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Minnesota. First State Bank v. Thuet (1903) 88 Minn. 364, 93 N. W. 1. Missouri. Brinkman v. Hunter (1883) 73 Mo. 172, 39 Am. Rep. 492. Nebraska. Burke v. Utah Nat. Bank (1896) 47 Neb. 247, 66 N. W. 295. New York.-Glover v. Tuck (1841) 1 Hill, 66; American Waterworks Co. v. Venner (1892) 63 Hun, 632, 45 N. Y. S. R. 441, 18 N. Y. Supp. 379; Lamborne v. Lake Shore Bkg. & T. Co. (1921) 196 App. Div. 504, 188 N. Y. Supp. 162, affirmed in (1921) 231 N. Y. 616, 132 N. E. 911; Williams Ice Cream Co. v. Chase Nat. Bank (1923) 120 Misc. 301, 199 N. Y. Supp. 314; Courteen Seed Co. v. Hong Kong & S. Bkg. Corp. (1926) 216 App. Div. 495, 215 N. Y. Supp. 525, affirmed in (1927) 245 N. Y. 377, A.L.R. —, 157 N. E. 272.

Ohio. Sherwin v. Brigham (1883) 39 Ohio St. 137.

Pennsylvania.-First Nat. Bank v. Fiske (1890) 133 Pa. 241, 7 L.R.A. 209, 19 Am. St. Rep. 635, 19 Atl. 554; Camp v. Corn Exch. Nat. Bank (1926) 285 Pa. 337, 132 Atl. 189.

Texas.-Craig v. Marx (1886) 65 Tex. 649.

Vermont.-Michigan State Bank v. Leavenworth (1856) 28 Vt. 209.

Washington.-National City Bank v. Seattle Nat. Bank (1922) 121 Wash. 476, 30 A.L.R. 347, 209 Pac. 705.

And see annotation in 30 A.L.R. 353 [Letter of Credit, § 1], as to variance between description of goods in letter of credit and documents accompanying the draft, as affecting duty to accept draft. As to filling order from diverted ship under contract calling for shipment to a certain point as affecting letter of credit, see annotation in 36 A.L.R. 518.

Where an agreement to accept accept drafts drawn in payment of goods pur

chased, if presented within a certain time, is revocable, the promisor may attach other or different conditions to payment. United States Steel Products Co. v. Irving Bank-Columbia Trust Co. (1925; C. C. A. 2d (9 F. (2d) 230.

A letter of credit for a certain amount is limited to the extent, at least, of the amount for which the person issuing the letter is liable, and where this amount has been exhausted he cannot be held liable for a greater sum. Ranger v. Sargent (1871) 36 Tex. 26.

It has been pointed out that the holders of these drafts have the right to expect that, when drafts conform in all essential requirements to the letter of credit, they will be paid by the drawee bank. Camp v. Corn Exch. Nat. Bank (1926) 285 Pa. 337, 132 Atl. 189. And where the conditions of the letter of credit are complied with, the holder is entitled to recover on drafts properly drawn thereunder if the bank issuing the letter fails or refuses to pay the draft. Lamborn v. National Park Bank (1924) 123 Misc. 211, 204 N. Y. Supp. 557, affirmed in (1925) 212 App. Div. 25, 208 N. Y. Supp. 428. And see same case (1925) 240 N. Y. 520, 148 N. E. 664. It is pointed out in Lindley v. First Nat. Bank (1889) 76 Iowa, 629, 2 L.R.A. 709, 14 Am. St. Rep. 254, 41 N. W. 381, that when the offer to accept or pay is in advance of the drawing of the bill, the undertaking is to be determined from the language of the offer. If the bill is drawn corresponding in terms with the offer, and is received by another in reliance on the offer, the drawee will be liable from that time as an acceptor. the bill drawn must correspond with the terms of the offer, or no such result will follow. The liability, if any, is created by the contract, and it is impossible that the drawee shall be bound by conditions or stipulations to which he never gave his consent. letter of credit may, on its face, be limited to a liability for an original purchase of goods, and not extend to subsequent purchases. Aldricks V. Higgins (1827) 16 Serg. & R. (Pa.) 212; Ten Eyck v. Vanderpoel (1811) 8



Johns. (N. Y.) 120. Or, it may be restricted as to time or limited as to amount. People's Sav. Bank & T. Co. v. Landstreet (1920) 80 Fla. 853, 87 So. 227. The conditions attached to the promise to honor a draft, as contained in a letter of credit, may be established by parol. Storer v. Logan (1812) 9 Mass. 55.


