David Scrimshaw's personal annotations on this page
Contracts in which performance is dependent upon the exercise of discretion on the part of one of the parties are contracts that are particularly characterized by the implied duty of good faith performance.
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letters of credit are an important mechanism for ensuring that international
commerce flows smoothly, effectively, and with some degree of assurance.
As one American authority has put it, albeit colourfully, letters of
credit are intended “to grease the wheels of trade and commerce”: Alaska
Textile Co., Inc. v. Chase Manhattan Bank, N.A., 982 F.2d 813 (2d Cir.
1992), at p. 824. Care is required, therefore, to ensure that they are not
interpreted and enforced in a way that might jeopardize their uniqueness and
commercial efficacy or the relative certainty that must surround their
use. Hence the doctrines of autonomy, strict compliance and strict
construction that will be discussed below -
At the same time, however, letters of credit are not completely divorced from
the general rules and principles of contract law, including those invoking
notions of fairness and equity -
also Sarna at p. 5-1.
[55]
The corollary of the issuer’s obligation to pay, however, is another
fundamental concept relating to letters of credit: the beneficiary’s obligation
of strict compliance with the terms and conditions of the credit. This
includes the responsibility of the beneficiary to inspect the terms of the
credit before accepting it in order to determine whether it meets the needs of
the underlying commercial transaction, and to request any changes if the terms
of the credit cannot be strictly adhered to -
the equitable doctrines of waiver and estoppel apply in letter of credit cases:
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Although Canadian law
has not yet recognized a stand-alone “duty of good faith” in the performance of
a contract that is independent from the terms of the contract, as the United
States has done, the jurisprudence establishes that there is an implied
contractual duty of good faith not to act in a way that defeats or eviscerates
the very purpose and objective of the agreement -
In such circumstances, the discretion must be exercised reasonably and in good
faith -
The issuer of a letter of credit has an obligation to give timely notice that
it is refusing to pay when it is asserting non-compliance -
Both custom and the provisions of the UCP 500 impose on the issuer of a letter
of credit a duty to give timely notice of dishonour. This duty is the flip
side of the strict compliance coin
This link has been bookmarked by 1 people . It was first bookmarked on 10 Nov 2009, by David Scrimshaw.
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David Scrimshaw
Contracts in which performance is dependent upon the exercise of discretion on the part of one of the parties are contracts that are particularly characterized by the implied duty of good faith performance.
-
letters of credit are an important mechanism for ensuring that international
commerce flows smoothly, effectively, and with some degree of assurance.
As one American authority has put it, albeit colourfully, letters of
credit are intended “to grease the wheels of trade and commerce”: Alaska
Textile Co., Inc. v. Chase Manhattan Bank, N.A., 982 F.2d 813 (2d Cir.
1992), at p. 824. Care is required, therefore, to ensure that they are not
interpreted and enforced in a way that might jeopardize their uniqueness and
commercial efficacy or the relative certainty that must surround their
use. Hence the doctrines of autonomy, strict compliance and strict
construction that will be discussed below -
At the same time, however, letters of credit are not completely divorced from
the general rules and principles of contract law, including those invoking
notions of fairness and equity - 6 more annotations...
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