CORRESPONDENCE
| Date | 01 September 1962 |
| Author | P. NARASIMHAM |
| DOI | http://doi.org/10.1111/j.1468-2230.1962.tb02221.x |
| Published date | 01 September 1962 |
CORRESPONDENCE
THE
Eorma,
Ths
Modern
Law
Rsvi8w.
Dear
Sir,
My object in writing this letter is to draw
to
your attention that the High
Court
of
Australia
in
8affon
v.
8oeiSt4
Mimidrs
Ccrfrika
(
(1958-59)
100
C.L.R.
291)
did not hold that an irrevocable confirmed credit wan an absolute
payment
as
contended by
Mr.
E.
P.
Ellinger
in
hh
case
note appearing
in
24
M.L.R.
680.
All that the High Court held
waa
that
if
the
issue
had
been
whether the letter of credit was intended
88
the primary
source
of payment,
the answer would have been that it wan.
I
would quote below the relevant
passage
(100
C.L.R.
at p.
244)
:
“Had the issue been, however, whether the letter of
credit
was
intended
as
the primary source of payment, the answer
would
have
bee0
that it was. In that event, the further question
would
have
arisol
whether the circumstances
in
which
that
primary
sourn
of payment
failed excused the dcfendant from payment altogether.
It
would
seem
that the
only
possible ground upon which the seller could have
beem
defeated
in
his claim for the price would have been
that
the seller was
solely responsible for the failure of the primary source of payment”
In the
case
in
question it was not necessary
to
determine the issue
as
the
buyer received the goods and could not
be
in
a
position
to
resist
a
claim
for
payment of the price.
I
have not come across
MY
pwge
in
the whole of
the
judgment to the effect that letter of credit was an absolute payment:
primary source of payment is not the same
as
absolute payment. The
ordinary meaning of primary is “of the first importance, chief.”
To
appre-
ciate the
point
of view one must be aware of the mechanics
of
a
credit
The
general rule
as
to
payment is that unless otherwise agreed delivery
of
the
goods and payment of the price arc concurrent
conditions.
Where
a
confirmed
credit
is
bargained for and
is
to be opened by the buyer, the
mdit
must
be
opened not later than the very first date when the seller may lawfully ship
the
goods
because the seller
is
entitled, before he
&ips
the
goods,
to
be
assured that on shipment he
will
get
paid.
Since
the seller may
be
ded
upon
to
ship
the
goods
at
any time
after
the shipment period ha8
commenced
he must be prepared to ship at once and
is
entitled
to
the assurance of
pay-
ment. When
a
confirmed irrevocable credit
is
opened
in
favour of the seller
he must utiJise it by complying with its requirements. If he
is
prevented
from
wing
it through no fault of his, then he hae
a
ranedy
against
the
buyer. If he cannot uttlise
it
through his own fault, he
cannot
have
rr(?~urnc
against the buyer
:
he cannot have the bat of both
worlds.
The view of the
High
Court that
a
confirmed, irrevocable letter of
credit
is a primary source
of
payment and that the only poesible ground upon
which
the seller could be defeated
in
his claim for
the
price would be that the seller
was solely responsible for the failure of the primary source of payment
accords with the views of the learned editors of the 21st edition of
Chitty
on
Conttaetr,
Vol.
11,’
which
I
quote below:
“As
to
the question whether, if once
a
crrdit hae
berm
opened,
the
exporter thereby loses
his
right to recover payment from the importer
and must
look
only
to
the appropriate banker, authorities
in
the
U.S.A.
1
Now the 2and edition
(1961)
at
5
401.
689
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