Discrepant notice by nominated bank

nesarul · Post by **nesarul** » Mon Aug 31, 2009 11:10 pm

Dear,
What will be the possible consequences if the nominated bank's [other than confirming bank] notice of refusal is not according to sub article 16(c)?
Regards
Nesar

wongvv · Post by **wongvv** » Tue Sep 01, 2009 8:24 am

Hi !

According to UCP600 Art 16f, it states "If an issuing bank or a confirming bank fail to act.......". It does not include the nominated bank, since nominated bank has no undertaking on the L/C. To nominated bank, Art 16 C is just an advice only.

V.V.

nesarul · Post by **nesarul** » Sat Sep 05, 2009 1:59 pm

Dear,
The reason behind my conceren as follows:
If one consider sub-artricle 12(a),One can be catagorized it into two types:
one is nominated bank without providing express consent and another one ,the nominated bank who provide its express consent towards beneficiary.
.
Lets consider above two types under law of contract:
first one: since NB didn't extend its consent to other salient party i.e. beneficiary, so no contract has been occured between NB and beneficiary and thereby free from any obligation.
.
on the other hand,
the second one explicitly proved that NB extended its consents towards beneficiary and thereby become an obligated party under an irrevocable credit.
.
now my concerned issue:
What will be the possible consequences if the nominated bank's[who provided express consent towards beneficiary but not confirming bank] discrepant notice is not according to sub article 16(c)?
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Eagerly awaiting for reply from the forum members.
.
Regards
.
Nesar
I

shahriar · Post by **shahriar** » Sat Sep 05, 2009 4:00 pm

Good point raised. In my opinion even an express consent may not bind the nominated bank. The first thing is that there is no hard rule to govern the express consent. It largely depends on the wording. If i consider the most common case, the experess consent is for negotiation which is by definition related to complying presentation. Based on this, i think nominated bank is not bound by article 16

nesarul · Post by **nesarul** » Sat Sep 05, 2009 6:54 pm

dear shahrier, if some one make an argument with u that as per starting point of sub article 16(c)

a nominated bank acting on its nomination.......MUST [EMP. ADDED]

WHAT WILL BE YOUR RESPONSE. R U STILL REFER TO 16(F)....؛‎ ‎ NESAR

nesarul · Post by **nesarul** » Sun Sep 06, 2009 8:16 pm

Dear Shahrier,
After completion of my posting, i have been thinking of this case over and over.
Here i found some logic rather than cogent which furnish below:
Considering the fact that:
Nominated bank provided express consent towards beneficiary as per sub article 12(a)
Which implied that nominated bank obligated to honour or negotiation under a complying presentation towards beneficiary.
as per as UCP is concern , nominated bank bank is free from preclusion rule and thereby is not obligated to provide discrepant notice to the beneficiary under a discrepant presentation . sub article 16(f) [ this is my in line agreement with you].
. lets consider the issue from another angle:
When nominated bank provided its express consent toward beneficiary, NB binding itself with the beneficiary. [here OFFER derived from issuing Bank (by nominating a bank to act) and duly ACCEPTANCE given that nominated bank towards beneficiary. assume that the underlying transaction is legal. hence a lawful contract has duly been accomplished. Moreover since Credit by their nature is irrevocable [according article 2 and 3], the contract definitely irrevocable.
.
Under a irrevocable contract, it is trite law that one parties action in no case diminish another parties irrevocable right.
.
On the other hand , in order to determine the particular presentation is complying or not, NB compelled to examine the document.
Let assume a case: [here nominated bank and beneficiary situated in different country]
After examination of document NB found the following discrepancies:
1. Description of the goods in invoice is not correspondent with the credit.[ Invoice stated Incoterms FOB but credit stipulated CFR]
2. Shipping company certificate [under..........] is not signed.
3. container no. stipulated in the Bill of lading is conflicted with the same in packing list. etc.
.
But it [NB] didn't provide any discrepant notice towards beneficiary on the pela of sub article 16(f). BY DOING THE SAME, NB ALSO DIDN'T GIVE AN OPPORTUNITY TO CURE THE DISCREPANCIES BY THE BENEFICIARY [ AN IRREVOCABLE RIGHT UNDER A IRREVOCABLE CONTRACT] SO BREACH THE CONTRACT...... ISN'T IT.
.
. IN WORST CASES, WHEN IB WENT INTO BANKRUPTCY[ THE COMMON PHENOMENA NOW A DAYS] NB MIGHT BE LIABLE.
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IN THE SAME CONTEXT, NB CAN ALSO BE LIABLE FOR NOT PROVIDING DISCREPANT NOTICE UNDER SUB ARTICLE 16(C).
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SORRY FOR LONG POSTING WITH EXAGGERATE THINKING.......
.
REGARDS
NESAR

