Q&A Uncategorized CONDITIONAL ACCEPTANCE OF PAYMENT By Mr Old Man Posted on April 19, 2011 5 min read 6 0 3,466 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr QUESTION FROM C.P.Q HI MR. OLD MAN, SORRY TO DISTURB YOU AGAIN. PLS HELP ME SOLVE THE FOLLOWING ISSUES RELATING TO L/C: 1) L/C IS AVAILABLE WITH A NOMINATED BANK ( BANK N ) BY PAYMENT: 1(a) MUST BANK N HONOUR IF THE BENEFICIARY MAKES A COMPLYING PRESENTATION? 1(b) IF BANK A PAID THE BENEFICIARY BY DEBITING THE ISSUING BANK’S ACCOUNT WITH BANK N, BUT AFTER THAT, THE DOCUMENTS FORWARDED TO THE ISSUING BANK WERE FOUND DISCREPANT AND REJECTED BY THE ISSUING BANK, MUST BANK N REPAY THE ISSUING BANK? IF YES, CAN BANK N HAVE RECOURSE TO THE BENEFICIARY BENEFICIARY? 2) L/C STIPULATED: 41A: AVAILABLE WITH THE ISSUING BANK BY DEFERRED PAYMENT47A: THE PAYMENT OF THIS L/C WILL BE SUBJECT TO THE PRESENTATION BY THE APPLICANT TO THE ISSUING BANK OF A LETTER DECLARING THAT THE GOODS, ONCE COMPLETED IN CUSTOMS AND UNLOADED INTO THEIR WAREHOUSE, EXPIRE WITH THE SPECIFICATIONS AGREED BETWEEN BOTH PARTIES. (1) THE BENEFICIARY MADE A COMPLYING PRESENTATION THROUGH THEIR BANK (PRESENTER) TO THE ISSUING BANK.(2) THE ISSUING BANK CONFIRMED UNDER MESSAGE TO THE PRESENTER THAT “ON DD/MM/YY WE SHALL REIMBURSE YOU AS PER YOUR INSTRUCTIONS AND ACCORDING L/C TERMS AND CONDITIONS”(3) ON DUE DATE, THE PRESENTER SENT A MESSAGE TO THE ISSUING BANK TO REQUEST THE PAYMENT.(4) THE ISSUING BANK REPLIED THAT ” WE ARE AWAITING INSTRUCTIONS FROM THE APPLICANT AS PER L/C TERMS AND CONDITIONS. WE WILL REVERT AS SOON AS WE RECEIVE THEIR INSTRUCTIONS.”(5) AFTER THAT, THE ISSUING BANK INFORMED THAT “GOODS WILL BE RETURNED TO THE BENEFICIARY BECAUSE THEY HAVE NOT COMPLIED WITH THE THE CONTRACT SPECIFICATIONS. THE APPLICANT HAS NOT PRESENTED US THEIR WRITING LETTER AUTHORISING THE PAYMENT OF THIS L/C AS PER THE CLAUSE IN FIELD 47A. PLS NOTIFY THE BENEFICIARY OF THE SAME AND CONSIDER THIS L/C AS CANCELLED. QUESTION: CAN ISSUING BANK REFUSE PAYMENT AFTER CONFIRMING THE DUE DATE IN THIS CASE? THANK YOU,C.P.Q——————————– ANSWER Hi CPQ, 1(a) Unless Bank N is the confirming bank, it may at its own discretion decide whether or not to act on its nomination, i.e., agrees or refuses to honour (Sub-article 12(a)). 1(b) Yes, if the issuing bank rejects the discrepant documents, Bank A must repay the issuing bank. Bank A will not have recourse to the beneficiary once it honoured unless the documents were found not complying and Bank A agreed with the beneficiary to pay on a with recourse basis. 2) The answer is “YES” in this particular case. It is clear that the issuing bank’s payment acceptance was conditional, i.e., according to the L/C terms and conditions (subject to Field 47A). The beneficiary should have not accepted this “soft clause” L/C. Best regards,Mr. Old Man
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?