You are here: / / All Ambiguities Re: Letters of Credit Resolved Against the Issuer—“Independence...
, ,

All Ambiguities Re: Letters of Credit Resolved Against the Issuer—“Independence Principle” Applied—Beneficiaries of Letters of Credit Entitled to Payment

In a full-fledged opinion by Justice Andrias, the First Department reversed Supreme Court and determined plaintiffs were entitled to payment as beneficiaires of irrevocable standby letters of credit.  The opinion is detailed and meticulously resolved all ambiguities in the relevant documents against the issuer of the letters of credit.  The opinion includes an extended discussion of the “independence principle” in this context.  With respect to the basic analytical principles to be applied, the court wrote:

Under New York law, in order to recover on its claim that the issuer wrongfully refused to honor its request to draw down on a letter of credit, the beneficiary must prove that it strictly complied with the terms of the letter of credit … . “The corollary to the rule of strict compliance is that the requirements in letters of credit must be explicit, and that all ambiguities are construed against the [issuer]” … . The reasoning is that “[s]ince the beneficiary must comply strictly with the requirements of the letter, it must know precisely and unequivocally what those requirements are” … . “Where a letter of credit is fairly susceptible of two constructions, one of which makes it fair, customary and one which prudent men would naturally enter into, while the other makes it inequitable, the former interpretation must be preferred to the latter, and a construction rendering the contract possible of performance will be preferred to one which renders its performance impossible or meaningless” … . * * *

In November 2000, the independence principle was codified in a general revision of article 5 of the UCC. UCC 5—103(d) now provides that:

“[r]ights and obligations of an issuer to a beneficiary or a nominated person under a letter of credit are independent of the existence, performance, or nonperformance of a contract or arrangement out of which the letter of credit arises or which underlies it, including contracts or arrangements between the issuer and the applicant and between the applicant and the beneficiary.”

The doctrine of independent contracts, as codified in UCC article 5, allows the letter of credit to provide ” a quick, economic and trustworthy means of financing transactions for parties not willing to deal on open accounts'”… . “Only staunch recognition of this principle by the issuers and the courts will give letters of credit the continuing vitality that arises from the certainty and speed of payment under letters of credit” … .BasicNet SpA v CFP Servs Ltd, 2014 NY Slip Op 04585, 1st Dept 6-19-14

 

You might also like
IDENTITY THEFT STATUTE AMBIGUOUS, THE ASSUMPTION OF THE VICTIM’S IDENTITY IS AN ESSENTIAL ELEMENT OF THE OFFENSE, HERE DEFENDANT USED HER OWN NAME, CONVICTION REVERSED.
FAMILY COURT SHOULD HAVE MADE FINDINGS WHICH WOULD ALLOW THE CHILD TO PETITION FOR SPECIAL IMMIGRANT JUVENILE STATUS (SIJS) (FIRST DEPT).
DEFENDANT CARPET AND FLOORING SUBCONTRACTOR’S REQUEST TO INSPECT THE AREA OF THE FLOOR WHERE PLAINTIFF ALLEGEDLY STEPPED INTO AN UNGUARDED VENT HOLE SHOULD HAVE BEEN GRANTED; ALTHOUGH THE VENT COVER HAD BEEN REPLACED, IT CAN NOT BE SAID THE INSPECTION WOULD BE FRUITLESS, OR THAT THE INSPECTION WOULD CAUSE UNREASONABLE ANNOYANCE, EXPENSE, EMBARRASSMENT OR OTHER PREJUDICE (FIRST DEPT).
PLAINTIFFS STATED A CAUSE OF ACTION FOR FRAUD AND PROPERLY ALLEGED A CIVIL CONSPIRACY (FIRST DEPT).
DEFAMATION ACTION BASED UPON A REPORTER’S NAMING THE WRONG TEACHER AS HAVING BULLIED A FIFTH-GRADER PROPERLY DISMISSED; THE REPORTER HAD SUFFICIENT REASON TO RELY ON THE STUDENT’S MOTHER AND ANOTHER SOURCE BOTH OF WHOM PROVIDED THE WRONG NAME (FIRST DEPT).
TRIAL JUDGE PRESSURED DEFENDANT INTO PROVIDING A DNA SAMPLE AFTER DEFENSE COUNSEL HAD BEEN RELIEVED, DEFENDANT WAS DEPRIVED OF HIS RIGHT TO COUNSEL AT A CRITICAL STAGE, GUILTY PLEAS VACATED AND INDICTMENT DISMISSED.
PLAINTIFF DID NOT ALLEGE THE CITY HAD WRITTEN NOTICE OF THE SIGN POST STUMP OVER WHICH SHE TRIPPED AND FELL, THE FALL OCCURRED WITHIN THE 15-DAY GRACE PERIOD FOR THE NOTICE THE CITY DID RECEIVE, COMPLAINT PROPERLY DISMISSED.
LADDER MOVED FOR NO APPARENT REASON, PLAINTIFF ENTITLED TO SUMMARY JUDGMENT ON HIS LABOR LAW 240 (1) ACTION (FIRST DEPT).

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2026 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy

Statute of Limitations Starts When the Alleged Malpractice Occurred, Not When... Error for Trial Judge to Defer to Prosecutor’s Wish to Dismiss a Count...