Masoom Hasan · Post by **Masoom Hasan** » Sun Sep 06, 2009 10:55 pm

Dear Neasar,
It is clear from sub-article 16(c) that a nominated bank (NB) acting on its nomination must give notice of refusal to the beneficiary / presenter if the doc. is discrepant. But according to sub-article 16(f) NB is not included in the preclusion rule, ie, though (as principal obligator ) issuing bank (IB) or the confirming bank (CB) (if any) will be preculded from claiming the doc. does not constitute a complying presentation, if they fail to act in accorance with the provisions of this rule. On the hand, under article 12(a) if a NB gives it express consent to the beneficIary, can we oblige a NB to perfrom ? If NB bank does not perform ultimate obligation rests to the shoulder of the IB, which is apparent from sub-article 7(a)(ii),(iii),(iv),(v),(b). So can we say that in this case NB cannot be obliged under UCP, but under the contract that has been established by the express consent of the NB under sub-artilce 12(a) ?

Thanks.

shahriar · Post by **shahriar** » Tue Sep 08, 2009 9:15 am

nesarul wrote: dear shahrier,
if some one make an argument with u that as per starting point of sub article 16(c)
a nominated bank acting on its nomination.......MUST [EMP. ADDED]

WHAT WILL BE YOUR RESPONSE. R U STILL REFER TO 16(F)....؛‎ ‎ NESAR

Dear nesar bhai,

again good point. well i need to know whether the express consent was irrevocable?

it is also important the point of time when the nominated bank actually started to work on its nomination. 14a. i still believe that it depends on the wordings of the "express communication"

nesarul · Post by **nesarul** » Tue Sep 08, 2009 8:16 pm

Dear Shahrier,

well i need to know whether the express consent was irrevocable?

Nominated bank has only authorized by the issuing to make a contract with the beneficiary according the the terms and conditions set into the credit, applicable provision of these rules and international standard banking practice. Since credit by nature irrevocable, the contract between nominated bank and the beneficiary must be irrevocable [otherwise protection of the NB from IB will be undermine].

it is also important the point of time when the nominated bank actually started to work on its nomination. 14a. i still believe that it depends on the wordings of the "express communication"

.
In this point i do agree with you that its all about depends on the wording of "Express Communication"
would you pls site an example of wording of "Express Communication " where nominated bank is obligated to provide discrepant notice.
Reagrds
Nesar

shahriar · Post by **shahriar** » Tue Sep 08, 2009 8:37 pm

Dear nesar bhai,
I dont think that the express communication is always irrevocable. Negotiation with recourse does not go with this concept. May be i am missing something. Is there. I frequently get export lc where the advising bank clearly mentions "we would like to negotiate presentation under this lc." in my opinion such communication is express one but does not bind the nominated bank. Your opinion please.

nesarul · Post by **nesarul** » Tue Sep 08, 2009 10:27 pm

Dear Sir,

Negotiation with recourse does not go with this concept. May be i am missing something.

Before putting my posting, i thought that you will definitely raised he point. thats why i stipulated the word that is INTERNATIONAL STANDARD BANKING PRACTICE.......... RECOURSE IS A RESULT NOT ACTION. IRREVOCABILITY IS MERELY RELATED WITH THE ACTION.

I frequently get export lc where the advising bank clearly mentions "we would like to negotiate presentation under this lc." in my opinion such communication is express one but does not bind the nominated bank

.

IF YOU LOOK INTO SUB ARTICLE 12(A) AND ACCORDING TO YOUR OPINION WHEN NOMINATED BANK PROVIDES ITS EXPRESS CONSENT, NB WILL BE OBLIGATED TO HONOUR OR NEGOTIATION A COMPLYING PRESENTATION... BUT...........
.
FROM MY POINT OF VIEW YOUR PROPOSED STATEMENT DOESN'T OBLIGATE THE NB..... HENCE I CAN NOT CONSIDER IT AS EXPRESS COMMUNICATION.....
REGARDS
NESAR