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to be drawn, the authority to draw must point to the specific bill or bills to which it is to be applied, so that it is identified and distinguished from all others. Where, however, the authority merely amounts to a promise. to accept a draft upon presentation at its maturity, such an authority inures to the benefit of any bona fide holder of a bill or draft who takes it on the faith of the promise. The import and meaning of the promise is that it is not made exclusively to the drawer of the bill, but to any person into whose hands the bill may come, bona fide, for value; that the same shall be accepted and paid according to its tenor and effect; hence, such person may maintain an action for the breach of the promise.

The foregoing cases are referred to as illustrative merely of the rule as to acceptance, and are not thought to be exhaustive of the subject. It is not intended to take up this particular question, since in a way it is immaterial to the specific question under consideration whether a letter of credit is regarded as an acceptance of a draft or bill of exchange purchased in reliance thereon, or a contract to accept. Upon the latter point, it may be said that the cases of this country generally hold that for breach of an agreement to accept a nonexisting bill of exchange or draft, an action will lie by the holder of the bill accepted in reliance upon such agreement, where the bill or draft is issued in accordance with the terms of the agreement.

United States. Exchange Bank v. Hubbard (1892; C. C.) 58 Fed. 530; Russell v. Wiggin (1842) 2 Story, 213, Fed. Cas. No. 12,165.

Alabama.

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Kennedy v. Geddes (1842) 3 Ala. 581, 37 Am. Dec. 714. Colorado. McPhee V. Fowler

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(1906) 36 Colo. 202, 85 Pac. 421.

Georgia. Parrish v. TaggartDelph Lumber Co. (1912) 11 Ga. App. 772, 76 S. E. 153.

Illinois. Second Nat. Bank v. Diefendorf (1878) 90 Ill. 396; Farmers & M. Nat. Bank v. Illinois Nat. Bank (1908) 146 Ill. App. 136.

Iowa.-Lindley v. First Nat. Bank

(1889) 76 Iowa, 629, 2 L.R.A. 709, 14 Am. St. Rep. 254, 41 N. W. 381. Kentucky.-Vance v. Ward (1834) 2 Dana, 95.

Maryland.-Franklin Bank v. Lynch (1879) 52 Md. 270, 36 Am. Rep. 375. Massachusetts. Nevada Bank v. Luce (1885) 139 Mass. 488, 1 N. E. 926; Putnam Nat. Bank v. Snow (1899) 172 Mass. 569, 52 N. E. 1079. Michigan.-Bissell v. Lewis (1857) 4 Mich. 450. Minnesota.

Woodard v. GriffithsMarshall Grain Commission Co. (1890) 43 Minn. 260, 45 N. W. 433; Oil Well Supply Co. v. MacMurphey (1912) 119 Minn. 501, 138 N. W. 784. Mississippi. Pollock v. Helm (1876) 54 Miss. 1, 28 Am. Rep. 342. Missouri.-Bank of Seneca v. First Nat. Bank (1904) 105 Mo. App. 722, 78 S. W. 1092; Bank of Laddonia v. Bright-Coy Commission Co. (1904) 139 Mo. App. 110, 120 S. W. 648.

New York.-Union Bank v. Coster (1850) 3 N. Y. 203, 53 Am. Dec. 289; Evansville Nat. Bank v. Kauffmann (1883) 93 N. Y. 273, 45 Am. Rep. 204; Muller v. Kling (1913) 209 N. Y. 239, 103 N. E. 138; Merchants' Exch. Nat. Bank v. Cardozo (1872) 3 Jones & S. 162; Monroe v. Pilkington (1857) 14 How. Pr. 250.

North Carolina.-Nimocks v. Woody (1887) 97 N. C. 1, 2 Am. St. Rep. 268, 2 S. E. 249.

Vermont.-Michigan State Bank v. Peck (1855) 28 Vt. 200, 65 Am. Dec. 234.

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Washington. Kelley v. Greenough (1894) 9 Wash. 659, 38 Pac. 158.

