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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.

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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 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. But 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. Germania 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 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

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