In order that a promise to accept a draft shall be conditional, the condi. tion must be a substantive part of the promise, and be a precedent one, and so coupled with the promise as to show that the promisor did not intend to bind himself except on the promisee's compliance with the condition. mania Nat. Bank v. Taaks (1886) 101 N. Y. 442, 5 N. E. 76; Bank of Montreal v. Recknagel (1888) 109 N. Y. 482, 17 N. E. 217. Every lawful condition will control if it can be deemed to have been inserted for any definite or perceptible purpose. In determining this question the court will look to the surrounding circumstances, the situation and relation of the parties, and the subject-matter of their negotiations. Bank of Montreal v. Recknagel (N. Y.) supra, holding that an agreement to accept drafts accompanied by a bill of lading showing it to have been issued for transportation of certain articles did not bind the promisor to pay drafts not accompanied by such a bill of lading.

It has been held that the fact that an agreement to pay a draft contains a statement that the promisor will pay such a draft for some particular purpose does not impose upon the purchaser of the draft the duty of showing that the proceeds were used for the purpose indicated, in order to hold the drawee. State Bank v. Bradstreet (1911) 89 Neb. 186, 38 L.R.A. (N.S.) 747, 130 N. W. 1038. See also to the same effect, Coffman v. Campbell (1877) 87 Ill. 98. So, where a recital in a letter of credit preceding a clause conferring the authority to make drafts on the writer merely set forth the cause or motive for conferring it, but contained no condition or restriction upon its exercise, the holder of a draft drawn and accepted in reliance upon the letter of credit is entitled to

recover for breach of the agreement to accept, although the proceeds of the draft were diverted, it not appearing that the plaintiff was cognizant of, or party to, the fraud thus practised. Bissell v. Lewis (1857) 4 Mich. 450. An agreement to accept drafts for produce bought and paid for by a designated person does not cover a draft where no goods were purchased. Chartered Bank v. Macfayden (1895) 64 L. J. Q. B. N. S. (Eng.) 367. So, where a letter of credit refers to drafts to be drawn for shipments of goods to be made, it will not cover a draft for goods which had been shipped prior to the issuance of the letter of credit, although not then received. Foerderer v. Moors (1898) 33 C. C. A. 641, 62 U. S. App. 538, 91 Fed. 476.

Substantial compliance with the conditions outlined in the letter of credit are sufficient. Lathrop v. Harlow (1856) 23 Mo. 209, holding that a letter conditioned upon the purchase of fifty bales of cotton is enforceable, although only forty-nine bales were actually purchased. Greele v. Parker (1830) 5 Wend. (N. Y.) 414, holding that a letter of credit for $2,500 to secure bills of exchange drawn for three and four months may be enforced as to a single bill of the same amount drawn at four months. And see, for application of this rule, Seaboard Nat. Bank v. Burleigh (1893) 74 Hun, 400, 26 N. Y. Supp. 587, affirmed in (1895) 147 N. Y. 720, 42 N. E. 726.

In Farmers' & M. Nat. Bank v. Illinois Nat. Bank (1908) 146 Ill. App. 136, the acceptor of a draft by the seller upon the promisor, who had agreed to pay the draft at the instance of the buyer, was held liable to the drawer for the amount of the draft actually drawn, although, at the time of the promise, the amount was not determined, except that it was to be for a car of a certain product, at a certain amount per crate.

b. As to time.

See annotation in 45 A.L.R. 1393 [Letter of Credit, § 1], as to the construction of provision for extension of

letter of credit or guaranty for purchase price of goods.

Ordinarily, drafts payable after the time fixed in the letter of credit are not within the terms of the latter. Boyd v. Townsend (1843) 4 Hill (N. Y.) 183. That the date fixed for the expiration of a letter of credit is a condition that must be complied with, in order to fix liability under the letter of credit, is also the holding in G. Jaris Co. v. Banque D'Athenes (1923) 246 Mass. 546, 141 N. E. 576, where an extension of a letter of credit provided the "validity was extended to February 1st, 1919." This provision was held to require the presentation of drafts by that date, although it was assumed by the court that, in the ordinary course of events, it would be impossible to comply with the provision. The court said: The "construction of the letter and its amendments is not affected by the geographical situation of Newfoundland, nor by the fact that only one steamship cleared St. Johns during January or February, 1919, for any port in Greece. The written instrument is unmistakable in its meaning." The time for the presentation of drafts was also held to be a condition essential to be complied with in order to fix the liability of the bank issuing the letter in Barde Steel Products Corp. v. Franklin Nat. Bank (1922; C. C. A. 3d) 281 Fed. 814.