It is pointed out in Lonsdale v. Lafayette Bank (1849) 18 Ohio, 126: "As it respects the rights and the remedy of the immediate parties to the promise to accept, and all others who may take bills upon the credit of such promise, they are equally secure and equally attainable, by action for the breach of the promise to accept, as they could be by an action on the bill itself." Quoting from Boyce v. Edwards (1830) 4 Pet. (U. S.) 121, 7 L. ed. 803.

That there is a distinction between an actual acceptance and an agreement to accept seems to be recognized

in Murdock v. Mills (1846) 11 Met. (Mass.) 5, wherein the court said: "It is now a well-settled principle of American mercantile law respecting bills of exchange that when a party holds the written authority of another to draw bills on him, with a promise to accept them when so drawn, a third person purchasing such bills for a valuable consideration upon the faith of such written authority can maintain an action against the writer in his own name, upon the breach of such promise to accept."

It is not essential to the validity of a letter of credit in the hands of a bona fide holder for value that it shall show on its face that it was based upon a valuable consideration; at least, where the representations of the person issuing it would constitute an estoppel in this regard. Johannessen v. Munroe (1895) 84 Hun, 594, 32 N. Y. Supp. 863. Later appeal (1896) 9 App. Div. 409, 41 N. Y. Supp. 586, which is affirmed in (1899) 158 N. Y. 641, 53 N. E. 535 (no opinion).

b. Beneficiaries in letter of credit.

The letter of credit may contemplate a single transaction, or it may contemplate an open and continued credit embracing several transactions.

In the latter case, such letters are not generally confined to transactions with a single individual; but if the nature of the business which the letter of credit was intended to facilitate requires it, different individuals are authorized to make advances upon it, and it then becomes a several contract with each individual, to the amount advanced by him.

United States.-American Steel Co. v. Irving Nat. Bank (1920; C. C. A. 2d) 266 Fed. 41, later appeal (1921; C. C. A. 2d) 277 Fed. 1016 (no opinion), certiorari denied in (1922) 258 U. S. 617, 66 L. ed. 793, 42 Sup. Ct. Rep. 271; SECOND NAT. BANK V. M. SAMUEL & SONS (reported herewith) ante, 49.

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Missouri. Bank of Laddonia v. Bright-Coy Commission Co. (1909) 139 Mo. App. 110, 120 S. W. 648.

New York.-Evansville Nat. Bank v. Kaufmann (1883) 93 N. Y. 273, 45 Am. Rep. 204; Johannessen v. Munroe (1895) 84 Hun, 594, 32 N. Y. Supp. 863; same case later appeal in (1896) 9 App. Div. 409, 41 N. Y. Supp. 586 affirmed in (1899) 158 N. Y. 641, 53 N. E. 535; Cheever v. Schall (1895) 87 Hun, 33, 33 N. Y. Supp. 751; Scott v. Pilkington (1861) 15 Abb. Pr. 280.

Ohio.-Lonsdale v. Lafayette Bank (1849) 18 Ohio, 126.

Canada.-Montreal Bank v. Thomas (1888) 16 Ont. Rep. 503; Manning v. Wells (1854) 12 U. C. Q. B. 515.

And see list of cases cited supra. Where the purpose in issuing the letter of credit is to induce the delivery of goods to the drawer upon the credit of the drawee, the letter will not be construed by the rule strictissimi juris, but by the rule of construction which holds the party to the full extent of the fair import of his engagement. Krakauer v. Chapman (1897) 16 App. Div. 115, 45 N. Y. Supp. 127, affirmed in (1900) 162 N. Y. 623, 57 N. E. 1114.

The rule applicable to a general letter of credit has been held to be: "As soon as any person accepts the proposition tendered, and complies with the request of the letter, a contract is at once completed between himself and the letter writer. A direct priority arises at once between the acceptor and letter writer, and the contract becomes the same in effect as if the letter had been specially directed to the acceptor." Cheever v. Schall (1895) 87 Hun, 32, 33 N. Y. Supp. 751.

