www.ebook3000.com BILLS OF LADING AND BANKERS’ D O C U M E N TA RY CREDITS F O U RT H E D I T I O N www.ebook3000.com ESSENTIAL MARITIME AND TRANSPORT LAW SERIES Bills of Lading: Law and Contracts by Nicholas Gaskell, Regina Asariotis and Yvonne Baatz (2000) Modern Law of Maritime Insurance, Volume Edited by Professor D Rhidian Thomas (2002) Maritime Fraud by Paul Todd (2003) Port State Control 2nd edition by Dr Z Oya ệzỗayir (2004) War, Terror and Carriage by Sea by Keith Michel (2004) Freight Forwarding and Multimodal Transport Contracts by David A Glass (2004) Contracts of Carriage by Land and Air by Malcolm Clarke and David Yates (2004) Marine Insurance: Law and Practice by F D Rose (2004) General Average: Law and Practice 2nd edition by F D Rose (2005) Maritime Insurance Clauses 4th edition by N Geoffrey Hudson and Tim Madge (2005) Marine Insurance The Law in Transition Edited by Professor D Rhidian Thomas (2006) Liability Regimes in Contemporary Maritime Law Edited by Professor D Rhidian Thomas (2007) www.ebook3000.com BILLS OF LADING AND BANKERS’ D O C U M E N TA RY CREDITS BY PAUL TODD M.A., B.C.L Professor of Law, University of Plymouth F O U RT H E D I T I O N LONDON 2007 www.ebook3000.com Informa Law Mortimer House 37–41 Mortimer Street London W1T 3JH law.enquiries@informa.com an Informa business © Paul Todd, 1990, 1993, 1998, 2007 First published 1990 Second edition 1993 Third edition 1998 Fourth edition 2007 British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN 978 84311 6318 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of Informa Law Whilst every effort has been made to ensure that the information contained in this book is correct, neither the author nor Informa Law can accept any responsibility for any errors or omissions or for any consequences resulting therefrom Typeset by Interactive Sciences Ltd, Gloucester Printed in Great Britain by MPG Books, Bodmin, Cornwall www.ebook3000.com P R E FAC E When the first edition of this book was published in 1990, international trade seemed to be in a crisis, and there was a sense that things had to change New forms of trade, and associated documentation, were being forced on the trading parties and the banks, with which the law had not developed adequately to cope In particular, the contractual relationships with carriers, being based on law that had originated nearly 150 years earlier, were outdated and inadequate.1 Now we are almost 20 years on There has, of course, been much development of the law since then, and two further revisions of the UCP, the latest just last year From a legal viewpoint, probably the most important single change is that carriage contract issues have been largely resolved by the Carriage of Goods by Sea Act 1992 This has had a knock-on effect on the usefulness of newer forms of documentation, making it possible for waybills in particular to be used far more securely than before The problems are not the same now as they were in 1990 Today, it may be that the documentary credit itself is in crisis, as it seems to be declining in popularity, as against other forms of payment This may reflect no more than that it is best suited to a particular type of market, the type of market for which it originally developed, and has not adapted well to some of the different types of market that exist today Maybe it cannot adapt Maybe there is also a case for saying that different forms of finance suit different types of trade, and that there is little point in using documentary credits in trades for which they are not well suited It is now over nine years since the third edition of this book was published in 1998 Nine years is old for a law text, and I have taken the opportunity to revise the text fairly substantially The most important recent development of course is the new UCP (UCP 600) Though this is very much an evolution, rather than a revolution, its new approach to original documents is significant, as also is its encouragement of deferred payment credits other than by use of bills of exchange Of course it also reflects a modern view of credits, that they should be irrevocable, and that drafts should not be drawn on the applicant for the credit It is structured more logically than its predecessor, with less repetition and tighter drafting This is, however, a law book, and the principles discussed here are legal principles (mostly of the common law of England and Wales, for there is relatively little statutory intervention in bills of lading and bankers’ documentary credits, and European law has, as yet, had virtually no influence) Though the UCP is of great importance to documentary credits, I have not attempted to write a handbook for the UCP, still less a line-by-line analysis There are other publications which this Not every Article of This is discussed in chapter v www.ebook3000.com P R E FAC E the UCP is covered in the text (though the most important are, and in particular those which relate to documentation and to the main obligations of the parties) Nor I claim any particular expertise in banking or maritime trading practice, except to the extent that this is necessarily encompassed within a study of the law Apart from the new UCP, there have been important legal developments since 1998, including the treatment of the straight bill of lading as a document of title in The Rafaela S, further elaboration of the nature of documents of title, and developments to the fraud rule (discussed in chapter 9) There have also been disappointments Since 1998 we have had both Bolero and the eUCP, but neither has been a success Electronic documentation has not taken off, though there are signs that single-carrier based schemes are now beginning to develop Surely the role of electronic documentation in international trade will increase, but maybe not in documentary credits All publishers and authors know that successive editions of textbooks have a tendency to expand For this edition I tried to take a lesson from UCP 600, to tighten up the work, and ruthlessly to remove material that was not strictly necessary (the last edition had, on reflection, become rather bloated) For the reasons in the last paragraph, there is far less on electronic documentation than there was in the old book I have removed nearly all the long quotations from judgments, and