A Claim in Time Is Not a Claim in Law: Must the Statement of Default Be Presented Within the Validity of an SBLC?

A Swift sent before expiry does not mean you’ve made a valid claim.
In standby business, “documents will follow” can be the most expensive sentence of the year…

A banker sent me a case that looks simple — until you read it carefully.

And as always in standby LCs, the devil is hiding in one small word: “and”.

The Case (in brief)

An issuing bank issued an MT760 SBLC with the following availability clause:

“This SBLC is available by your sight draft or T/T claim on us and your statement stating that H.L Construction Company has defaulted in their obligations, signed with authorized signatures and stamps (if any) by both parties.”

The SBLC expired on 23 January 2026.

Timeline:

• On 23 January 2026, the presenting bank sent a Swift claim stating that the statement of default would follow by mail.
  • On 3 February 2026, the issuing bank received the statement of default, signed only by the beneficiary.

The issuing bank refused the claim, citing:

• Late presentation
  • Statement of default not signed by the applicant

The presenting bank rejected the refusal, arguing that the claim was sent before expiry and that the joint-signature requirement was a “toxic clause” and therefore void.

The Legal Reality

1. A claim is not complete until all required documents are received

The SBLC is not available by a T/T claim alone.
It is available by a T/T claim and a statement of default.

That single word “and” means the presentation is only complete when both documents are received.

So although the Swift claim was sent on time, the real presentation date is 3 February 2026 — after expiry.
Saying “documents will follow” does not stop the clock.

2. The signature requirement is not “toxic” here

Yes, clauses requiring the applicant’s cooperation can be toxic.
But not every uncomfortable clause is a toxic one.

This clause is clear, specific, and capable of performance.
It simply defines the form of the required document.

If the beneficiary cannot obtain the applicant’s signature, that is a commercial risk, not a banking defect.

3. The refusal is valid

Both discrepancies stand:

• Late presentation, because the statement arrived after expiry.
  • Missing applicant signature, because the SBLC expressly required both parties’ signatures.

The issuing bank’s refusal is therefore valid.
The presenting bank’s rejection is not.

4. Who can sue?

Only the beneficiary has standing to sue the issuing bank.
The presenting bank is merely an agent.

With a non-complying presentation, the beneficiary is very unlikely to succeed.
Its real claim is against the applicant under the underlying contract.

5. When can the cash margin be released?

Since the SBLC was issued against 100% cash deposit, the issuing bank may release the funds once it is satisfied that the SBLC has expired and that no complying presentation is possible, subject to internal procedures.

Lesson for bankers

A message sent before expiry is not a presentation.
Only documents received in full within validity count.

____

Mr. Old Man