Dröjsmål vid öppnande av remburs - en konsekvensanalys
(2008)Department of Law
- Abstract
- In international trade with buyer and seller in different countries the parties can be insecure whether their counterpart will fulfil its contractual obligations in accordance with the contract of sale. The seller can be insecure in getting paid for his goods at contractual time and the buyer's insecurity can be whether the goods will be shipped at the contractual time and in contractual state. To minimise the above risks the parties can choose to agree payment against a letter of credit. The letter of credit is in short a mandate between a bank and a buyer where the bank obligates to pay the beneficiary, often the seller, against conforming documents that together gives a picture of the state of the goods. According to the mandate between... (More)
- In international trade with buyer and seller in different countries the parties can be insecure whether their counterpart will fulfil its contractual obligations in accordance with the contract of sale. The seller can be insecure in getting paid for his goods at contractual time and the buyer's insecurity can be whether the goods will be shipped at the contractual time and in contractual state. To minimise the above risks the parties can choose to agree payment against a letter of credit. The letter of credit is in short a mandate between a bank and a buyer where the bank obligates to pay the beneficiary, often the seller, against conforming documents that together gives a picture of the state of the goods. According to the mandate between the bank and the buyer the bank must open the letter of credit, examine the presented documents and pay the amount stated in the letter of credit to the beneficiary, the seller, if the documents are strict in conformance with the terms in the letter of credit. Through its unique elaboration and characteristics the letter of credit helps to secure payment in international transactions. The International Chamber of Commerce have legal regulations of letters of credit called UCP, but those aren't in any way exhaustive. Domestic law such as sales law, contract law and law of damages must be applied in gap-filling and interpreting the terms in the letter of credit and solve the disputes that arise. As in all commercial relations freedom of contract should be strong and the parties' intention must have a strong penetration when interpretation and gap-filling is required. The opening bank, instructed by the buyer, has an obligation to open the credit on time, examine the presented documents and pay the amount in the letter of credit against strict conforming documents. They can not take the underlying contract into consideration according to the principle of autonomy. The bank's obligation to pay is independent and separate from the contract of sale. To let the contracted price freeze because of a dispute under the contract of sale should tear down the function of the letter of credit in international trade, to secure payment. Discussion has been held whether opening of the letter of credit is absolute or conditional payment. If opening of a letter of credit is absolute payment that means the buyer has completed its obligation to pay when instructing the bank to open the letter of credit, even though payment has not been completed, for example because of a bank's insolvency. A relatively unanimous doctrine states that opening of a letter of credit is conditional payment of the purchase price which means that the seller can still claim the purchase price against the buyer if payment is not complete. Opening of a letter of credit is a condition precedent to the seller's obligation to ship the goods, which means that in absence of a letter of credit the seller has no obligation to ship the contracted goods. If nothing is stated in the contract of sale concering time for opening the letter of credit the letter of credit must be opened within reasonable time. The parties' knowledge of possible delays for openings the letter of credit is considered within the reasonable time because it's held to be with in the parties' intention. In case law and doctrine it seems unclear whether the letter of credit must be opened on the first day of the shipment period or within reasonable time before this date, in absence of an express term. It is fundamental for the seller to be secure of payment before he parts with the goods. If the letter of credit is to be opened within reasonable time before the beginning of the shipment period that enables him to have payment secured when he prepares the goods for shipment. When payment is not made in accordance with the contract of sale, the buyer can be held liable for the seller's damages. The buyer could then possible turn to the bank for damages if the bank has not fulfilled its obligations against him. The bank's responsibility for damages could include all of the buyer's damages, including damages the buyer has to pay the seller for breach of contract. Since payment of the purchase price is the buyer's primary obligation under the contract of sale, the opening of the letter of credit is also primary. If the letter of credit is not opened on time that means the purchase price is not paid on time. Delay in opening the letter of credit is considered to be breach of contract and the seller can terminate the contract and claim damages. Calculation of damages shall be according to customary rules for breach of contract. In Swedish law calculation is limited to damages with ''adekvat kausalitet'' to the breach of contract. The limitation for damages according to CISG is found in article 74 which limits the loss to what the party in breach did foresee or ought to have foreseen as a possible consequence to the breach of contract. In English law Hadley v. Baxendale is a guidance principle and it limits the damages to what could be reasonable expected as a result of the breach of contract and also special loss for which the party in breach is only liable for if he has knowledge of the consequence on the day of the contract. In KöpL, CISG and English law there is also a duty to mitigate loss. The main rule in delayed payment is that only interest and loss on exchange is recoverable. The reason for this is that the consequences of delayed payment are hard for the party in breach to predict. There is a possibility to get more extensive damages if called upon by special circumstances. Liability for damages when the letter of credit is not opened on time should, if the seller can resell the goods, be the difference between contract price and the market price at the time of the breach. But seller sometimes uses the letter of credit to finance the transaction which means that the seller can not get the contracted goods if the letter of credit is not provided. In those cases the liability for damages is calculated to loss of profit. Whether the duty to mitigate loss applies to letters of credit is debated in case law and doctrine. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/1562842
- author
- Wahlgren, Sara
- supervisor
- organization
- year
- 2008
- type
- H3 - Professional qualifications (4 Years - )
- subject
- keywords
- Köprätt
- language
- Swedish
- id
- 1562842
- date added to LUP
- 2010-03-08 15:55:30
- date last changed
- 2010-03-08 15:55:30
@misc{1562842,
abstract = {{In international trade with buyer and seller in different countries the parties can be insecure whether their counterpart will fulfil its contractual obligations in accordance with the contract of sale. The seller can be insecure in getting paid for his goods at contractual time and the buyer's insecurity can be whether the goods will be shipped at the contractual time and in contractual state. To minimise the above risks the parties can choose to agree payment against a letter of credit. The letter of credit is in short a mandate between a bank and a buyer where the bank obligates to pay the beneficiary, often the seller, against conforming documents that together gives a picture of the state of the goods. According to the mandate between the bank and the buyer the bank must open the letter of credit, examine the presented documents and pay the amount stated in the letter of credit to the beneficiary, the seller, if the documents are strict in conformance with the terms in the letter of credit. Through its unique elaboration and characteristics the letter of credit helps to secure payment in international transactions. The International Chamber of Commerce have legal regulations of letters of credit called UCP, but those aren't in any way exhaustive. Domestic law such as sales law, contract law and law of damages must be applied in gap-filling and interpreting the terms in the letter of credit and solve the disputes that arise. As in all commercial relations freedom of contract should be strong and the parties' intention must have a strong penetration when interpretation and gap-filling is required. The opening bank, instructed by the buyer, has an obligation to open the credit on time, examine the presented documents and pay the amount in the letter of credit against strict conforming documents. They can not take the underlying contract into consideration according to the principle of autonomy. The bank's obligation to pay is independent and separate from the contract of sale. To let the contracted price freeze because of a dispute under the contract of sale should tear down the function of the letter of credit in international trade, to secure payment. Discussion has been held whether opening of the letter of credit is absolute or conditional payment. If opening of a letter of credit is absolute payment that means the buyer has completed its obligation to pay when instructing the bank to open the letter of credit, even though payment has not been completed, for example because of a bank's insolvency. A relatively unanimous doctrine states that opening of a letter of credit is conditional payment of the purchase price which means that the seller can still claim the purchase price against the buyer if payment is not complete. Opening of a letter of credit is a condition precedent to the seller's obligation to ship the goods, which means that in absence of a letter of credit the seller has no obligation to ship the contracted goods. If nothing is stated in the contract of sale concering time for opening the letter of credit the letter of credit must be opened within reasonable time. The parties' knowledge of possible delays for openings the letter of credit is considered within the reasonable time because it's held to be with in the parties' intention. In case law and doctrine it seems unclear whether the letter of credit must be opened on the first day of the shipment period or within reasonable time before this date, in absence of an express term. It is fundamental for the seller to be secure of payment before he parts with the goods. If the letter of credit is to be opened within reasonable time before the beginning of the shipment period that enables him to have payment secured when he prepares the goods for shipment. When payment is not made in accordance with the contract of sale, the buyer can be held liable for the seller's damages. The buyer could then possible turn to the bank for damages if the bank has not fulfilled its obligations against him. The bank's responsibility for damages could include all of the buyer's damages, including damages the buyer has to pay the seller for breach of contract. Since payment of the purchase price is the buyer's primary obligation under the contract of sale, the opening of the letter of credit is also primary. If the letter of credit is not opened on time that means the purchase price is not paid on time. Delay in opening the letter of credit is considered to be breach of contract and the seller can terminate the contract and claim damages. Calculation of damages shall be according to customary rules for breach of contract. In Swedish law calculation is limited to damages with ''adekvat kausalitet'' to the breach of contract. The limitation for damages according to CISG is found in article 74 which limits the loss to what the party in breach did foresee or ought to have foreseen as a possible consequence to the breach of contract. In English law Hadley v. Baxendale is a guidance principle and it limits the damages to what could be reasonable expected as a result of the breach of contract and also special loss for which the party in breach is only liable for if he has knowledge of the consequence on the day of the contract. In KöpL, CISG and English law there is also a duty to mitigate loss. The main rule in delayed payment is that only interest and loss on exchange is recoverable. The reason for this is that the consequences of delayed payment are hard for the party in breach to predict. There is a possibility to get more extensive damages if called upon by special circumstances. Liability for damages when the letter of credit is not opened on time should, if the seller can resell the goods, be the difference between contract price and the market price at the time of the breach. But seller sometimes uses the letter of credit to finance the transaction which means that the seller can not get the contracted goods if the letter of credit is not provided. In those cases the liability for damages is calculated to loss of profit. Whether the duty to mitigate loss applies to letters of credit is debated in case law and doctrine.}},
author = {{Wahlgren, Sara}},
language = {{swe}},
note = {{Student Paper}},
title = {{Dröjsmål vid öppnande av remburs - en konsekvensanalys}},
year = {{2008}},
}