International Contracts and Letters of Credit

International Contracts and Letters of Credit

Parties.

§ Account: Buyer.

§ Issuer: Bank.

§ Beneficiary: Seller.

Issuer is bound to pay the beneficiary who has complied with the terms and conditions of the letter of credit, usually requiring a bill of lading to the issuer to prove shipment has been made.

Agreement of the Parties

Parties agree that some defective goods will be acceptable.

Parties agree that defective goods can be replaced or repaired within a certain time.

Seller’s Cure

Seller has the right to “Cure” (ship conforming goods to Buyer) if:

§ Agreed time of performance has not yet expired; or

§ If Seller had reasonable grounds to expect that Buyer would accept non-conforming goods, i.e., these goods are better than goods ordered, or Buyer has accepted non-conforming goods in the past.

Substitution of Carriers

If a carrier becomes impracticable or unavailable through no fault of either party, a commercially reasonable substitute is acceptable.

Commercial Impracticability

Occurrence of an unforeseen contingency that makes performance impracticable.

Nonoccurrence was a basic assumption on which the contract was made.

If only partial impracticability, Seller must allocate what he/she has.

Case 21.1: Maple Farms v. City School District of Elmira (1974).