*1 GOLDBERG, Circuit Judge, specially con-
curring:
I concur the result.
PHILADELPHIA GEAR
CORPORATION,
Plaintiff-Appellee, BANK, Defendant-Appellant.
CENTRAL
No. 82-3294.
United Appeals, States Court of
Fifth Circuit.
Oct.
Rehearing and Rehearing En Banc 17, 1983.
Denied Nov. *2 we conclude that Because
presented. the correct bal- strike court did not district duties competing parties’ ance between judgment. we reverse obligations,
Background *3 Bank, 23, 1981, appel- April On “Irrevoca- lant, entitled issued a document No. 02408” Letter of Credit ble Commercial (herein- million dollars in the amount of 4.5 credit”). “letter of “credit” or after of Central’s on behalf credit was issued Harrold, Allen, & Wildman, Dixon Services, Inc. Machinery United customer McDonnell, McNeese, Memphis, Stanley J. Philadelphia Gear (“United”) in favor of Tenn., Beard, Sartor, & Inabnett Snellings, (“Philadelphia”) Corporation La., Sartor, Jr., Monroe, Trascher, Daniel R. was is- the credit reflects that The record defendant-appellant. for obligations support Central’s sued to Stuart, Gordon, Arata, & Ger- McCollam goods of contract. under a sale Philadelphia Stuart, IV, Jr., Walter B. Slattery, ald F. terms, could accommodate the credit By its La., Orleans, plaintiff-appellee. New for of amounts in maximum drafts individual dollars; to be auto- thereafter 75 thousand million a limit of 4.5 reinstated to matically pursuant dollars. Each GOLDBERG, RAN- to bear the nota- GEE and was Before the credit DALL, LETTER OF Judges. “DRAWN UNDER Circuit tion: rec- BANK.” The CREDIT OF CENTRAL
GEE, Judge: Circuit be draft was to that each ord also reveals In the credit. copy of accompanied by appeal is a The terrain of the upon addition, was conditioned transaction, one that culmi- failed business intermediary, presentation of allegations nated in several and mutual Philadelphia of Bank Provident National obligations. failure to honor contractual lading “inland bill of (“Provident”), of an let- documentary The contract at issue is a of the above any evidencing shipment of ter The district court deter- of credit.1 Inc.” Machinery, units to United described wrongfully mined that the bank dis- did not the credit provision, to this Contrary presented pursuant honored drafts to be goods nature of the the exact specify it ordered consequence, letter of credit. More, expressly the credit face value of all drafts delivered.2 pay the issuer to draft, accompany lading ‘documentary ing each ‘documentary bill of that a “A draft’ or a 1. type as to the nature payment’ is silent is one honor of which demand for goods This omission presentation is meant to evidence. of a docu conditioned any arguably bill where means a circumstance ment or documents. ‘Document’ creates title, security, Be- paper including lading in the credit’s terms. fulfill document voice, certificate, expressed on stan- of default and the Central’s cause the credit obligated to 10:5-103(1)(b). because Central like.” dard form and La.R.S. payment, clearly precondition of articulate just. effect would Philadelphia argued a construction to this In the district court Sav’gs National Ass’n v. Citizens East Girard consequences legal defects existence and Co., 602 Bank and Trust lading proffered nonis- within bills of was a however, appears, Cir.1979). Philadelphia put A bill of sue. as follows: We the issue appeal; in- transporter have abandoned this lading representation is a appellant’s sought meet each specific for stead it delivered has been merchandise concerning bills of lad- arguments represen- whether 10:1-201(2). shipment. This La.R.S. the res- presented. ing properly Because signals were that the tation to the issuer analysis, Here, alter our requir- this issue would olution of Id. relinquished while title. preliminary permanent in- subject gation to the Uniform Customs and Prac- —a Documentary junction tices for Commercial Credits future drafts be ordering Congress the Thirteenth fixed result the district timely paid.3 Without (1974 International Chamber of Commerce the parties’ to reconcile attempted 290)(hereinafter Revision Publication “I.C.C. By this pretrial differences at conference. 290”). Pub. time had been made aware of Philadelphia previ- the exact defect in each of the drafts latter half during the Sometime eve of trial Phila- ously tendered. On the relations between United and eleven addi- delphia presented to Central goods United refused to soured. tional with supporting drafts documenta- ordered; which it claimed were not placed registry tion. These were in the contradiction, Philadelphia, demanded the court. The record also reflects that goods were payment maintaining — throughout Philadelphia presented trial ad- pursuant to contractual agree- delivered drafts; reg- in the placed ditional each was dispute ment. As a result of this Philadel- *4 Provident, through istry. tendered six phia, drafts
