STOP PAYMENT ORDER

QUERY FROM Ahmed Sayed
Preventive action

In case of acceptance LC , as an example its payment will be 90 days from the bill of lading & after the bank had accepted the documents & passed the same to the applicants to clear the goods , the applicants found a significant descrepancy between the goods received & the goods description stipulated in the LC ,
So in such case is there any preventive action could be taken to stop the payment before its maturity date expressing such aforesaid reason .

Best regards.
Ahmed Sayed

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COMMENT
Stop Payment Order

Dear Ahmed Sayed,

Banks deal with documents and not with goods, services or performance to which the documents may relate (UCP 600 Art. 6).

Under UCP if the presentation is complying and the bank has accepted the time draft it has to pay at maturity. Only a stop payment order from a local court of law can prevent the issuing bank from paying at maturity but provided that (i) the local court is willing to issue such an order; (ii) the court order reaches the issuing bank before the payment is made; and (iii) the accepted draft has not been discounted by a third party.

Please note when a draft or a bill of exchange is accepted, it becomes an instrument which is independent of the LC and can be discounted or sold on the forfaiting market. The drawee is obligated to pay to the order of the holder in due course/bona fide holder when the draft becomes due..

Best regards
Nguyen Huu Duc …