When a letter of credit is addressed to all persons indefinitely, it is in effect a request made to anyone who may accept and act upon the proposition contained in it, and, on his doing so, that

which was before indefinite and uncertain becomes definite and fixed; a contract immediately springs up between the person making the advance and the writer of the letter, and it is then in legal effect the same as though the name of the former had been inserted in the letter at the beginning. Watson v. McLaren (1838) 19 Wend. (N. Y.) 557, affirmed in (1841) 26 Wend. 425; Boyce v. Edwards (1830) 4 Pet. (U. S.) 111, 7 L. ed. 799; Adams v. Jones (1838) 12 Pet. (U. S.) 207, 9 L. ed. 1058; Lawrason v. Mason (1806) 3 Cranch (U.S.) 492, 2 L. ed. 509; Bradley v. Clary (1832) 8 Me. 234; Carnegie v. Morrison (1841) 2 Met. (Mass.) 381; Re Agra & Masterman's Bank (1867) L. R. 2 Ch. (Eng.) 391; Banco Nacional Ultramarino v. First Nat. Bank (1923; D. C.) 289 Fed. 169.

The fact that the purchaser of a draft is not mentioned in the letter, and it is not addressed to him, does not affect his rights. It is not essential to a contract that all the parties should be named in it, or that they should be known, or even be in existence when it is made. Russell v. Wiggin (1842) 2 Story, 213, Fed. Cas. No. 12,165. And see to the same effect, Bank of Laddonia v. Bright-Coy Commission Co. (1909) 139 Mo. App. 110, 120 S. W. 648; Scott v. Pilkington (1861) 15 Abb. Pr. (N. Y.) 280; Nisbett v. Galbraith (1848) 3 La. Ann. 690; Old Colony Trust Co. v. Continental Bank (1921; D. C.) 288 Fed. 979.

Where a letter of credit is general, and not addressed to any particular individual, and contemplates an open and continued credit embracing several transactions, it is not generally confined to transactions with a single individual; but if the nature of the business which the letter of credit is intended to facilitate requires it, different individuals are authorized to make advances upon it, and it then becomes a several contract with each individual to the amount advanced by him. Union Bank v. Coster (1849) 3 N. Y. 203, 53 Am. Dec. 280, supra; Bank of Seneca v. First Nat. Bank (1904) 105 Mo. App. 722, 78 S. W. 1092.

It is said in Union Bank v. Coster (1850) 3 N. Y. 203, 53 Am. Dec. 280: "Letters of credit are of two kinds, general and special. A special letter of credit is addressed to a particular individual by name, and is confined to him, and gives no other person a right to act upon it. A general letter, on the contrary, is addressed to any and every person, and, therefore, gives any person to whom it may be shown authority to advance upon its credit. A privity of contract springs up between him and the drawer of the letter, and it becomes in legal effect the same as if addressed to him by name."

It is held in Woodard v. GriffithsMarshall Grain Commission Co. (1890) 43 Minn. 260, 45 N. W. 433, that a written promise to accept a bill of exchange, made at a reasonable time before it is drawn, amounts to an acceptance of the bill in favor of any person to whom the promise is communicated, where such person takes the bill for a valuable consideration on the faith and credit of the promise.

It is held in Exchange Bank v. Hubbard (1892; C. C.) 58 Fed. 530, that, having authorized the drawer to secure money upon sight drafts to be used in purchasing goods, the defendant was liable precisely as though he had himself directed the plaintiff to cash drafts drawn upon him by the drawer.

Where a credit is advanced upon a check without knowledge of a letter of credit promising to pay such a check, the holder of the check is without remedy as against the issuer of the letter of credit. Bank of Seneca v. First Nat. Bank (1904) 105 Mo. App. 722, 78 S. W. 1092.