on the letter of credit in late December of At the of all the evidence the conclusion days 1981. later Central decided Several (1) district court found: of Philadel- Each that it would not the drafts and re- phia’s respect tendered drafts failed in some to with to turned them Provident notice credit; (2) to conform the letter of all effect. The notice stated that that curable; (3) the defects were some of the being drafts were returned “due to their agents deficiencies were known to of Phila- non-compliance with the terms of the rele- Provident; (4) nei- delphia and Central early January vant credit.” of 1982 ther returned the documentation Philadelphia tendered three additional (submitted drafts before Again drafts on the credit. Central refused suit) institution of nor informed Philadel- pay, citing in each case as its reason phia that it would hold documentation general noncompliance with the credit’s file to these inspection. Applying on for its Undeterred, Philadelphia terms. wired rele- perceived what it to be the findings requesting Central a more definite state- law, vant and case the district statutory ment of Central’s reasons. Central re- that was liable court determined sponded that reasons for dishonor are “[t]he presented for the face value of all drafts previously as stated.” judgment corresponding and entered in a logic of Cen- Oblivious the manifest judg- appeals amount. Central now 10, 1982, position, on Phila- February tral’s ment. delphia diversity instituted this action for of contract in the Western District breach Relevant Standard Specifically, of Louisiana. the resolution of all other issues Because judgment sought declaratory determination, the crucial flows from its payable
drafts were under the dam- whether the district dishonor, appeal issue of this and —because ages wrongful for balance between proper the credit remained a valid contractual obli- court struck yet given present We also note that because the credit not disturb the result form, facts, today own no violence simply written on Central’s we do not we note that ambigui- resolving to the done contract in East Gir- principles abandon the enunciated against ties created that omission Central. ard, supra. appel- regard note that In this we Bank, Venizelos, Manhattan S.A. v. Chase allegations that: lant’s claim is also based Yet, (2d Cir.1970). in so (1) accompanied none of the drafts were doing required to rewrite the entire we are not itself, (2) required; some of the drafts letter as obligations. The credit re- contract signatures; bore unauthorized some lacked timely lading quired presentation of bills of notations; some were support payment. photocopies photocopies, combina- fact support April absent terms, expired tion of which our result By on 3. the credit upon. the issue we focus made, claim is to be (e) If such obligations duties and competing
parties’
therefor,
reasons
effect, stating the
did
conclude that
credit. We
under the
by cable or
must,
delay,
given
without
characterized the
The district
not.
the bank from
means to
expeditious
other
dis-
action for
as an
case
present
have been received
which the documents
extensively
it relied
doing,
honor. So
bank) and such notice
(the remitting
of the Louisiana
following provisions
being
the documents
must state that
(hereinafter
Code
Uniform Commercial
bank or are
disposal
at the
of such
held
Pub. 290:
I.C.C.
“Code”) and
returned thereto.
being
rejection;
for honor or
Time allowed
hold the
issuing bank fails to
(f) If the
rejection by
or
con-
withholding honor
remit-
disposal
documents
sent; presenter
bank,
to return the docu-
or fails
ting
documentary
to which
(1) A bank
bank,
issuing bank
such
ments to
or demand
claiming
precluded
shall be
may
a credit
without dishonor
under
acceptance
negotia-
payment,
relative
the draft of credit
in accordance
tion was not effected
honor until the close
(a) defer
of the credit.
terms and conditions
banking day following receipt
third
8(c)-(f).
art.
Pub. 290
I.C.C.
document;
background
provi-
of these
Against
(b)
presenter
honor if the
further defer
sions,
court first reasoned
the district
expressly
impliedly
consented
case
pertinent
at all times
thereto.
presenter
was a
defined
Provident
*5
here
to honor within the time
Failure
remitting
bank as
10:5-112 and
La.R.S.
dishonor of the draft
specified constitutes
In
8(e)
Pub. 290.
article
of I.C.C.
defined
and of the credit.
demand
obliged
was
to inform
consequence, Central
the bank
unless
(2) Upon
may
dishonor
reasons it con-
precise
Provident of the
duty,
fulfill
to
otherwise instructed
documents to be non-
sidered the tendered
the
or demand and the docu-
return
290,
8(c),
conforming.
