Payment By Letter Of Credit
| Published date | 01 November 1960 |
| Date | 01 November 1960 |
| DOI | http://doi.org/10.1111/j.1468-2230.1960.tb00641.x |
Nov.
1960
NOTES
OF
CASES
689
L.J.
(as he then was) in
Combe
v.
Cornbe,14
but
it
is an essential
ingredient
in
its American counterpart,15 and is apparently begin-
ning to find favour amongst British judges.la
J.
F.
WILSON.
PAYMENT
BY
LETTER
OF
CREDIT
Tm
judgment in the recently reported Australian case of
Saflron
v.
Socie’te’
Mini2re
Cafrika
suggests answers to a question which
is, with the growing use of commercial credits in the export trade,
increasingly likely to be of practical importance, namely, whether
in
any circumstances a stipulation for payment by bankers’ credit
debars a seller who is not in fact paid through the credit from
suing the buyer for the price.
The essential facts of the case were that a seller contracted to
sell chrome ore and stipulated for payment by means of what was
assumed between the parties to be an irrevocable but not a con-
firmed credit. The seller delivered the goods to the buyer but
payment was not met out of the credit because the bank found
the documents presented to
it
were not in order. The seller
thereupon sued the buyer for the price but the buyer contended
that the stipulation as to a bankers’ credit was to be regarded as
specifying an exclusive method of payment and that therefore upon
its failure
it
was not open to the seller to sue the buyer
on
the
contract of sale.
In
delivering the judgment
of
the High Court of Australia upon
this point, Dixon
C.J.
referred to Professor
A.
G.
Davis’ mono-
graph
on
The
Law
Relating
to Commercial Letters
of
Credit
s
where, said the Chief Justice, the question was discussed and such
authority as there was cited. The conclusion drawn by Professor
Davis was that though dicta favoured the view that normally a
seller did not take
EL
draft drawn under a letter of credit in absolute
but only
in
conditional payment the question could not be regarded
as definitely settled until
it
was raised in an action between buyer
and seller. Dixon
C.J.
went
on
to point out that the question could
only arise in special circumstances as where the bank responsible for
the credit went insolvent (a case suggested by
Prof.
Davis)
or,
as
in the instant case, when the documents tendered were not in con-
formity with the letter of credit but the buyer had obtained
possession of the goods.
Dixon
C.J.
then proceeded to explore the problem by distin-
guishing between various types
of
credits, thereby advancing
14
[1951] 2
K.B.
at
p.
220.
15
See
s.
90
of
the Restatement
of
the Law
of
Contract.
16
See,
e.g.,
Viscount
Simonds in
Tool
Metal Manufacturing
Co.,
Ltd.
v.
Tungsten
Electric
Co.,
Ltd.
[1955]
2
All
E.R. at
p.
660.
1
(1958-59) 100
C.L.R.
231.
2
(1958-59) 100
C.L.R.
at p.
243.
3
2nd
ed.,
1954,
at p.
45.
(The Report
is
in
error
in giving
the reference to
relevant passage
in
Prof.
Davis’
work
as
p.
42.)
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