Letters of credit — strict compliance and the use of banking ‘shorthand’
A fundamental principle underlining the use of a letter of credit (LC) as a means of payment security is that the documents presented under the LC must strictly comply with the requirements of the LC in order for the issuing bank to make payment.
In this case, the Commercial Court considers the doctrine of strict compliance and the extent to which so-called ‘trivial’ discrepancies will justify a refusal to pay under the LC. The court goes on to consider what is required under UCP 600 for a bank to give valid notification of a refusal to pay.
The claimant sellers entered a contract to sell a cargo of wheat bran pellets to buyers in China. Pursuant to the contract, the buyers procured the issue of an LC by the defendant, Shinhan Bank, under which the claimant was the beneficiary…
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