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The Bank issued irrevocable letters of credit to De Reny Fabric Industries to purchase goods from an American supplier. When the goods arrived, they were found to be colored chalks instead of dyestuffs. De Reny refused payment and possession. Under the terms of the letters of credit, the Bank is not responsible for the goods themselves or any discrepancies, but only the documents. It is also standard practice in international banking for banks to only deal with documents, not verify the actual goods. Therefore, De Reny is liable under the letters of credit to pay the Bank as agreed.
The Bank issued irrevocable letters of credit to De Reny Fabric Industries to purchase goods from an American supplier. When the goods arrived, they were found to be colored chalks instead of dyestuffs. De Reny refused payment and possession. Under the terms of the letters of credit, the Bank is not responsible for the goods themselves or any discrepancies, but only the documents. It is also standard practice in international banking for banks to only deal with documents, not verify the actual goods. Therefore, De Reny is liable under the letters of credit to pay the Bank as agreed.
The Bank issued irrevocable letters of credit to De Reny Fabric Industries to purchase goods from an American supplier. When the goods arrived, they were found to be colored chalks instead of dyestuffs. De Reny refused payment and possession. Under the terms of the letters of credit, the Bank is not responsible for the goods themselves or any discrepancies, but only the documents. It is also standard practice in international banking for banks to only deal with documents, not verify the actual goods. Therefore, De Reny is liable under the letters of credit to pay the Bank as agreed.
BPI v. DE RENY FABRIC INDUSTRIES, documents; for any difference in character,
quality, quantity, condition, or value of the FACTS : property from that expressed in documents," or for "partial or incomplete shipment, or failure De Reny Fabric Industries, Inc. applied to the or omission to ship any or all of the property Bank for four (4) irrevocable commercial letters referred to in the Credit," as well as "for any of credit to cover the purchase by the deviation from instructions, delay, default or corporation of goods from its American fraud by the shipper or anyone else in supplier, the J.B. Distributing Company. connection with the property the shippers or vendors and ourselves [purchasers] or any of us." Having agreed to these terms, the As each shipment arrived in the Philippines, the appellants have, therefore, no recourse De Reny Fabric Industries, Inc. made partial but to comply with their covenant. payments to the Bank amounting. Further payments were, however, subsequently discontinued by the corporation when it But even without the stipulation recited above, became established, as a result of a chemical the appellants cannot shift the burden of loss test conducted by the National Science to the Bank on account of the violation by their Development Board, that the goods that vendor of its prestation. arrived in Manila were colored chalks instead of dyestuffs. It was uncontrovertibly proven by the Bank during the trial below that banks, in providing The corporation also refused to take possession financing in international business transactions of these goods, and for this reason, the Bank such as those entered into by the appellants, caused them to be deposited with a bonded do not deal with the property to be warehouse paying therefor the amount of exported or shipped to the importer, but P12,609.64 up to the filing of its complaint with deal only with documents. the court. The existence of a custom in international ISSUE : Whether or not De Reny fabrics is banking and financing circles negating any liable under the letter of Credit? duty on the part of a bank to verify whether what has been described in letters of credits or drafts or shipping documents actually tallies HELD : with what was loaded aboard ship, having been positively proven as a fact, the appellants are Under the terms of their Commercial bound by this established usage. They were, Letter of Credit Agreements with the after all, the ones who tapped the facilities Bank, the appellants agreed that the afforded by the Bank in order to engage in Bank shall not be responsible for the international business. "existence, character, quality, quantity, conditions, packing, value, or delivery of the property purporting to be represented by