Los Dibujos.

The rule of strict compliance has been applied, more than in any other situation, to the goods' description in the tendered documents/^ The reason was explained by Goddard, L.J., in the Rayner v. Hambros Bank^"^ in following terms: "It does not matter whether the terms imposed by the person who requires them to open the credit are reasonable, or seem to be reasonable, or unreasonable. Of course, they may be terms which, as between themselves and the beneficiary, they would not be entitled to impose. The bank is not concerned with that. The bank, if it accepts the mandate to open the credit, must do exactly what its customer requires it to do, and if the customer says: "I require a bill of lading for Coromandel groundnuts", the bank is not justified, in my judgment, in paying against a bill of lading for anything except Coromandel ground nuts, and it is no answer to say: "You know perfectly well machine shelled groundnut kernels are the same as Coromandel groundnuts". For all the bank knows, its customer may have a particular reason for wanting "Coromandel groundnuts" in the bill of lading. At any rate, that is the instruction which the customer has given to the bank, and if the bank wants to be reimbursed by the customer, it must show that it has performed its mandate [...] The question is: what was the promise which they made to the beneficiary under the credit, and has the beneficiary availed himself of that promise?"^^

A question of importance may arise as to whether the description of the goods must be identical in all documents presented by the beneficiary. In other

The following differences between description o f goods in the letter o f credit (A) and documents tendered (B) are as examples held by courts to be bad presentation. Those examples are as followes. 1. (A) Yellow Pine Flooring, (B) Yellow Pine Lumber [Brown v. Ambler. 66 M.D. 391 (18887)]; 2. (A) Alicante Bouchez Grapes, (B) Grapes [Laudisi v. Amer. Exchange Nat. Bank, 239 N.Y. 234 (1924)]; 3. (A) Standard White Granulated, (B) Granulated White Suger, Java Suger No. 24 [National C ity Bank v. Seattle Nat. Bank. 121 Wash. 476 (1922)]; 4. (A) Dried Grapes, (B) Raisins [Bank o f Ita ly y. Merchants Nat Bank. 236 N.Y. 106 (1923)]; 5. (A) 100% Acrylic Yarn, (B) Imported A ciylic Yarn [Courtaulds N. Amer. Inc. v. North Carolina Nat. Bank. 528 F. 2d 802 (1975, 4th Cir.)].

[1942] 2 A ll ER 694 (CA). Ibid., p. 703.

words if goods are described by different terms in the invoice and in the bill of lading, and if those descriptions together express what is required by the credit, does that make it a good tender?

2.1. In English law

For many years the view adopted by the courts was that the description of the goods should be in every individual document similar to what had been stipulated in the credit.^® But it has been accepted, at least, by English and American authorities in recent years that if documents are read together and if they give a perfect description of the goods they constitute a proper tender.

However, there are some conditions applying to the rule "reading documents together". Firstly, all documents should give a full description of the subject matter. Secondly, only those documents which are stipulated in the credit can be read together. As to this point a question may arise: what would be the role of tendered documents which are not stipulated in the credit transaction if there are distinction(s) between them and documents which are required under the credit contract? In other words, would description of goods in additional documents treated as a good ground for rejection of goods and stop payment under LCs? In Soproma S.p.A. v. Marine & Animal By-Products Corporation,^® it was decided negatively; it was pointed out, however, that the situation would be different concerning particular documents like an invoice which would offer the applicant for a credit a well-justified reason for doubting the reliability of the other documents.The third

Bank of M ontreal v. RecknageL 109 N.Y. 482, 17 N.E. 217 (1888); London & Foreign Trading Corporation v. British and North European Bank (1921) 9 Ll.L.R. 116; Ellinger, supra (f.n. 11), pp. 307-308.

Landisi v. American Exchange National Bank. 239 N.Y. 234, 146 N.E. 347 (1924), p. 349.

18 19

[1966] 1 Lloyd's Rep. 367.

