LIST OF ABBREVIATIONS

UCP Uniform Customs and Practice

L/C Letter of Credit

STATEMENTS OF FACTS

Abels, a company established in the Netherlands, sells to Bartels, a company

established in Germany, a number of radios at a price of 150,000 Euros. The moment they
are delivered to Bartels it becomes clear that these radios suffer from an electronic defect.
Abels and Bartels negotiate that payment method will be L/C. Bartels now wants to stop
payment by asking the bank to revoke L/C or apply for an injunction granted by the court.

ISSUES

Whether the goods delivered’ quality is the reasonable ground for the bank to stop making
payment to the seller via the revocation of L/C or the injunction granted by the court?

LEGAL PLEADINGS

I. THE LETTER OF CREDIT IS IRREVOCALE UNDER UCP 600

1. Prior to UCP 600, the credit could be either revocable or irrevocable. A revocable
credit could be amended or canceled at any time and without notice to the
applicant. 
2. Under UCP 600, the credit includes only L/C “that is irrevocable and thereby
constitutes a definite undertaking of the issuing bank to honor a complying
presentation”1. This is reinforced by the interpretation given in Article 3: “A credit
is irrevocable even if there is no indication to that effect”. Article 10 then makes it
clear that: “A credit can neither be amended nor canceled without the agreement
of the issuing bank, the confirming bank, if any, and the beneficiary”. 
3. Accordingly, it is without question that, under UCP 600, the credit includes only
an irrevocable L/C which cannot be amended or canceled without notice to the
applicants. 

1
UCP 600, Article 2.
 4. Here, as the parties of the contract of sale, including Bartels and Abels, chose to
make the credit subject to the UCP 600, L/C opened by Bartels is identified as
irrevocable.

II. THE BANK MUST MAKE PAYMENT TO ABELS UNDER UCP 600

A. The conditions of the credit are met

5. According to Article 15, the issuing bank “must honor” when it “determines that
a presentation is complying”. This is consistent with the bank’s guarantee to make
payment to the seller when it meets the conditions of the credit. 
6. Nevertheless, if the bank “determines that a presentation does not comply, it may
refuse to honor”2. 
7. Accordingly, albeit the irrevocability of the credit under UCP 600, a credit could
be revoked if the documents sent by the seller to the bank are discovered as not
conform to the requirements of the credit. 
8. Under the DNP International Co. v. Banco Santander, Banco Santander’s decision
to revoke the L/C was justified. The court stated that under the UCP 600, a bank
has the right to revoke L/C if a beneficiary fail to comply with the documentary
requirements. 
9. Here, there was no tangible proof that Abels failed to fulfill the requirements of the
credit. 
10.  As Abels did not fail to present the complying documents, the bank is bound to
make payment to Abels.

B. The bank cannot refuse to make payment to Abels by reason of defect

11.  L/C is an independent contract of the contract between the seller and the buyer and
the contract between the buyer and the issuing bank as it is provided by Article 4
which states that: “A credit by its nature is a separate transaction from the sale or
other contract on which it may be based. Banks are in no way concerned with or
bound by such contract, even if any reference whatsoever to it is included in the
credit. Consequently, the undertaking of a bank to honor, to negotiate or to fulfill
2
Ibid.
 any other obligation under the credit is not subject to claims or defenses by the
applicant resulting from its relationships with the issuing bank or the beneficiary”.
12. The independence of L/C may be then described as the autonomy principle, which
allows the beneficiary to prompt payment albeit any dispute relating to the
underlying contract.
13. In addition, the bank deals only “with documents and not with goods, services or
performance to which the documents may relate”3.
14. It is not the duty of the bank to check whether the goods delivered are good up to
the contract of sale between the buyer and the seller or not. Thus, even if the goods
shipped are defective, it does not affect the bank’s duty to make payment to the
seller once the conditions of the credit are met.
15. Power Curber International Ltd. v National Bank of Kuwait stated that: “The
bank is no way concerned with any dispute that the buyer may have with the seller.
The buyer may say that the goods are not up to the contract. Nevertheless, the
bank must honor its obligations. The buyer may say that he has a cross-claim in a
large amount. Still the bank must honor its obligations”4. 
16. Here, after the radios were delivered to Bartels, it turned out that these radios
suffer from an electronic defect. 
17. Nevertheless, according to the doctrine of independence of L/C of the underlying
contract of sale, the bank cannot refuse to make payment to Abels by reason of
goods’ quality. 

III. THE COURT CANNOT APPLY AN INJUNCTION TO STOP THE BANK

FROM MAKING PAYMENT TO ABELS UNDER UCP 600

18. Under UCP 600, the issuing bank is obliged to honor unless the documents sent by
the seller do not satisfy the requirements of compliance of the credit5.

3
Ibid, Article 5.
4
Power Curber International Ltd. v. National Bank of Kuwait [1981]2 W.L.R. 1233.
5
UCP 600, Article 5.
 19. Documents are found not complying with the requirements of the credit if it
include “a material, false representation, an intent to defraud thereby, and
reasonable reliance on the representation, causing damage to the plaintiff”6. 
20. In the case of Hyosung America, Inc. v Sumagh Textile Co., Ltd 36 7, the
beneficiary admitted that it had known that the fiber content of the goods delivered
did not match the description of the goods given in the presented documents. The
beneficiary also knew that the payment would be made if the documents that
appeared on their face to comply with L/C terms were presented; thus making it
clear that the beneficiary had intention to defraud. Hence, the court decided to
apply an injunction prohibiting the bank from making payment to the beneficiary. 
21. In addition, UniCredito Italiano S.p.A. v. Alan Chung Wab Tang8 states that: “It is
clear that fraud must only be alleged when there is sufficient evidence and then it
must be alleged specifically with full particulars”. 
22. Moreover, when asking for the court’s injunction to stop the bank from making
payment to the beneficiary, the burden of proof lies within the plaintiff, that is to
support the plaintiff’s requirement with sufficient evidence to establish substantial
grounds to believe that the beneficiary fails to fulfill the requirements of the credit;
as it is provided in the case of UniCredito Italiano S.p.A. v. Alan Chung Wab Tang
which stated that: “Mere allegation of fraud will not be accepted by the court, so
the applicant must produce cogent evidence to support its charge”. 
23. By the same token, as Bartels asked the court to apply an injunction to stop the
bank from making payment to Abels, it is Bartels’s duty to submit sufficient
evidence to prove Abels’s failure to present complying documents. Yet, Bartels did
not provide any evidence to prove that Abels failed to fulfill the requirements of
the credit. 
24. As there was no conclusive evidence to prove Abels’s misconduct as well as its
intent to not comply with the documentary requirements or falsify the documents,

6
This approach is adopted in the case of Hyosung America, Inc. v. Sumagh Textile Co.; Turtur v. Rothschild Registry
Intern., Inc.; Katara v. D.E. Jones Commodities, Inc.
7
[1998] 25 F. Supp. 2d 376 (S.D.N.Y.) (USA).
8
[2002] 339 HKCU 1 (Hong Kong).
the court must refuse Bartels’s application, thus cannot apply an injunction to stop
the bank from making payment to Abels.