It seems that where the writer of a letter of credit issues it upon the faith of some fund or credit received as security, the purchaser of a draft, who purchases it in part upon the security of such fund or credit, is entitled to have the amount of the draft paid out of this fund or the proceeds of the credit, where the drawee refuses to pay it. Thus, in Muller v. Kling (1913) 209 N. Y. 239, 103 N. E. 138, the drawer of a draft for the purchase price of property made an assignment

for the benefit of creditors after issuing the draft, which had been delivered to the seller, the draft having been drawn upon parties who had issued a letter of credit in favor of the drawer, which was expressly based upon the security of a draft hereinafter mentioned. Before the presentation of the draft for payment, the drawee was informed of the assignment for creditors of the drawer, and upon this ground refused to pay the draft. The drawee had issued the letter of credit on the faith of a draft by the person securing the letter upon a debtor, and it was held that the circumstances were such as to raise an equity in favor of the purchaser of the draft as to the proceeds of the other draft, which had been turned over to the drawee of the draft given to the seller. The court said: "The equities of the plaintiffs [the sellers] are the greater because, in giving the value of the draft to the drawers, they enabled them to realize immediately on Invernizio's debt to them. Whether the result of this transaction was to effect an equitable assignment of a fund, it may not be necessary to decide. Any act which makes an appropriation of a fund amounts to an equitable assignment of it. Story, Eq. Jur. § 1047. In my opinion the circumstances do justify us in giving such a construction in the present case. If, from what took place, the inference is to be drawn that the parties intended that the plaintiffs should be entitled to the security of the draft on Invernizio, I thing a court of equity might give effect to the intent by holding that there was an equitable assignment of the debt it was drawn against. Such a construction, to use the language of Finch, J., in Tallman v. Hoey (1882) 89 N. Y. 539, when speaking upon the subject of equitable assignments, 'proceeds upon a necessity demanded by the justice of the case, and to obviate an injury or a wrong which would otherwise occur. Where the holder (of a bill) has parted with nothing, and so loses nothing by the application of ordinary legal rules, no pressure of justice requires the intervention and the help of an equitable doc

trine.' Whatever may be the doubt as to the application of this equitable rule, I think there should be no doubt that the plaintiffs' case is safely within the equitable doctrine that, where the just and clear rights of a party to payment of a debt from a particular fund can be secured in no other way, the fund or its proceeds will be regarded as a trust for his better security."

Under a special letter of credit the liberty of accepting its terms is confined to the persons to whom it is addressed, and no cause of action can arise thereon except by complying with its conditions. Such a letter contemplates a trust in the person of the promisee, and from its very nature it is not assignable until a right of action has arisen thereon. Evansville Nat. Bank v. Kauffmann (1883) 93 N. Y. 273, 45 Am. Rep. 204. It has been held that a letter of credit or guaranty directed to a specific individual is not negotiable, nor can any person but the one to whom it is addressed maintain an action upon it. Birckhead v. Brown (1843) 5 Hill (N. Y.) 634, affirmed in (1845) 2 Denio, 375, later appeal in (1851) 5 Sandf. 134; Second Nat. Bank v. Diefendorf (1878) 90 Ill. 396; Pollock v. Helm (1876) 54 Miss. 1; Lyon v. Van Raden (1901) 126 Mich. 259, 85 N. W. 727; Fletcher Guano Co. v. Burnside (1914) 142 Ga. 803, 83 S. E. 935. But there is authority for the rule that where a letter of credit is addressed to a specified person, authorizing him to draw on the defendant, and such party does draw, and another buys the bill, the latter may sue in his own name upon breach of the contract represented by the letter of credit. Barney v. Newcomb (1851) 9 Cush. (Mass.) 46; Murdock v. Mills (1846) 11 Met. (Mass.) 6.