Ibid., at pp. 389-90 where it is said: "The sellers' invoice described the goods as "CHILEAN FISH FULL M E A L,70% protein". The invoice from the shippers. Empresa Pesquera Eperva. which in error was included among the shipping documents, described the goods as "CHILEAN FISMEAL minimum 67% protein". The certificate o f quality issued bv Empresa Pesquera Eperva stated that "the analysis or composition o f goods is in accordance with the following analysis: Protein 67 per cent, minimum". The analysis certificate signed by German Fernandino Salamanca stated that the analysis gave the following results: "Protein 69.7 per cent.".

limitation is that the descriptions of goods in different documents must not be inconsistent with each other. For instance, in Bank Meili Iran v. Barclays Bank,^® the goods were described in the invoice as "in a new condition"; whereas a certificate described them as "new". It was held that those description were not similar with each other since there is a difference between "new" and "in a new condition".Which one of approaches above is in harmony with the practice and is more preferable? To deal with this point the UCP 500 is considered first.

2.2. UCP 500

In the UCP 500, Article 37(c) adopts a solution similar to the above second attitude (reading documents together). It provides: "The description of the goods in the commercial invoice must correspond with the description in the Credit. In all other documents, the goods may be described in general terms not inconsistent with the description of the goods in the Credit." As to the meaning of "correspond" two views may be expressed: (1) it means identical; therefore, a difference would be emerged between the UCP and the rule "reading documents together" applying to the invoice, since in the latter there is the possibility that the description of goods is different from the terms of the credit. (2) the term "correspond" does not mean The Bord o f Appeal made no finding as to the effect o f any o f these inconsistencies since they took the view that the only documents which need to be tendered were the invoice and the bills o f lading. So far as the tender o f the documents under the letter o f credit is concerned, this view was, in my judgment, eironeous. Quite apart from the shippers’ invoice, which probably in law is irrelevant, though it may well have afford the buyers with a well-justified reason for doubting the true protein content o f the goods shipped, it is in my judgment plain that the two documents relied upon by the buyers in their rejection, namely, the shippers' certificate o f quality, and the certificate o f analysis, did not constitute valid shipping documents under the letter o f credit as was in fact acknowledged by the sellers, when [...] they instructed the Italian bank to withdraw these documents and substituting in their place [...] In my judgment, the documents so tendered were not a good tender against the letter o f credit." [Emphasis added]; Ellinger, supra (f.n. II) , at p. 309 said: "Thus, when a credit stipulates for payment against a b ill o f lading and an invoice, only these can be read together. The fact that the tender includes an additional documents, which gives a perfect description o f the goods, is immaterial. However, if an additional document, which contradicts a statement in one o f the stipulated documents, is tendered, this may constitute a “ red flag” , and the person to whom the documents are tendered may be entitled to doubt the trustfulness o f the other documents."

[1951] 2 Ll.I.R. 367, p. 375.

Similar attitute was expressed in Laudisi v. American Exchange National Bank. 239 N.Y. 234, 146 N.E. 347 (1924); Ellinger, supra (f.n. 11), p. 309.

identical and as a result no differences exists between the UCP and the rule "reading documents together".

In a question relevant to the point under consideration the ICC Banking Commission gave its comment as following: "That "correspond" was not synonymous with "identical", but meant that the description in the commercial invoice must not be contradictory with the description in the credit; [...] it was important to base one's interpretation closely on the wording of the relevant Article of the Uniform Customs and Practice; Article 32(c)^^ stated that the descriptions had to correspond, but did not require identical wording."^®

It seems the first above view ("correspond" means "identical") is much preferable because the description in the invoice is made by the beneficiary of the credit himself, so it is more likely to be accurate. Moreover, his view will be preferred against other descriptions in other documents made by others. In addition, if the opposite view is accepted then there is no reason to differentiate the description of goods in a commercial invoice with the description of the same goods in other documents; then, Article 37(c) would become meaningless. In contrast, by accepting the above first view a difference would emerge between the UCP and the rule "reading documents together" regarding the description of goods in the commercial invoice; but, it seems the UCP's approach (based on the first above view, namely, "correspond" means "identical") for reasons pointed out previously is preferable.

As to the above point, namely, for what reason(s) the rule "reading documents together" would be more sensible than the view expressed in the Rayner v. Hambros Bank (above), one may rightly argue that the former is more in harmony with practice accepted by the banking business. Moreover, if the description of goods in a credit transaction includes details, more than what is required in the credit, such a description should not be interpreted in a manner that

Article 32(c) (UCP 1974) was equivalent to Article 37(c) in the UCP 500.