However, where the letter of credit is ambiguous as to the date of expiration, it will be construed in this regard with reference to existing conditions, and such a construction will be adopted as will result in giving force and effect to the letter. Thus, where the letter provides for shipment of goods up to a certain time from a distant port, it will be construed as relating to the time of expiration so that it will be available to the seller who ships goods within the time specified. Lamborn v. National Park Bank (1925) 212 App. Div. 25, 208 N. Y. Supp. 428, affirmed in (1925) 240 N. Y. 520, 148 N. E. 664.

A draft purchased in reliance upon a letter of credit, limited as to the time for the presentation of any draft issued thereunder, is enforceable

against the person issuing the letter, where the draft was presented substantially within the time fixed in the letter. Boyd v. Townsend (N. Y.) supra. Thus, where in the usual course of mail transportation a letter containing a draft drawn on the faith of a letter of credit would have arrived at its destination so that the draft would have been presented within the time fixed in the letter, the fact that it was one day late, where due to delay in transmission through the mails, is not a ground for refusing to pay the draft, since the delay is excusable within the Negotiable Instruments Law. SECOND NAT. BANK v. M. SAMUEL & SONS (reported herewith) ante, 49.

The payment by the bank issuing a letter of credit, of drafts drawn thereunder and presented after the expiration of the time fixed in the letter, does not obligate the bank to pay other drafts presented after such date. Barde Steel Products Corp. v. Franklin Nat. Bank (Fed.) supra.

A mere delay in presenting a draft drawn and accepted on the faith of a letter of credit does not entitle the person contracting by the letter of credit to accept the same, to divert to other purposes money held by him to meet such draft. Lowery v. Steward (1858) 3 Bosw. (N. Y.) 505, affirmed in (1862) 25 N. Y. 239, 82 Am. Dec. 346; Starr v. Murchison (1878) 1 N. Y. City Ct. Rep. 413.

In Johnson v. Clark (1868) 39 N. Y. 216, where a person who had issued a letter of credit in the form of an agreement to accept a draft of a designated person for a certain amount refused to honor it on the ground that the draft was not drawn according to the authority of the letter, and subsequently the purchaser of the draft procured a new one, drawn according to the terms of the letter, and delivered up the first draft to be canceled, it was held that the person issuing the letter of credit and agreeing to accept the draft could not refuse acceptance on the ground of delay in presenting the second draft.

Authority to draw on the promisor at ninety days does not authorize a draft on him payable ninety days

after date, since in such case the promisor might not know of the existence of the draft until the day it was due, while, if the draft was drawn ninety days after sight, he would have ninety days in which to pay it after it had been presented to him. Ulster County Bank v. McFarlan (1843) 5 Hill (N. Y.) 432, affirmed in (1846) 3 Denio, 553.

Authority to draw for sixty days does not authorize the drawing of drafts under a letter of credit for ninety days. Birckhead v. Brown (1843) 5 Hill (N. Y.) 634. The court said: "We have no means of entering into their minds [of the parties] or discovering the motives which influence them in fixing on a precise period of sixty days. It is one of those questions which judicial tribunals cannot investigate. We could do no more than to venture a guess on the subject, and a surety is not bound to take the hazard of our guessing wrong. He has a right to say, "That is not my contract,' and so long as he can give this answer truly, he cannot be charged with the debt of his principal." Affirmed in (1845) 2 Denio, 375.

c. As to presenting shipping documents,


The purpose of a letter of credit is to assure one party to a contract prompt payment of the obligations assumed by the other; as a protection for the party arranging for the letter, it is usual, especially where the letter is issued as an assurance to the seller of goods, to provide therein that bills of lading, and perhaps other shipping documents, shall accompany any draft or drafts drawn under the letter. It is settled law that a provision of this character imposes a condition of liability under the letter. See cases cited III. a.

There is no legal objection to the letter of credit requiring the shipping documents to declare on their face compliance with the commercial or manufacturing details of the underlying agreement between the recipient of the credit letter and the buyer of the goods. The conditions imposed may be onerous, but, whether light or

heavy, they must be complied with. International Bkg. Corp. v. Irving Nat. Bank (1922; C. C. A. 2d) 283 Fed. 103.

