Mr Old Man Payment Q&A PARTIAL PAYMENT ON DISCREPANT DOCUMENTS By Mr Old Man Posted on May 8, 2015 4 min read 2 0 3,389 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr Can an issuing bank pay only part of a discrepant presentation based on the applicant’s instructions? In documentary credit practice, situations sometimes arise where the applicant is willing to accept discrepant documents, but only on condition that the beneficiary agrees to a reduction in payment. This usually happens when market conditions have changed and the importer no longer wishes to pay the full contract value. Can the issuing bank simply follow the applicant’s instruction and pay only part of the amount claimed? Or must the beneficiary first agree? QUESTION Dear Mr. Old Man, The presenting bank submitted documents under a documentary credit to the issuing bank for payment. However, the documents were found to be discrepant, and the issuing bank rightfully refused them and notified the applicant. The applicant later informed the issuing bank that he was willing to pay only 50% of the claimed amount. In this case, does the issuing bank need to obtain the beneficiary’s consent before making the partial payment? Thank you, T. ________ ANSWER Dear T., Thank you for your question. When documents are discrepant, the issuing bank has the right to refuse them, even if the applicant is willing to waive the discrepancies. However, if the issuing bank decides to accept the applicant’s waiver and proceed with payment, it must honour the presentation for the full amount claimed. The issuing bank cannot unilaterally make a partial payment based solely on the applicant’s instructions. Any partial settlement must be agreed to by the beneficiary. Therefore, if the issuing bank intends to effect a partial payment, it must first obtain the beneficiary’s consent, ideally through an authenticated SWIFT message from the presenting bank acting on the beneficiary’s behalf. This situation occasionally occurs, particularly when goods arrive at the port after market prices have fallen, leaving the importer facing a loss if they take delivery. In such cases, the seller may agree to reduce the price in order to avoid the cost of returning the goods or finding another buyer, not to mention additional storage and warehousing charges. If the exporter agrees to a price reduction, the arrangement should be confirmed by the bank through an authenticated SWIFT message. Best regards, Mr. Old Man