Global Trade Obligations and Australian Policies

Subject: Politics & Government
Pages: 2
Words: 315
Reading time:
2 min

“A bank assumes no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document, or for the general or particular conditions stipulated in a document or superimposed thereon; nor does it assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods, services or other performance represented by any document, or for the good faith or acts or omissions, solvency, performance or standing of the consignor, the carrier, the forwarder, the consignee or the insurer of the goods or any other person.”

Since the parties are engaged in an irrevocable credit, thus the seller has a definite undertaking of the issuing bank. In this case, the doctrine of “strict compliance” applies, so the bank will only accept documents that conform to the letter of credit. If the issuing bank refuses to pay, saying the documents are wrong, then the row is between two banks and is a row over documents. The autonomy or independence principle can give rise to problems. If the contract of sale does not closely follow the UCP, the requirements as to documents in the sales contract and under the UCP may vary in material respects.

The most obvious example is the difference between commercial practices relating to the particulars to be included in an invoice (which may not require a description). It must be appreciated, however, that, as far as the UCP is concerned, there is a clear intention to prevent a claim by a beneficiary against the issuing bank that the credit does not comply with the contract between the buyer and the seller. Equally, a claim by an applicant that payment should be stopped because of a breach of the sales contract obligation is intended to be defeated by the UCP.