I.C.C. Pub.
arts.
See
by holding
disposal
ments
them at the
each instance that Cen-
(e). Concluding in
sending
and
him an advice
presenter
the
the dis-
obligation,
meet this
tral failed to
to that effect.
es-
that Central was
trict court determined
means
any person
“Presenter”
deficiencies
to raise the documents’
topped
pay-
a draft or demand for
presenting
com-
defense,
of strict
requirement
as a
under a credit even
ment
for honor
letters of credit
with the terms of
pliance
confirming
is a
bank
though
person
Cruises,
Flagship
notwithstanding.
Cf.
acting
which is
correspondent
or other
Merchants Nat’l
England
Ltd. v. New
under an issuer’s authorization.
More,
(1st Cir.1978).
Bank,
699
569 F.2d
estoppel
reasoned that
10:5-112.
the district court
La.R.S.
either
failure
proper
because Central’s
documents,
If,
receipt of the
(c)
upon
documenta-
to return the drafts’
they appear
bank considers that
issuing
held
being
that it was
give
tion or to
in
on their face not to be
accordance
8(f)
article
disposal violated
at Provident’s
the terms and conditions of the
290, thwarting any attempt
to
Pub.
I.C.C.
determine,
that bank must
on the basis of
cure the drafts’ defects.
alone,
claim
the documents
whether
to
payment, acceptance
negotiation
it is
plausible,
analysis
the above
While
was not effected in accordance with
flaw in this anal-
primary
The
incomplete.
terms and conditions of the credit.
dishon-
concept
approach
is its
to
ysis
The district
(d)
or in credit transactions.
bank shall have a reason-
issuing
pay,
issuer to
of the
duty
focused
able
time to examine
documents
in
wanting
finding
performance
Central’s
to
to make
determine as above whether
however,
us,
respect.
appears
It
to
this
such a claim.
puts
instance
underlying transaction,
the first
dishonor
at
with absolutely
consequence given
underlying
beneficiary’s per-
issue the
of the
trans
adequacy
action unless the credit expressly incorpo
formance under
letter of credit. While
rates its terms. See La.R.S. 10:5-109.
In
must
adequacy
performance
consequence,
duty
pay
the issuer’s
is con
examined in
light
correspond-
issuer’s
ditioned
solely upon
credit’s terms: usu
ing duties,
always
pri-
it must
remain the
ally,
here,
the beneficiary’s presentation
mary
analysis.
focus of
We reach this con-
conforming
Id.,
facially
documents.
by tracing
clusion
of a credit
contours
10:5-114;
Harfield,
see also
Bank Credits
transaction.
Acceptances
(1975) (herein
73-86
usually
a transaction
com
Such
after cited as “Bank
Accept
Credits and
prises
separate
“[f]irst,
three
contracts:
ances”). More,
obligation
the issuer has no
issuing bank
into a contract with
enters
go beyond
a facial
examination
customer
to issue the
of credit.
letter
determining
tendered documents in
wheth
Second, there is a contract between the
and,
fact,
er
is warranted
may
party receiving
bank and the
Id.;
incur
if he does
see
liability
so.4
also
Third,
letter of credit.
the customer who
Brazil,
do
Ltd.
Sisalcords
v. Fiacao Brasi
procured
signs
the letter
a con
Sisal, S.A.,
leira de
236 “ risks of the to assume the compelled 5: be Agreed’ Article Otherwise ‘Unless Contract,” it of 11 nonperformance, in Freedom contract’s underlying Exercise
An (1967). L.J. 416 assume addi- Louis also be St. of its judicial realignment of tional risks duty pay arises an issuer’s Since the credit: obligations under credit, of terms exclusively from the letter of cred- terms, values of the peculiar those beyond no defenses [T]he the assurance (1) they provide that turns on whether are liability provide in with the terms can they accordance of that performed payment, the credit. See Cour conditions of transac- respect assurance America, Inc. Nat. North N.C. inexpensive. taulds tion, they (4th Cir.1975). 805 The Bank, F.2d 528 performance if will be lost These values necessary support pay documentation infected of credit is to be the letter beneficiary as its source and has the ment underlying nonperformance exactly requirements must conform that happens when transaction because credit; otherwise the issuer is enti credit not an assurance letter Girard, East payment. tled to refuse happens payment and because if Kong, Wing Hong On Bank Ltd. supra; must include a letter cost of Note, Cir.1972). 328 See also expense. litigation problematic issuer’s of Credit and the Documentary Letters Use of Harfield, Domestic Increasing Docu Customs and Practice for Uniform Credit, 4 Commercial Uniform Letter Revision): (1974 Credits A Selec mentary (1972) (emphasis origi- 257 Code L.J. J.Corp.L. (1977); Har Analysis, tive dishonor nal). can be no There “Code, field, and Conscience in Customs presented are nonconform- where the drafts Law,” 4 Uniform Letter of Credit Commer and suffi- gives timely ing and the issuer 7 (1971). cial Code L.J. cient to that effect. See La.R.S. This doctrine of strict compliance 10:5-112, undisputed 114. Because it grounded reality. in commercial firmly timely notice of received payment upon event is made presen In the accompanied in each instance nonpayment, credit, that do tations not conform the was refused aby statement loses right the issuer to reimbursement noncompliance Philadelphia’s because of J. White from its customer. See & R. Sum inquiry our with the terms of the mers, Uniform Commercial Code 18.7 at § of Central’s sufficiency must focus (1972) (hereinafter as “J. p. 742-43 cited notice. Summers”). R. In this White & event the district contends and beneficiary's debt is satisfied and the cus substantial ir that there were found escapes liability underly tomer on both the ten pre first regularities letter of contracts ing and while *7 record supra note sentations. See corresponding liability— incurs a issuer by accompanied pho were that six reflects More, without defense or recourse. the re or “shipping “ship evidences” tocopies of jection of strict as a doctrine compliance in required rather than the ping notices” would vitiate the economic value a credit addition, transaction; ship- lading. land only would the issuer bills of any (4)Notwithstanding or agreed modification rev- Unless once irrevo- otherwise an any person regards credit is cable established as the cus- au- ocation of a revocable only tomer it can or negotiate be modified revoked under to honor or thorized with the consent of the customer once it and original to entitled reim- credit is terms regards is established it any draft or for or honor of de- bursement only can be his modified or revoked negotiat- duly or honored mand for consent. receipt of of the modification ed before agreed Unless after revocable otherwise a is in turn entitled or revocation and the issuer may be or it modified established its customer. reimbursement from revoked notice to or the issuer without consent customer persuaded are we the first ten Nor that ping accompanying requires documents custom issuer, instance, every were Article 41 of an presentations notify stale. ICC rejecting nonconforming reference into the customer before incorporated Pub. credit, no ... provides period nothing that drafts. We find in the Code or “[i]f credit, result. time is in the banks will Pub. 290 that warrants such a stipulated I.C.C. more refuse documents them of the Bills days
than 21 after the issuance Louisiana law that: provides “[a] of Lading shipping or other documents.” course of between dealing parties any that Philadelphia The district court found in the or trade in usage trade vocation defects at the was aware of “some” of these they engaged they or of which presentation. respect time of With are or give particular should be aware Philadelphia drafts that knew to be defec- meaning supplement qualify to and tive, we hold that notice was not Central’s agreement.” terms of an 10:1- La.R.S. deficient and that the district court erred in 205(8). Concomitantly, imposes that law an it concluding wrongfully that dishonored faith in the obligation good performance these drafts. Id., every contract. 10:1-203. Here it is a seriously dispute does not that I.C.C. Pub. 290 reflects undisputed Instead, banking accepted practice. the facts we have stated. it codification 3(c) publication provides a of that presents argument designed three-tiered Article First, can neither irrevocable letter of impact. urges to vitiate their it credit] “[an agree because be amended nor cancelledwithout shipping documents were stale an it agreement virtue of between all parties language ment of thereto.” This United, Central was to seek Unit- precise meaning requires Next, it approval prior ed’s to dishonor. Because interpretation. obvi contends that the defects were curable be- to decline invi ously chosen goods, cause it have reshipped modify only inquiry could tation to génerating lading, fresh bills of had Central whether the law good required by faith— permitted return the shipped imposes duty beyond United to both Louisiana— Finally, Philadelphia urges merchandise. custom the credit’s terms. We believe possessed unqualified duty that Central faith “means in fact in honesty not. Good notify precise it of the defects within its or transaction concerned.” La. conduct liability 10:1-201(9). Nothing drafts and that absent such notice in the record R.S. must attach. believe suggests dishonestly We this that Central acted without merit. transaction. We aspect timely prepared
are not to hold nonconforming draft rejection facially of a above, a letter As noted of credit Corpo constitutes an act of bad faith. See underlying completely and the contract are Bank Agricola racion de Mercadeo Mellon separate agreements, may and the issuer International, (2d Cir.1979). not use the terms of the transac underlying prepared lay Nor are we down tion as a defense unless the credit expressly good imposes duty faith to rewrite a incorporates its terms. It follows that an contract where there is no hint of uncon underlying may contract not be used to scionability recognize or fraud. We amplify expressly the terms of a credit not issuers often consult their customers before incorporating them. It further follows that *8 rejecting nonconforming drafts submitted because the transaction does not underlying a under credit: a any proof concerning affect the that in- particular dealing thought every or course of be It must not be custom gener- alleged noncompliance tween the issuer’s customer and the benefi stance dishon- dispute leading wrongful transaction can ates a ciary underlying within arise in the issuer’s nonconformity not cure of a or. When doubts apparent presentment or not a 10:5-109. mind as to whether required document. See La.R.S. 238 stipulated in the credit. J. White at tions See is not all uncommon for
complies, it whereby 18.2 711-715 agreement Summers, p. an at supra, the issuer to reach & R. § alleged there). in effect waives consequence, the customer cases (and cited or some other ad- makes condi- noncompliance obligation wholly issuer’s for the ben- justment so that occasion upon beneficiary’s performance, tioned wrongful dishonor does eficiary to assert here, specified documents. delivery not arise. Further, gives by the issuer nonpayment Summers, beneficiary for p. 18.6 at to an action supra rise J. White & R. § beneficiary a course of which the 623. Doubtless such action of contract in breach cannot, good etiquette; commercial we on performance due plead prove must however, it where the terms of the require above, per- stated due part. its Id. As credit do not. a only by demonstrated may formance with the credit’s showing compliance
Appellee’s points and third we second terms. together, assuming treat since even that the defects in the documentation submitted to above, the As we have noted curable, we unable to con- Central were incorporates good a standard faith Code judgment
clude that the district court’s its in every pursuant made in contract is- compounded correct. To answer these That stan junctions. conse- La.R.S. 10:1-203. legal sues we must determine the in fact the conduct quences knowingly requires honesty a sub- dard beneficiary where nonconforming Id., 10:1-201(9). mits documents. The credit or transaction concerned. clearly permits payment the issuer to refuse provides 10:5-111 of the Code Section on accompanied lading drafts bills of warrants, beneficiary presentation, a 290, old. days more than 21 See I.C.C. Pub. its drafts conform to the conditions on the payment article Central refused tendering credit.6 non By knowingly ground draft that each failed to comply drafts, conforming Philadelphia breached with the credit declined to furnish Phil- abe provisions. both of these It would adelphia any amplifying information. strange party rule indeed under which a At oral argument, Central asserted that the tender defects of containing could drafts rejected drafts were because the bills of recovery yet knew and attain lading were stale. See note 2. supra By them. ground that it was not advised of however, analysis, the district court’s al- Moulton, 182 District of Columbia though Philadelphia knew at least some of (1901). 1237 U.S. L.Ed. S.Ct. be nonconforming drafts to when ten- reasons, these we For conclude dered, Central was to specify its re error judgment district court’s was in refusing payment reasons for irrespective deficien garding those drafts in which the of Philadelphia’s knowledge. today cies were known. We do not hold never beneficiary may prevail
that a
where
to meet
documentation fails
reading
Our
the relevant case
that,
only
credit’s
but
requirements
law and
commentaries confirms that
facts,
beneficiary
peculiar
essence a
is a
of execu
form
its contrac
contract,
abysmally meeting
failed so
tory
whereby
one
the issuer makes
obligations
inquiry beyond
a
tual
continuing
pay upon
offer
benefi
ciary’s performance of
failure is required.
the terms and condi-
agreed
negotiating,
presentment
Unless
a
6. Warranties on transfer and
otherwise
agreed
advising,
confirming,
collecting
otherwise
or
Unless
documentary
transferring
presenting
transferring
presenting
a draft or
bank
payment
or demand for
warrants
all
warrants
demand
under
necessary
parties that
condi-
interested
collecting
only
by a
warranted
matters
complied
tions
credit have
with.
been
Chapter 4.
bank under
existing
This is in addition to
warranties
La.R.S. 10:5-111.
under the law.
*9
little
circumstance,
We also find
substance
Philadel
As to the latter
because the
yet
Louisiana court has
to make its views
phia’s
contention that
case is
known,
our
relies
analysis
lan-
injunctive
best
as one for
treated
relief.
guage of the Code:
Because a letter of credit transaction deals
When an
wrongfully
issuer
cancels or
solely
payment
with
monies there
repudiates
otherwise
a credit before
adequate
can be no
that no
reme
presentment of a draft or demand for
exists at law.
dy
See Productos Carnic S.A.
payment drawn under it the beneficiary
Etc.,
Beef,
Cent. Am.
As noted knew of Philadelphia only found issuing bank claims a draft (e) If [the defects in the of the “some” the terms of the not in with compliance drafts: effect, stating the letter], notice to that must, therefore, delay, Phil- to Central reasons without
All drafts submitted
to the require-
failed to conform
means
adelphia
given
expeditious
cable or other
the letter of credit in various
ments of
from which the documents
to the bank
of the deficiencies were
respects. Some
bank)
(the remitting
have been received
agents
Philadelphia
and Pro-
known
the docu-
notice must state that
and such
All of these defects were curable.
vident.
disposal
being
are
held at
ments
that the
of the record indicates
thereto.
being
Our review
returned
such bank or
clearly
aspect
on this
court did not
focus
fails to hold the
(f)
issuing
If the
bank
us,
the case.
brief
of the remit-
disposal
documents at the
the “fact” that it knew that
speaks
twice
bank,
to return the docu-
ting
or fails
earlier
accompanying
the documents
bank,
bank
issuing
to such
ments
stale,
were
and the district court’s
drafts
claiming that the
precluded
shall be
from
not
opinion
Philadelphia did
observes
negotia-
payment acceptance
relative
that it knew of
seriously dispute
defects
in accordance with
tion was not effected
knowledge
all
of the de-
the drafts. Since
of the credit.
the terms and conditions
holding,
fects is crucial under our
we think
Pub.
International
of Commerce
Chamber
so,
the best course is to remand. We do
sub-
8(e), (f). Philadelphia
290 art.
Gear
directing the district court
to determine
Bank un-
drafts to Central
mitted defective
which,
some,
presenta-
rather than
of the
knowing
letter of
der
this
tions
deficiencies known to the
contained
of the drafts were defective. Cen-
“some”
presenter
presentation,
at the time of
drafts,
offering
tral Bank dishonored the
judgment accordingly.
to enter
noting
other
than
explanation
above,
judg-
For the reasons stated
with the let-
compliance
drafts were not in
ment
the district court is
reversed
credit;
failed to
ter of
Central Bank also
further
In con-
proceedings.
remanded for
supporting
promptly the drafts
return
sequence,
parties’ argu-
we do
reach
hold them at the dis-
documentation or to
concerning
proper
ments
allocation of
posal
remitting
of the
bank.
damages in credit transactions.
Bank for
Philadelphia Gear sued Central
REVERSED and REMANDED.
The district
wrongful dishonorment.
GOLDBERG,
Judge, dissenting:
Circuit
estopped
Bank was
held that Central
the drafts as a defense
asserting defects in
persuasive
Ever mindful of the
force of
First,
reasons.
separate
for two
must, nonetheless,
majority opinion,
I
notice to
give
Bank failed to
majority
dissent. The
faults the district
defects;
second,
specific
Cen-
Gear
being unduly
court for
attentive to the issu-
hold at
tral Bank did not return or
ing
duty
bank’s
a draft under a
remitting
bank
drafts
disposal
beneficiary’s
letter
than the
of credit rather
panel
documentation.
supporting
duty to
to the terms of the
comply strictly
tender of defec-
knowing
holds that a
today
majority
letter of
I fear that
credit.
of its
bank
tive drafts absolves
similarly
unduly
been
attentive to the
and of
notice of the defects
duty
give
facts of this case and has uttered a rule
the drafts and
duty
to return
insufficiently
day-to-day
sensitive
for a
documentation;
remands
panel
use of
letters of credit.
determination of which drafts were
know-
knew beforehand of the de-
ingly defectively submitted.
I believe this
fects,2 the steps
part
are still
of the dance.
rule to be inadvisable for two reasons.1
An
advantage
inherent
of letters of cred-
*11
First, although
majority’s
the
rule might
it is that questions regarding dishonorment
equitable
be an
treatment of the present
are easily answered —a court
potential
litigants,
it introduces a factor
treading
litigant
merely
need
look to the choreogra-
the
principles
toes of
basic to letters of phy and see if the
proper
dancers took the
credit. Letters of credit are near-mechani-
steps. This
an
usually poses
objective ques-
cal
designed
forms of
facilitate
tion, with the answer obvious from the face
commercial exchange. The terms of letters
of the documents and the terms
the
applicable
of credit and
laws choreograph
letter of
The
credit.
rule the
has
majority
an
long
elaborate dance. As
as the steps
chosen to apply
injects
to this case
into the
followed,
are
payment also follows. There
otherwise mechanical
simple
inquiry
is
inquiries
no need to make
into the under-
subjective
that most
issue of the knowledge
transaction;
lying
the parties
merely
need
of the beneficiary.
pirouette
path prescribed
down the
The
majority’s
result of the
rule does not
applicable
letter and
statutes. Facial com-
pliance
clearly
is the
offend me in the case in which the
watchword.
beneficiary in fact knowingly presented de-
procedures
relating to
a
dishonoring
earlier,
fective
I
drafts —as mentioned
draft are equally choreographed. One of
opportunity-to-cure
overly
rationale is not
important
turns in that
provid-
dance is
compelling
deeply
such cases. What
dis-
ing the
an
beneficiary
opportunity to cor-
turbs me is that
the majority has encour-
rect a defective draft.
I.C.C.Pub. 290 arts.
aged dishonoring banks to remain silent as
8(e), (f) delineates
steps
two
this turn:
reasons, stonewalling
to their
and injecting
issuing
an
bank must return the defective
a complex, subjective,
litigable issue into
give specific
notice of the defects.
every
dishonorment.
Henceforth
These two steps are crucial to allowing an
defendant
banks will
innocent
include in
beneficiary
opportunity to cure
an inadvertent error in a
their
Though
responsive pleadings
boilerplate
draft.
this motivation is
compelling
“Furthermore,
less
when
defense:
Gear
majority
ambiguities
topped
dishonoring
1. The
rule contains some
from
because of the un-
undesirable,
pertinent
that are
but that are not
known and uncured error # 2?
my major objections. First,
Presumably,
questions
majority
these are
it is not clear to
postpone
type
they
knowledge
required.
me
for cases in which
what
are
is
Con
postponement,
following
outcome determinative.
That
sider the
situations:
however, merely
uncertainty
contributes to the
1. The
documents
are volumi-
majority
injected
into a device
beneficiary
nous and the
knows to a mor-
specifically
uncertainty
created to remove
from
certainty
they
al
must contain some
commercial
transactions.
errors somewhere.
beneficiary suspects
2. The
that a term in
key
support
point,
of its
on this
compliance,
the draft is not in
but
majority
solely upon
District of Co-
relies
sure.
Moulton,
lumbia v.
182 U.S.
21 S.Ct.
day
presentment
3. The
after
the benefi-
(1901).
issuing bank excused state mind
majority simply engrafted rule has a new parties’ agreements.
term into the This
judicially imposed condition renders some- suspect majority’s
what nominal obei-
sance to the of free principle contracting.
Though diversity instant case is we “writing diversity
case write on wind,” Thompson Johns-Manville Corp.,
Sales F.2d 581 Cir.
1983) (Gee, J.), precedential force of the
majority opinion likely great .to be con
sidering the law and the field of stature of It author. distresses me to think that
the once useful of letters device of credit
may be a less device reliable now. The
previously impossible possibility of conten litigation subjective
tious of a can element every
now arise in suit for dishon- Accordingly,
orment. I must the ma leave to their
jority pas glissade de deux
offstage, dissenting.