer is allowed to pay over such documents which have discrepancies, then the strict compliance rule is breached. In contrast to a, under §5-112(‘62) of the UCC, although banks were allowed only 3 days for examination of documents, it did not really takeaway the bank’s discretion to extend the examination period if necessary. §5-112(‘62) clearly indicated the possibility of banks communicating with the beneficiaries and that the banks had aright of dishonour after the examination was finished. It is submitted such process encapsulated the very essence of reasonable care that banks should exercise in examination of documents — it allows banks to avoid the possibility of making payment without checking the
162
See discussion above on pressure put on bank letter of credit document checkers.

documents properly. It recognised the power of banks to exercise their discretion to decide, based on each individual case, how long a proper examination should require and discouraged banks from being hasty when executing their duty of examination.
(b) Allowing beneficiaries the opportunity to cure discrepancies
The preclusion clause insists that the issuer has to notify beneficiaries of the discrepancies that the beneficiaries have to cure. If banks allow documents to betaken back by the beneficiaries after first submission and altered in order to make them into conforming documents they are, in effect, being given an opportunity to perfect what could be a fraudulent transaction. In such cases a bank which subsequently receives firm evidence external to the documents of fraud by a third party does not have the option of refusing to honour the credit. It is submitted that such practice has placed the duty of ensuring conforming documents wrongfully on the issuer. By allowing the beneficiary to change the discrepant facts to meet the terms and conditions of the credit, the system implicitly permits forgery or false information in the absence of a system to guarantee that the curing process is done by a legitimate entity or that the new facts are true. Furthermore, because there is no substantial standard to judge whether the issuer has exercised reasonable care and there is no requirement for the issuer to accept documents based on good faith, banks can easily turn a blind eye to forgery or false documents under the protection of the disclaimer under UCP Buckley, op.cit., at 267 and 274.

Article 15 that the issuer is not responsible for the genuineness or falsity of the documents. It is submitted, therefore, that such a system can be too easily taken advantage of by a fraudster without (a) imposing a clear duty on the beneficiary to provide conforming documents which truly represent the contractual goods the beneficiary has shipped (b) clearly stating that by presenting the documents, the beneficiary warrants that it has performed its underlying contract to entitle the payment (c) imposing a system whereby both the issuer and the applicant will have recourse to the beneficiary on breach of warranty and/or on misrepresentation and/or on documentary discrepancies or on fraud, and (d) imposing on the issuer a duty to exercise reasonable care with good faith.

Download 302.29 Kb.

Share with your friends: