International trade, problem question Essay Example | Topics and Well Written Essays - 2000 words

International trade, problem question - Essay Example Hence, if the bank, at which presentation is to be made is closed as a result of any act of God such as in this case, a tsunami, the bank has no obligation to accept or negotiate a credit, which expired at such time it was closed. However, there are exceptions to the rule. If the bank is closed for other reasons, not stated under this article, the period of presentation is extended until the next day when the bank opens. In the case at bar, Maltic Ltd. cannot file a case against Fidelity Bank because the reason for the closure of the bank is due to a force majuere, a tsunami occurred which restrained to banks employees to report for work for three (3) days until the tsunami passes. Therefore, the bank cannot be held liable for the refusal to pay of The Agribusiness Credit Bank. The doctrine of autonomy can also be applied in this instance. Well-entrenched is the rule under Article 3 of the Uniform Customs and Practice (UCP), which states that: â€Å"Letters of credit, by their natur e are separate and distinct from a contract of sale or any other contract on which they may be based and that banks are in no way concerned with or bound by such contract, even if the letter of credit contains a reference to the underlying contract†. It is for this reason that it is deemed that the undertaking by the bank to pay or accept bills of exchange or drafts, nor to fulfil any other obligation under the letter of credit, is not subject to claims of defences by the applicant resulting from its relationship with the issuing bank or with the beneficiary. â€Å"As for the contractual relationship existing between the applicant and the issuing bank, the beneficiary cannot avail itself of any benefit from it because he is not a privy to such contract† (van Niekerk & Schulze 307). Therefore, Maltic Ltd., the beneficiary, cannot hold the Fidelity Bank for the refusal of The Agribusiness Credit Bank to pay of the credit for the simple reason that it is merely a correspon dent bank, which is in the same locality of the exporter, Stevenson Ltd. The role of the correspondent is only to act as the advising bank, the confirming bank and the paying bank. â€Å"The correspondent bank is the advising bank as it informs the beneficiary that the letter of credit has been opened in his favour† (Sarkar 20). In the case of The Agribusiness Credit Bank, it shall be liable to pay Maltic Ltd. on the basis of issuing an irrevocable letter of credit and damages incurred by Maltic Ltd as beneficiary. This is pursuant to Article 9 of the UCP which provides: â€Å"An irrevocable credit constitutes a definite undertaking of the issuing bank, provided that the stipulated documents are presented to the Nominated Bank or the Issuing Bank, and the terms and conditions of the credit are complied with.† In this case at bar, Maltic Ltd. was issued an irrevocable letter of credit by The Agribusiness Credit Bank, based on the following terms: 1. Payment against invo ice, insurance policy, bill of lading and; 2. Certificate of quality signed by two experts from the National Oatmeal Inspectorate. There was no showing that Maltic Ltd. was not able to comply with the documents set forth under terms and conditions provided in the letter of cre