International Commercial Terms

Since Westland Bank is situated in England, and Baxwell is in Singapore, Westland Bank is considered as the confirming bank, with an issuing bank presumed to be in Singapore where Baxwell, as the buyer, is located. Baxwell paid for the consignment through a confirmed letter of credit with an issuing bank in Singapore. Both the issuing bank and the confirming bank do not have any direct contractual relationship with the carrier, Cargolines, or with Floyd’s Insurance Plc (unless the policy is assigned by the seller to the issuing bank, for instance).

The goods to be shipped represent collateral for the credit secured by Baxwell, and by such there may come a point wherein the banks become owners of the goods. If the banks are holders of a bill of exchange, they have no rights whatsoever on the goods, and the buyer Baxwell may claim on the insurance policy for any loss or damage to the goods. The buyer would also be able to claim directly from the seller, or even from the carrier pursuant to an implied contract between them.

Once the issuing bank pays the money for the letter of credit (paid by the buyer, Baxwell, to the issuing bank) to Westland Bank, as the confirming bank, then Baxwell receives the bill of lading from the issuing bank in Singapore. In exchange, the issuing bank holds on to a Trust Receipt. The seller, Sweet, has to tender the documents including the bill of lading, insurance policy, and receipt to Westland Bank, and cannot tender the transport documents directly to Baxwell, the buyer.

In this case, it was indicated that Westland Bank paid the agreed price in the contract once Sweet tendered the transport document. In this case, there was damage to 5100 of the books covered by the contract between Sweet and Baxwell. Westland Bank, as the issuing bank, has no right of recourse against the carrier. Furthermore, the Doctrine of Privity of Contract provides that persons not party to a contract cannot take action on the contract nor be sued on the contract.

Not only does Westland Bank do not have any direct contractual relationship with the carrier (regardless of the latter’s negligence), but it also does not have any direct contractual relationship with the seller, Sweet. In this case, Sweet already received the agreed price. Westland Bank’s right of recourse would be against the buyer, Baxwell. Upon payment by Baxwell to Westland Bank for the value of the goods damaged, Baxwell would have a right to reimbursement from the seller or from the insurance policy with Floyd’s Insurance Plc.

If the voyage policy was assigned by the seller, Sweet, to Westland Bank, then the latter may claim on the insurance from Floyd’s Insurance Plc, and the latter would have a right to reimbursement from the carrier Cargolines since the damage was due to the negligence of the carrier.


Laws Carriage of Goods by Sea Act 1971 Carriage of Goods by Sea Act 1992 International Commercial Terms 1990 Jurisprudence Brandt v. Liverpool Brazil & Riverplate S. S. Co. [1924] 1 KB 575 Silver v. Ocean Steamship Ltd [1930] 1 KB 416