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to present documents that conform to the requirements of the letter of credit, and the beneficiary’s right to payment if the conforming documents are in order. Actual responsibility to perform the sales contract should arise only if the required documents are obtained that truly reflect the reality of the goods. Although it is expressed in the UCP that banks have to exercise reasonable care in examining the documents, it is unclear for whose benefit banks actually exercise this obligation. If banks actually are not concerned whether the goods are of the quality and in the quantities required and are shipped on time (which are the central concerns of the buyers, it is unclear what criteria should be applied by courts to ascertain whether the banks have actually discharged their obligation of checking the documents properly in order to give the concept of reasonable care some substance in this context.
(e) Duty of confirming bank to applicant
Article 5 of the UCC (’95) does not contain any warranty that the banks, such as confirming banks, presenting banks and negotiating banks, make to the issuer. This might suggest, as pointed by Dolan, that such banks neither make warranties to the issuer that there is no forgery or fraud, nor to the applicant that presentation does not violate the underlying agreement between the beneficiary and the applicant. Absent a direct agreement between the applicant and a confirmer, normally the obligations of a confirmer are to the issuer not the applicant, but the applicant might

have aright to injunction against a confirmer under §5-
109 or warranty claim under The reason why a letter of credit is confirmed is because confirmation gives the beneficiary greater confidence in the bank’s financial strength in paying the draft if it has fulfilled its obligation to provide documents which comply strictly with the terms of the credit. A confirming bank can be either the issuing bank’s division in the beneficiary’s jurisdiction or a bank with which the issuing bank has conducted business transactions. §5-107 states that a confirmer has all rights and obligations under §5-108. A confirmer that has paid in accordance with the terms and conditions of the letter of credit is entitled to reimbursement by the issuer even if the beneficiary committed fraud. With this immunity clause, a confirmer has greater rights than the beneficiary against the issuer. It is open to question whether giving a confirmer greater rights bylaw is a breach of the mandate imposed on the issuer by the agreement between the issuer and the applicants. If an exercise of a duty of care by the issuer is expected from the applicant, what rights does the applicant have against the confirmer? Under such a clause, a confirmer can also be said to have the freedom to engage in the activity of either discounting the documents and obtaining a discounting fee (although the court in
Santander took a different view – see below, or sitting tight and obtaining a confirmation commission even with the knowledge of existence of fraud.
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J. Dolan, The Law of Letters of Credit Commercial and Standby Credits, op. cit, at 8 - 21

The neutrality of a confirming bank’s relationship with the beneficiary is of concern here as well. Both are located in the same jurisdiction and making payment is in both their interests. There is a great possibility of the confirming bank ignoring the applicant’s interest and accepting documents with no concern as to whether they are forged or false Accordingly, in the
Santander Case, the court clearly ruled that the confirming bank had to bear the risk of fraud and it did not have a greater right to obtain reimbursement from the issuing bank than the beneficiary.
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