placed the full text of the UCP as a whole, and some relevant statutory material, into appendices, rather than setting them out extenso in the text I have also restructured the entire book It is a book about documentary credits and the documentation, and I have tried not to stray too far from the main theme Nevertheless, despite the extensive pruning, I am disappointed to discover that this edition is actually longer than the old Perhaps it is simply the nature of law to expand On an issue of language, I have adopted what I perceive to be the usual practice of referring to sellers, buyers and carriers as ‘‘he’’ and banks as ‘‘it’’ Nothing should be read into this convention, any more than into the convention in French that a cat is male and a car is female It is not even a very logical convention, but that is a criticism that can be made of the English language in general But I see no point in bucking conventional usage, nor in resorting to the ugly and (because companies not come in two varieties) inappropriate ‘‘he or she’’ University of Plymouth, August 2007 PAU L TO D D vi www.ebook3000.com CONTENTS page v xv xxv Preface Table of Cases Table of Legislation INTRODUCTION TO BILLS OF LADING AND BANKERS’ DOCUMENTARY CREDITS Introduction Development of modern international sales of goods and protection of the parties Birth of the c.i.f contract Role of the bill of lading Contractual issues The c.i.f and other modern international sales contracts Re-sales and pledges Documentary credits Introduction The irrevocable documentary credit Cashflow considerations: credit offers mutual benefits to both parties Addition of confirming bank Multiple sales Contractual relationships and documentary credits The contracts Contracts autonomous but interconnected Nature of relationship with beneficiary Uniform Customs and Practice for Documentary Credits An introduction to the Uniform Customs and Practice (UCP) Application of UCP The UCP as contractual terms The UCP as a complete code? UCP 600 A multiplicity of objectives Changes in documentation Future of documentary credits 1 9 12 13 14 15 15 15 16 18 21 21 22 24 26 27 28 29 32 THE DOCUMENTARY CREDIT IN GENERAL TERMS Payment under documentary credits Bills of exchange Parties 33 33 34 vii www.ebook3000.com CONTENTS Negotiation with and without recourse Sight or time draft Deferred payment, acceptance and negotiation credits Types of credit Revocable and irrevocable credits Nature of issuing bank’s undertaking under irrevocable credit Nature of issuing bank’s undertaking under revocable credit Confirmed credits Nature of confirming bank’s undertaking Confirmation of deferred payment credits Unconfirmed credits The unconfirmed negotiation credit UCP 600 and advising of credits Advantages of confirmation Transfer of proceeds Transfer of credit Back-to-back credits Revolving credits Standby credits Varieties of guarantee and performance bond provided by seller Standby letter of credit provided by buyer The obligation to pay Application of the UCP Reimbursement issues Reimbursement by the issuing bank Reimbursement by buyer Proper law issues Express choice of law clause No express choice of law clause Application to documentary credits and performance bonds Relationship between the autonomous contracts; doctrine of infection Proper law of credit or performance bond independent of proper law of underlying transaction Conclusion 34 35 35 37 37 37 38 38 38 40 41 41 43 43 43 44 46 47 48 49 50 51 51 52 52 52 53 53 54 55 58 59 60 DOCUMENTS USED IN INTERNATIONAL TRADE Advantages and disadvantages of the traditional bill of lading Advantages Disadvantages of using shipped bill of lading Non-negotiable documentation Multimodal transport Negotiable document still required Bills of lading Negotiable and straight bills of lading Shipped and received for shipment bills Through bills of lading Sets of three originals Delivery orders Alternatives to the traditional shipped bill of lading Combined transport documents Waybills viii www.ebook3000.com 61 61 63 64 64 65 65 65 66 67 67 68 71 71 73 CONTENTS Hague-Visby Rules Mate’s receipts Electronic documentation 76 77 77 THE CONTRACT OF SALE General requirements of provision of credit Implied requirement for irrevocable credit Credit more than simply means of paying the price Opening of credit condition precedent of seller’s performance under sale contract Time of opening of credit Terms of credit Waiver and estoppel General principles Waiver and periodic actions Only unilateral benefits may be waived Consequences of failure to open credit, or failure to provide reliable and solvent paymaster Seller can claim loss of profit on transaction Position where there are a number of shipments Provision of reliable and solvent paymaster Mutual advantage of credit to both seller and buyer No short-circuiting of credit Conditional nature of payment: position if bank does not pay Buyer’s position if bank not reimbursed The consideration argument The trust receipt argument Documentary requirements under c.i.f and f.o.b sale contracts Shipped bill of lading required General considerations The traditional c.i.f position The traditional f.o.b position The present position c.i.f.? Negotiable bill of lading required Clean and claused bills of lading Other requirements One original of set required Charterparty bills Through bills of lading Delivery orders Commercial invoice Insurance requirements Extent of cover War risk insurance Insurance policy required, unless express stipulation to the contrary Additional shipping documents Time of tendering documents ix www.ebook3000.com 81 82 82 83 83 85 87 87 88 89 89 89 90 91 91 92 92 95 96 96 97 98 98 98 99 100 100 100 101 101 102 103 104 106 106 106 107 108 109 109 ... Table of Legislation INTRODUCTION TO BILLS OF LADING AND BANKERS DOCUMENTARY CREDITS Introduction Development of modern international sales of goods and protection of the parties Birth of the... Negotiable document still required Bills of lading Negotiable and straight bills of lading Shipped and received for shipment bills Through bills of lading Sets of three originals Delivery orders.. .BILLS OF LADING AND BANKERS D O C U M E N TA RY CREDITS F O U RT H E D I T I O N www.ebook3000.com ESSENTIAL MARITIME AND TRANSPORT LAW SERIES Bills of Lading: Law and Contracts