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Hi!

i would like to have your opinion once again on an old question. if a LC is confirmed and is available with the confirming bank and the beneficiary chooses to present the document directly to the issuing bank and the issuing bank wrongfully dishonors, should the confirming bank honor the presentation given that the LC has expired meanwhile. under UCP, the answer is quite simple though but i will appreciate your thought

the answer is not so simple in my opinion. i would settle for a short answer now. yes, the confirming bank would require to honor.

ACCORDING TO UCP SUBARTICLE 6A; ITS OK FOR THE BENFICIARY TO HAVE PRESENTED TO THE ISSIUNG BANK, HOWEVER IN VIEW OF YOUR QUESTION WHETHER THE CONFIRMING BANK SHOULD HONOUR. I WOULD SAY AN EMPHATIC YES", WHICH IS IN ACCORDANCE WITH UCPSUBARTICLE 8(C) HOWEVEVER AS TO THE EXPIRATION OF THE LC, THIS WHERE AM A LITTLE SKEPTICAL ... EXPIRED LC CONNOTES EXPIRED IRREVOCABILITY AND DEFINATE UNDERTAKING

Dear jmitra,
This question has been debated last month as I remember.
However, a short and straight reply you will find in UCP 600 art.8a:

Provided that the stipulated documents are presented to the confirming bank or to any other nominated bank and they constitute a complying presentation , the confirming bank must ......

Since docs were presented to other bank than the two above (issuing bank), the undertaking of confirming bank ceases.

Agree with Christian. Under most circumstances, the confirming bank would not be liable to pay.

However, if the LC structure requires the beneficiary to send documents directly to the issuing bank, the confirming bank will be liable to pay.

(Although the UCP is silent about this, a clear statement is given in ISP98 Rule 2.01 (d) (ii)

If the confirmation permits presentation to the issuer, then the confirmer undertakes also to honour upon the issuer’s wrongful dishonour by performing as if the presentation had been made to the confirmer.

Although it is very interesting what you have quoted I don't see an insane confirming bank to approve such a clause without actually reviewing the documents. It is in the interest of the confirming bank to protect its reputation as well when it doesn't know what goods beneficiary has actually dispatched

in my opinion, its a very complex issue. dear judith has quoted perfectly. however there are some significant differences in the underlaying situation.in commercial letter of credit, the presented document usually includes transport document which are also the document of title (for sea shipment). its not a default situation. but in standby letter of credit, the payment is only claimed when there is a default and the presented document only contains a draft or demand generally. so there is not much to examine and hence ISP98 upheld this notion. in commercial letter of credit, the bank indeed gets an opportunity to recover at least part of its loss by selling the goods.

while all these are true, i would also like to mention that bank deals with document and not with goods. its simply paying for the documents and for service LC there is nothing to recover from the goods. in addition, a confirming banks main aim is to support beneficiary against issuing bank's wrongful dishonor. if it is clear that the issuing bank has dishonored a presentation wrongfully, i think the confirming bank could not escape from its responsibility. that, at least to some extent align a confirming bank under UCP 600 with a confirming bank in ISP98.

cristiand969 wrote:insane confirming bank

The thought of insane commercial banks made me smile

Actually, I have seen many instances of these cases even in commercial transactions. More commonly where the issuing bank and confirming bank are branches of the same bank. Typically, the issuing bank is located in a "high risk" country and the confirming bank is in a "neutral" country.

This arrangement is used to make the LC acceptable to the beneficiary. The confirming bank is not interested in reviewing the transaction. It acts more in the capacity of a reimbursing bank who has issued an irrevocable reimbursement undertaking.

This is another story with branches of the same bank even located in diferrent countries which in fact stay under the same umbrela and most commonly the rating of such banks is taken from HEADOFFICE. In this respect I agree with you as such banks can solve any problem of this sort internally.
Have a nice day
C.