ICC, "Decisions H 975-1979) o f the ICC Banking Commission" on queries relating to Uniform Customs and Practice for Documentary C redits". ICC Publication No. 371 [hereinafter referred to as ICC Pub. No. 371], at pp. 35-36 (ICC Document 470/371, 470/373). [Emphasis added]

justify the applicant's action or his call to put an end to the letter of credit contract. Further, if different descriptions of goods in different documents presented under LCs are not contradictory but, in contrast, complete each other, such a difference should not be accepted as a good reason for rejecting documents by banks or the applicant for a credit.

2.3. Article 5 of the UCC

Sections 5-109(2) and 5-114(1) of the UCC emphasise the point that the tendered documents must comply with terms of the credit on their face.^'^ A similar attitude has been followed in a draft suggested for revision of Article 5 of the UCC.®®

In comment No.1 to that section it was emphasised that strict compliance does not mean "oppressive perfectionism" and the task of interpreting the principle of strict compliance lies with court.®®

Section 5-109(2) provides: "An issuer must examine documents with care so to ascertain that on their face they appear to comply w ith the terms of the credit and Section 5-114(1) : "An issuer must honour a draft or demand for payment which complies w ith the terms o f the relevant credit [...]." [Emphasis added; for full text o f those sections see appendix 1.]

In Section 5 -108(a) o f PFD, supra (f.n. 8), suggested: "[A ]n issuer shall honour a presentation [...] appears on its face strictly to comply with the terms and conditions o f the letter o f credit." [See appendix 2 for full text o f Section 5-108(a)]

Because o f the importance o f the issue the relevant part o f the comment quoted below: "This section combines some o f the duties previously included in Sections 5-114 and 5-109. [...] The standard o f strict compliance governs the issuer's obligation to the beneficiary and to the applicant. By requiring that a "presentation" appear strictly to comply, the section requires not only that the documents themselves appear on their face strictly to comply, but also that the other terms o f the letter o f credit such as those dealing with the time and place o f the presentation are strictly complied with. [...] Strict compliance does not mean slavish conformity to the terms o f the letter o f credit. By adopting standard practice as way o f measuring strict compliance, this article indorses the conclusion of the court in New Braunfels Nat. Bank v. O diorne. 780 S.W.2d 313 (Tex.Ct.App. 1989) (beneficiary could collect when draft requested payment on “ Letter o f Credit No. 86-122-5” and letter o f credit specified “ Letter o f Credit No. 86-122-8” holding strict compliance does not demand oppresive perfectionism). [...] The section rejects the standard that commentators have called "substantial compliance", the standard arguably applied in Banco Espaiioi de Crédite v. State Street Bank and Trust Company. 385 F.2d 230 (1st Cir. 1967) and Flagship Cruises Ltd. v. New England Merchants Nat. Bank. 569 F.2d 699 (1st Cir. 1978). Identifying and determining compliance with standard practice are matters o f interpretation for the court, not for the jury." [Emphasis added; see PFD, supra (f.n. 8), pp. 22-23]

As to the point under consideration, namely, description of goods in documents presented under the credit, particularly in a commercial invoice, nothing is precisely provided in the UCC.

2.4. Concluding remarks

The issue of description of goods and its connection to the principle of strict compliance has received similar treatment under both English law and the UCP 500, namely, goods may be described in terms not inconsistent with the description of goods in the credit transaction. There is a possibility, however, that a distinction would emerge between the UCP's approach under Article 37(c) and the rule of "reading documents together" accepted in English law concerning the description of goods in a commercial invoice if the term "correspond" is interpreted as "identical". If the term "correspond" is interpreted differently, then there would be a harmony between the UCP and the view accepted in English law; as a result there would be no need for having Article 37(c) if a commercial invoice is supposed to be treated in the same way as other types of documents tendered under the credit transaction as far as the description of goods is concerned. As a result of such a doubt it is suggested in under the present study that Article 37(c) should be clarified concerning the term "correspond" and replaced with the term "identical".

It becomes clear that differences still exist between the UCP and the UCC as well as the courts’ interpretation of the principle of strict compliance both in the UK and in the USA. As a result a uniform approach concerning the principle seems necessary more than ever.