Legal
Letters of credit: A mechanism for payment, not immunity from liability to pay the price
entitlement to demand the price directly from the buyer is not defeated if the LC fails for any reason (including seller default). The judgment is a win for commercial common sense and confirms with clarity that, in the absence of clear wording to the contrary, a LC is a conditional method of payment, meaning once title has passed and a buyer has taken the goods, the price is due under Section 49(1) of the Act despite LC or document transfer issues (even arising from the seller’s fault). The court rejected treating a LC as the exclusive source of payment without unequivocal contractual wording to that effect. It should be noted that the judgment may be appealed and more information can be found on HFW website at Letters of Credit: A Mechanism for Payment, Not Immunity From Liability to Pay The Price | HFW BIFA would like to thank William Gidman – william.gidman@hfw.com – a partner at HFW for the content contained within this article.
A letter of credit (LC) is a bank-issued document guaranteeing payment to a seller, provided strict document compliance is met, which signi fi cantly reduces international trade risks. BIFA Members should take special care when handling shipments covered by a LC. It is essential to check a LC carefully and prepare documentation BIFA highlights here a recent case that looked at an underpinning principle of letters of credit “ The judgment is a win for commercial common sense and confirms
processing of LC shipments, BIFA would like to highlight a recent case which looks at an underpinning principle of LC. A team led by William Gidman, of leading legal practice and BIFA Associate Member Holman Fenwick Willan, secured a significant victory in the English High Court. Commercial common sense The judgment reinforced commercial common sense. The court granted summary judgment confirming that a buyer’s obligation to pay the price of goods (which the buyer has accepted) is not usually discharged by the mere
accurately in line with the original LC document. Key areas include verifying buyer/seller details, exact documentation requirements (bills of lading, invoices), shipment dates, expiry dates, and ensuring terms comply with UCP 600 rules (ICC Uniform Customs & Practice for Documentary Credits). Members must remember that accuracy is paramount; banks deal with documents, not goods – discrepancies (even spelling errors) can invalidate the LC. Having reviewed the basic principles governing the
with clarity that, absent clear wording to the contrary, a LC is a conditional method of payment...
issue of a LC under the sale contract, and that a seller’s
BIFA utilises a network of Regional Representatives around the UK to act as a conduit for the dissemination of information and to seek local Member views on topics of interest. Forthcoming meetings are listed here. All BIFA Members are encouraged to attend their regional meetings, however pre-booking is essential. If there is no event listed in your region see www.bifa.org/events for future dates or contact your local Regional Representative: London West, the South & the South Support your local Member group
Region Anglia
Date
Venue
Tue 3 Mar Tue 3 Mar Thu 5 Mar Thu 5 Mar Tue 10 Mar Wed 11 Mar Thu 12 Mar Thu 12 Mar
Trimley Sports & Social club, Felixstowe Mayflower Theatre, Southampton
Solent
Manchester
The Nest, Manchester
Heathrow
Kempton Park Racecourse, Sunbury on Thames
London East East Midlands
Holiday Inn, Basildon
Radisson Blu, East Midlands Airport Best Western Dover Marina Hotel, Dover The Flight Deck, Birmingham Airport
Kent & East Sussex
West Midlands
Yorkshire Humber Gatwick Liverpool
Wed 18 Mar Thu 19 Mar Thu 19 Mar Tue 24 Mar * NEW DATE *
Clayton Hotel, Leeds
Hampton by Hilton, Humberside Airport
Venue TBC
One Fine Day, Liverpool
Northern Ireland – Shauneen McConville shauneenm@tr- logistics.com BIFA Young Forwarders’ Network FREE networking and information events for younger team members, see www.bifa.org/events
– Jack Rice j.rice@bifa.org Northern England – Andrew Melton a.melton@bifa.org Central England – Steve Murray s.murray@bifa.org Anglia, London East & South East - Paul Newman paul@pnauk.com
West – Paul Cunningham p.cunningham@bifa.org Scotland and the Borders
www.bifa.org
28 | March 2026
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