Honour or Negotiate

mohkahn · Post by **mohkahn** » Wed Mar 10, 2010 7:54 pm

Hi All,
I am confused about these terms very much: I will put my questions in simple terms:

So basically there are 2 different kinds of deals:

Deal 1 is Honour:
Honour means to pay upon receiving complying presentation.
This payment can be
1) by sight = immediately
2) by deferred payment undertaking = Tenor
3) by acceptance = by accepting time drafts

q 1 ; What is the main difference between deferred payment undertaking? seems they are both tenors and beneficiary can get paid either upon maturity? or upon earlier if he is dealing with confirming / nominated bank at the cost of interest. It seems in both cases the beneficiary can opt to get paid by either paying interest to the bank to get paid or by giving a discount to the bank to sell his documents. So why 2 different terms?

Deal 2 is Negotiation:
1) Exact same questions as above q 1 + additional question of :
2) If a confirming bank has already decided to negotiate and purchase docs from beneficiary, then why pay at deferred paying undertaking or why pay at acceptance.

And can you guys enlighten us on the flow of docs for deferred paying undertaking + Acceptance. like I asked above. what are the main differences. I guess, if we read about the whole flow of docs, we might be able to understand their main difference. Thanks a lot to all.

WARLORD77 · Post by **WARLORD77** » Wed Mar 10, 2010 8:50 pm

+1

Yes, what is the difference.?

saikryshna · Post by **saikryshna** » Thu Mar 11, 2010 2:50 pm

I got u n from ur post i understands dat .....
u need to know the diff b/w
defferedPayment n acceptance.

If dis is the query ? the solution is .......
In Both the Defpayment n Acceptance is da simple thing .....

In Defpayment u donot gets any negotiable instrument where as u can in case of Acceptance.

mohkahn · Post by **mohkahn** » Sat Mar 13, 2010 5:51 pm

thanks for replying

iLC · Post by **iLC** » Wed Mar 17, 2010 8:34 am

as far as UCP 600 is concerned, the basic differences between a deferred payment and acceptance letter of credit is only the issuance of a bill of exchange. this is mainly because of the restructuring of the issuing bank undertaking to the nominated bank in article 7 and 12. under UCP 500 the differences were immense as we witness in banco case. existence of an negotiable instrument could have change the court's decision.

im not sure whether any other significant difference lies from law point. better to consult with a lawyer.

Jackie · Post by **Jackie** » Wed Mar 17, 2010 5:52 pm

Hello all

The last post showed that the main difference between def payment and acceptance is that drafts are not presented under def payment. The main reason for this is that in a lot of countries, especially in asian/ middle eastern countries, the l/c beneficiary has to bear the cost of stamp duty. This can be alleviated by l/cs issued available by def payment.

The case Santander Vs Paribas although was the landmark for changes to def payment undertakings, mainly had to do with the fact that the undertaking was discounted, the bank requested an assignment of proceeds and the courts ruled that as an assignment of proceeds had been present, this was to repay a loan obligation and not a l/c obligation.

Jackie