Issue: Whether a court may compel payment despite the deviation made by Antex Industries in the mode of transportation used to deliver the integrated circuits to Tokyo?Rule: In issues concerning compliance with the terms of a letter of credit, the rule to be applied is the Uniform Customs and Practices issued by the International Chamber of Commerce.Analysis: One particular nature of a letter of credit is that the bank’s obligation to pay is separate and independent from the contract of sale or any contract involved in the transaction. The obligation of the bank is demarcated by the terms of the letter of credit alone.
The banks are not required to inquire outside of the documents of the letter of credit much more, be concerned over the conditions of the goods. In the case at bar, when the mode of transportation used to deliver the circuits was changed, necessarily, the documents regarding its transportation also changed and the variation may not have been necessarily reflected in the letter of credit. When the documents then, depart from the terms of the letter of credit, the bank is entitled to deny payment – since letters of credit are bound by the principle of “strict compliance.”Conclusion: Antex Industries cannot compel the bank to effect payment of the goods.
There was a deviation from the terms of the letters of credit which justifies the bank’s refusal to pay. This is not to say however, that Antex Industries is left without a remedy. It may still avail of the remedy for an action to enforce payment under the terms of the contract of sale since a letter of credit is separate and distinct from the contract of sale itself.
