TO PAY OR NOT TO PAY IF SHIPMENT IS NOT EFFECTED IN FULL

QUERY FROM NICO PARIS
Partial shipments

I am a trainee currently dealing with my first LC matter and have what I hope is a straight-forward query.
Under the LC, the sales contract and the UCP rules partial shipments are allowed. Partial drawings also.
If the beneficiary of the LC in which the description of goods is 5410 MT (+/-10%) ships only 80% is he entitled to payment of the equivalent amount of money, provided he invoice accordingly and provided all documents are consistent? I.e. can a beneficiary effect partial shipment and expect partial payment without shipping the full amount?

Would the position change if the bank is aware of factors which will render it impossible to make any further shipments so as to complete the quantity of goods under the LC?

Does the position change if the presentation is made prior to expiration of the LC but the bank waits until expiration before refusing to honour the LC on the basis that it is impossible to conduct a full shipment?

Thank you in advance for any help,
Nico

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COMMENT FROM MR. OLD MAN
To Pay or Not to Pay if Shipment not effected in full.

Dear Nico Paris,

I try to answer question by question as follows:

1/ If partial shipment is allowed, the beneficiary can effect partial shipment and receive payment of equivalent to the value of the goods partially shipped. The nominated bank/the issuing bank does not care whether the beneficiary shall effect further shipments or not. That the beneficiary fails to effect further shipments shall be subject to the penalty clause or arbitration clause, if any, in the sale contract.

2/ The position remains unchanged, i.e. the nominated bank/the issuing bank must honour the complying documents even if it is aware of any factors or even evidence showing that no further shipments are to be effected by the beneficiary.

3/ The position still remains unchanged whether the LC has been expired and no further shipments are to be effected. The nominated bank/the issuing bank must honour if the documents presented are complying. That the presentation is made prior to the expiration of the LC but the nominated bank/the issuing bank waits until expiration to refuse to honour on the basis that goods required have not been shipped in full are not encouraged and not acceptable.

Best regards,
Nguyen Huu Duc

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Armagedo's Comment

Excellent, Nguyen

Hi!

The similar question was already discussed at forum here
http://letterofcreditforum.com/node/275

But thanks to to Nguyen for his one more clear answer.

As we say in our country "revision is a mother of studies" :))))

Good luck …