Liability Advising bank wrong terms LC payment refused by issuing bank

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Frank S.
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Joined: 04/04/2011
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Hi LC experts,

I'm currently stuck on a problem and I would appreciate any advice or
thoughts on this issue. In a confirmed LC issued by the issuing bank against
documents (payment at sight) what would be the beneficiary’s position if we
tender all the required documents in accordance to the LC but we have our
quality certificate signed by one expert instead of two because the advising
bank advised us that one expert would be sufficient? The issuing bank now
refuses payment because of the non-conforming documents. The advising bank
forwarded the docs to the issuing bank so by doing so did they add their
confirmation? If so do they have to pay us?

Kind regards,

Frank S.

cabi
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Joined: 04/01/2011
Hi Frank, if the advising

Hi Frank,

if the advising bank added its confirmation to the L/C and you presented the documents to the advising bank in accordance with the terms of the credit as instructed by the advising bank itself, then the advising bank must pay you. The advising bank will have then to resolve its own problem with the issuing bank if the latter refuses to reimburse the advising bank.

You must make sure however that the advising bank added, in fact, its confirmation. It should be written in their notification when they sent you the L/C that they received from the issuing bank.

In that case, be tough as they are bound to pay you.

andrea 

Abrar
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Joined: 03/12/2009
Confirmation

My apolgies to the poster for my original answer. I had somehow overlooked the fact that the advising bank had confirmed the LC. This being the case, then of course the advising bank is obliged to pay you if the documents comply with the terms of the advised LC, even if incorrectly transmitted. But, I would question why (if the documents conform) you have not yet been paid by the advising bank. My previous post is still valid, but only in the circumstances of an unconfirmed LC.

Abrar
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Joined: 03/12/2009
liability of advising bank

The advising bank is acting as an "agent" of the issuing bank, and under its authority. Therefore, the issuing bank is bound to honour the presentation, despite any acts of omission or negligence on the part of the advising bank. The beneficiary is entitled to rely on the implied representation made by the advising bank that its advice of the LC, accurately reflects the terms of the LC as issued by the issuing bank ( sub-article 9b of UCP600), and therefore is entitled to perform under the LC with the direct conditional promise of payment of the issuing bank.

As to the advising bank's negligence, this is a matter between the issuing bank and the advising bank to resolve, mostly outside the UCP and LC process, but one would assume that there would be a case to answer on the part of the advising bank

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