Where a letter of credit contains a provision that drafts drawn on the faith thereof shall be accompanied by a straight bill of lading, no liability attaches under the letter for the payment of a draft accompanied by an order bill of lading. Lamborn v. Lake Shore Bkg. & T. Co. (1921) 196 App. Div. 504, 188 N. Y. Supp. 162, affirmed in (1921) 231 N. Y. 616, 132 N. E. 911. And the bank issuing a letter of credit containing a provision for such a bill of lading has no authority subsequently to agree with a holder of the draft that it may be accompanied by an order bill of lading. Williams Ice Cream Co. v. Chase Nat. Bank (1923) 120 Misc. 301, 199 N. Y. Supp. 314.

In Murdock v. Mills (1846) 11 Met. (Mass.) 5, where the letter of credit was issued upon the condition that the draft should be accompanied by a bill of lading of the property consigned to the promisor, it was held that the promisor was not liable for payment of drafts drawn upon him without complying with this condition.


It is pointed out in First Nat. Bank v. Bensley (1880; C. C.) 2 Fed. 609, supra: "The agreement of the defendant, as expressed in their telegram to the bank, was not simply an agreement to pay Buckingham & Brother's draft. It was an agreement on their part to pay J. Buckingham & Brother's draft with bill of lading attached, and, therefore, their promise was conditional. Its nature in this regard was communicated to the bank. parties were advised that compliance with the terms named by the defendants was essential if the drawers and the bank would have the draft honored on presentation; and it is the fair meaning of the language used in the despatch that bills of lading should accompany the draft upon its presentation for payment. It was necessary, in order to hold the defendants upon their special promise, that the drafts should be drawn as they directedthat is, in the name of J. Buckingham & Brother-and that proper bills of

was customarily delivered to the bank and paid prior to 3 o'clock in the afternoon of the same day; but on this occasion it happened that the draft was not delivered to the bank until the morning of February 2, 1923, which was the day after the letter of credit expired. It is alleged that on receipt of the draft on February 2d the Irving National Bank at once communicated with defendant and requested its authority to pay the amount thereof to the plaintiff, but that defendant declined to consent thereto, and it was returned unpaid to the plaintiff, and is now held by it.

The plaintiff thereupon commenced this suit, alleging that it had no adequate remedy at law, and that a court of equity should compel the defendant either to deliver up and surrender to it the merchandise covered by the invoice accompanying the draft at the time the draft was presented to the Irving National Bank for payment, and which was of the value of $8,038.73, which merchandise defendant would not have obtained, except for the purchase of the draft by the plaintiff, or in the alternative the defendant should be required to account to the plaintiff for the proceeds of the sale in the sum of $8,038.73, with interest thereon from January 31, 1923.

The defendant in its answer alleged that it paid the government of the United States for the merchandise purchased from it by the payment of $3,169.68 cash and the delivery of the letter of credit in the amount of $28,527.12. It further alleged that the purchase by plaintiff of the draft of $8,038.73 was solely for plaintiff's own use and accommodation in the course of its own business, and for its own profit, and not for the defendant's accommodation. It specifically denied that it refused to permit the Irving National Bank to pay the draft herein involved, and alleged that the said bank was at liberty to pay it, if it chose so to do, and it alleged that the plaintiff's remedy, if any, is against the Irving

National Bank, which issued the letter of credit.

The letter of credit was issued, not to the defendant, but to the commanding officer of the Toledo Ordnance Reserve Depot. It authorized him to draw at sight on the Irving National Bank for any sum or sums not exceeding the amount named therein, and the bank thereby expressly agreed "with the drawers, indorsers, and bona fide holders of the drafts, drawn under and in compliance with the terms of this credit, that the same" would be duly honored by it on presentation and surrender of the documents.

The plaintiff is a bona fide holder of a draft drawn by the commanding officer of the Toledo Ordnance Reserve Depot. He had the right to draw it, and the plaintiff purchased it from him, paying him the face amount thereof. It thereby acquired good title to the draft and was entitled to the payment thereof from the Irving National Bank on its presentation to it under the conditions specified in the letter of credit, as modified subsequently by extending the credit "until February 1st." The draft was not presented to the bank, however, until the morning of February 2d, although it was deposited in the mail on January 31st, and would have been delivered to the bank on the following day, before the close of banking hours on February 1st, and so within the time specified in the contract, had it not been for the unusual and unexpected delay in the transmission of the mail, and for which the plaintiff was in no way responsible.

The question which this state of facts raises is whether this unexpected and unforeseen delay in the transmission of the draft by mail, and which was not occasioned by the plaintiff's negligence, and for which it was in no way responsible, excuses the failure to make presentment of the draft on February 1st.

In Windham Bank v. Norton, 22 Conn. 213, 56 Am. Dec. 397, a case decided in 1852, a bill of exchange was drawn at Norwich, Connecticut,

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