Business Law Final Exam. Kellogg Business School
Law and Corporate Managers – Prof. Larry Franklin
Question Two A. (i) For refusal
In order to honor the LC, the Seller has to comply exactly with the terms of the letter of credit. There are numerous typo errors in the LC and misspellings of the destination port and the Seller name, hence only a waiver of the discrepancies from JFTC will enable Bank of China to pay the Seller. As long as the waiver is not received, the BOC cannot make any payments. BOC has to state why it is not going to pay. The seller reviewed the LC before the shipment of goods, so it is his mistake that he didn’t point out the discrepancies.
(ii) Against refusal
Since the LC is irrevocable, then JFTC can't make any modifications or cancellation without the consent of Voest-Alpine. The LC is a binding document and any change should be subject to the consent of the seller. Although there are typo errors in the LC, the negotiating bank should convince the BOC that these errors are not material, and therefore they should prevent the payment. In addition, JFTC objection for the waiver is not in good faith.
(iii) My conclusion
BOC refusal is justifiable; it can't take the responsibility for inconsistency between the LC and the payment terms. However, Voest-Alpine has the right to sue JFTC in ICC arbitration committee, according to the UCP rules that applies on the LC.
B. (i) For
JFTC has sent the seller the LC before the shipment. It was the seller mistake not to point out the discrepancies. On the contrary, the seller didn’t act in bona fide, and therefore JFTC decision is ethically right.
(ii) Against
JFTC is aware of the fact that the discrepancies in the LC are technical, and its real intention behind the insistence not to provide the waiver is its will to reduce the agreed price of the goods in a non-ethical way.
(iii) My conclusion
It is unequivocal that pacta sunt servanda, and if the seller doesn’t agree to amend the contract, the buyer can use any legal
Question Two A. (i) For refusal
In order to honor the LC, the Seller has to comply exactly with the terms of the letter of credit. There are numerous typo errors in the LC and misspellings of the destination port and the Seller name, hence only a waiver of the discrepancies from JFTC will enable Bank of China to pay the Seller. As long as the waiver is not received, the BOC cannot make any payments. BOC has to state why it is not going to pay. The seller reviewed the LC before the shipment of goods, so it is his mistake that he didn’t point out the discrepancies.
(ii) Against refusal
Since the LC is irrevocable, then JFTC can't make any modifications or cancellation without the consent of Voest-Alpine. The LC is a binding document and any change should be subject to the consent of the seller. Although there are typo errors in the LC, the negotiating bank should convince the BOC that these errors are not material, and therefore they should prevent the payment. In addition, JFTC objection for the waiver is not in good faith.
(iii) My conclusion
BOC refusal is justifiable; it can't take the responsibility for inconsistency between the LC and the payment terms. However, Voest-Alpine has the right to sue JFTC in ICC arbitration committee, according to the UCP rules that applies on the LC.
B. (i) For
JFTC has sent the seller the LC before the shipment. It was the seller mistake not to point out the discrepancies. On the contrary, the seller didn’t act in bona fide, and therefore JFTC decision is ethically right.
(ii) Against
JFTC is aware of the fact that the discrepancies in the LC are technical, and its real intention behind the insistence not to provide the waiver is its will to reduce the agreed price of the goods in a non-ethical way.
(iii) My conclusion
It is unequivocal that pacta sunt servanda, and if the seller doesn’t agree to amend the contract, the buyer can use any legal