SILENT CONFIRMATION AND LC AVAILABLE BY ACCEPTANCE

QUERY FROM TradeFin

Hello everyone,

I have one question about the silent confirmation of LC. I've read in a book on LCs that: the LCs available by acceptance cannot be confirmed silently.
Why? I can't find the reason.
Thank you for your anwers
BR
ps. I'm new on this forum and i think it's great.

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ANSWER

Hi,

It is commonly understood that silent confirmation is the confirmation added to an LC without the issuing bank’s authorization. It is done solely based on an agreement between the confirming bank and the beneficiary.

I think silent confirmation can be applied to any type of LC, whether it is available by negotiation or by acceptance.

If having good reason to believe that the issuing bank is a trustworthy bank which can fulfill their payment obligation under the LC available by acceptance, the advising bank or any bank can, at their own option and risk, agree with the beneficiary to add confirmation to the L/C.

The confirming bank’s payment obligation can be detailed in the agreement. For example, the confirming bank shall be liable to honour in case the stipulated documents presented to the issuing bank are complying but the issuing bank does not accept draft drawn on it, or having accepted a draft drawn on it, does not pay at maturity.

It’ll be more convenient if the confirming bank is simultaneously the bank nominated to accept the drafts under the LC.

Best regards,
Nguyen Huu Duc …