Assume that the transaction is under an acceptance credit. Documents are submitted by beneficiary in compliance with LC terms. The applicant takes delivery. He refuses to pay on due date, but goes to court, takes out an injunction or a 'stop payment' order from the court against the issuing bank - because he claims the goods to be apparently not per specifications.

What is the remedy for the beneficiary?

I am not sure I know the solution to this one. Inviting Ranger to jump in.

Replying to [Catalyst]:
Its really a difficult question. My presumption is that since banker has determined that the presentation is complying and has given acceptance to pay the drafts at maturity, he has to pay. This is becuase under ICC rules, banks only deal in documents and not in goods. As L/C mechanism is governed by ICC rules, the provisions of UCP will prevail over local court orders.

Regards

Quoting from [Catalyst]:


Assume that the transaction is under an acceptance credit. Documents are submitted by beneficiary in compliance with LC terms. The applicant takes delivery. He refuses to pay on due date, but goes to court, takes out an injunction or a 'stop payment' order from the court against the issuing bank - because he claims the goods to be apparently not per specifications.


What is the remedy for the beneficiary?


I am not sure I know the solution to this one. Inviting Ranger to jump in.

Well R.N. I believe that if this were to happen that the under article 9 of the UCP that bank would be compelled to pay or loose its credit ranking.  Surely no bank in the future would advise on behalf of the issuing bank or for that matter confirm an L/C.  Being that so many L/C's are now confirmed it would leave the confirming bank hanging in the wind.  Therefore if an inspection was not required to be presented with the documents for acceptance the DC would still be payable as confirmed.  I have heard of attempts to stop payment by the issuing bank but have not heard of an issuing bank refusing to pay based on that fact.   I assume since you have asked the question that you have heard of an issuing bank refusing to pay.  Moreover and still DC's have nothing to do with anything except negotiation of documents.

Ranger

Replying to [Ranger]:

The issuing bank did not refuse to pay on its own. It was prevented from doing so by the orders of a local court. Though technically the operations of an LC should not have been stopped since the terms had been complied with (unless it was a clear case of fraud was proven), it has happened. It was a dispute about quality.

It has happened recently with an issuing bank in Italy. The shipment was made from India.

Replying to [Spider Man]:

Agreed, the issuing bank SHOULD. But what now, since it has been prevented by a local court from doing so?

Quoting from [Catalyst]:


Assume that the transaction is under an acceptance credit. Documents are submitted by beneficiary in compliance with LC terms. The applicant takes delivery. He refuses to pay on due date, but goes to court, takes out an injunction or a 'stop payment' order from the court against the issuing bank - because he claims the goods to be apparently not per specifications.


What is the remedy for the beneficiary?


I am not sure I know the solution to this one. Inviting Ranger to jump in.

I know that contracts have nothing to do with payment of L/C but do you know if there was a contract in place?  This puzzled me at some length and I sent an email to an aquaintence about this.  He is a corporate and tradelaw lawyer at a major bank.  I havent heard back from him yet, but will give you his oppinion when I recieve it.

Ranger

Replying to [Catalyst]: i don't know how to handle this kind of question,just come here and take a look at your article..lol..

Replying to [evanse023]:

I have written several articles, opinions and responses - so you'd have to be specific.

What is important to note is that UCP does not have the force of law. The laws of the land rule supreme. They override UCP provisions. However, courts tend to take into account the UCP (if & since the parites have mutually agreed to abide by it) when they arrive at their rulings. Yet, they may not, they need not.

That is exactly the situation here.

Replying to [Ranger]:

About the contract: I have not been advised about it yet (sorry, I haven't yet asked). Though I agree with you that its existance should not make any difference to an LC operation.

As far as I know, courts do not interfere in LC operations unless there is a miscarriage of justice. Unless it had happened in this instance (in the opinionof the court), the only option for the beneficiary may be to go back to the court concerned and prevail on it to allow the UCP to take its own course. (If that is not allowed, then acceptance LCs become a useless piece of paper.)

The agrieved party always has the option to sue for breach of contract - as it should happen in this instance too.

Replying to [Catalyst]: a very interesting topic.

Replying to [Catalyst]:

The situation actually took place. There has been no solution yet. I am hoping that someone who has experienced it would offer a suggestion for the best way out.