Where a letter of credit is addressed to a particular individual, he alone has the right to act upon and acquire rights under it. If anyone else attempts to accept or act upon the proposition contained in the letter, he comes in as a mere volunteer, and he cannot, by thus thrusting himself forward, create any legal obligation upon

the part of the writer of the letter. Robbins v. Bingham (1809) 4 Johns. (N. Y.) 476; Walsh v. Bailie (1813) 10 Johns. (N. Y.) 180. Where authority to draw on a party is limited to a person with whom such party has a contract, whoever relies upon this authority must rely upon it only in the sense which it bears as between the parties themselves. The promisor cannot be held to any greater responsibility than that which he has assumed to the promisee. The third person, in order to recover, must show that the draft was drawn in pursuance of the authority given by the promisor to the promisee. Nevada Bank v. Luce (1885) 139 Mass. 488, 1 N. E. 926.

The fact that the drawee accepted drafts drawn by different individuals is entitled to weight in construing a letter of credit to determine whether it was intended thereby to limit the liability of the promisor to a certain individual, or to any individual who might purchase a draft in reliance thereon. Union Bank v. Coster (1850) 3 N. Y. 203, 53 Am. Dec. 280.

III. Compliance with terms of letter as condition of liability of writer.

a. In general.

The parties to the contract have a right to stipulate the conditions under which drafts drawn under letters of credit may be honored. Persons dealing in commerce should know that these conditions must be complied with, and what might not appear to be material variation may have been deemed very important by the parties, and hence purposely incorporated in the letter of credit or contract. Such conditions must be given effect, and parties disregarding them by payment do so at their peril. Pan-American Bank & T. Co. v. National City Bank (1925; C. C. A. 2d) 6 F. (2d) 762, writ of certiorari denied in (1925) 269 U. S. 554, 70 L. ed. 408, 46 Sup. Ct. Rep. 18; Laudisi v. American Exch. Nat. Bank (1924) 239 N. Y. 234, 146 N. E. 347. "If the terms of the letter of credit are not complied with, the letter of credit does not enter into the transaction. It provides no security 53 A.L.R.-5.

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It is the general rule that a person issuing a letter of credit in which are incorporated certain conditions upon which liability thereon shall accrue is liable only where such conditions have been complied with.

United States. Lanusse v. Barker (1818) 3 Wheat. 101, 4 L. ed. 343; Dickins v. Beal (1836) 10 Pet. 572, 9 L. ed. 538; First Nat. Bank v. Bensley (1880; C. C.) 2 Fed. 609; United States Steel Products Co. v. Irving Bank-Columbia Trust Co. (1925; C. C. A. 2d) 9 F. (2d) 230; State Nat. Bank v. Young (1883; C. C.) 14 Fed. 889; Barde Steel Products Corp. v. Franklin Nat. Bank (1922; C. C. A. 3d) 281 Fed. 814; International Bkg. Corp. v. Irving Nat. Bank (1922; C. C. A. 2d) 283 Fed. 103; Arctic Ice & Coal Co. v. Southgate (1923; C. C. A. 4th) 287 Fed. 48; Banco Nacional Ultramarino v. First Nat. Bank (1923; D. C.) 289 Fed. 169; Bank of America v. Whitney-Central Nat. Bank (1923; C. C. A. 5th) 291 Fed. 929, petition for writ of certiorari dismissed in (1924) 264 U. S. 598, 68 L. ed. 869, 44 Sup. Ct. Rep. 331; Old Colony Trust Co. v. Lawyers' Title & T. Co. (1924; C. C. A. 2d) 297 Fed. 152, writ of certiorari denied in (1924) 265 U. S. 585, 68 L. ed. 1192, 44 Sup. Ct. Rep. 459; Second Nat. Bank v. Lash Corp. (1924; C. C. A. 3d) 299 Fed. 371; Lienow v. Pitcairn (1832) 2 Paine, 517, Fed. Cas. No. 8,341.

California. S. L. Jones & Co. v. Bond (1923) 191 Cal. 551, 217 Pac. 725.

Florida.-People's Sav. Bank & T. Co. v. Landstreet (1920) 80 Fla. 853, 87 So. 227.

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