This has created uncertainty however, compounded by the implementation of Section 15A of the SGA (Treitel, 2007). Indeed Treitel argues that a document is not defective merely because it states something different to what the contract provides for and that only if the defect in the documents relate to a defect in the goods which amounts to a breach of condition can the document be rejected (2007). For example, in the Tradax case it was indicated that as the buyer could not reject the goods, there was no right to reject the documents.
However, in the case of Vargas Pena Apeztieguia y Cia v Peter Cremer G. m. b. H (1987] 1 Lloyds Rep 394 )it was held that the buyer was entitled to reject the goods which included a certificate of quality stating that the goods had a fat content in excess of 15%. In that case, there was an express clause providing that the goods were “rejectable at the buyer’s option” if the goods had a fat content in excess of 15%. Accordingly, the decision was distinguished as they disclosed a breach in the goods justifying rejection, and therefore the buyer was entitled to reject the goods.
With regard to the documentary credit, the general rule is that the documentary credit must be opened in accordance with the terms of the contract for sale (Sealey & Hooley, 2003). Under English Law, payments under documentary credits must be honoured by banks and the autonomy of credit principle asserts that documentary credit transactions are separate from the underlying contract and therefore does not impact payment obligations (Sealey & Hooley, 2003).
Furthermore, the credit is irrevocable, and as such an issuing bank cannot cancel a documentary credit without the consent of the seller (Bridge, 2007). The autonomy of credit principle is generally sacrosanct and indeed Sealy asserts that “it is irrelevant to the performance of the credit that the buyer alleges, for example, that the shipped goods are not of satisfactory quality” (Sealey & Hooley, 2003). Therefore, as the credit is an irrevocable credit the only way in which payment could be challenged under the documentary credit is by demonstrating fraud (Todd, 2003).
The fraud exception is very difficult to prove as the fraud has to be clear and obvious and the bank needs to be aware of the fraud in order to retain payment against the documents (Todd, 2003). Furthermore, in the case of Discount Record Limited v Barclays Bank Limited (1975] 1 WLR 315), it was asserted that “I would be slow to interfere with bankers irrevocable credits……unless a sufficiently grave cause is shown; for interventions by the Court that are too ready, or to frequent might gravely impair the reliance which, quite properly, is placed on such credits”.
Moreover, Articles 14-18 of the UCP 600 restrict time limits for rejection of documentary credits on grounds of discrepancies in documents to a five day time limit, which has now passed. 2. Commercial Documents In commercial contracts, the certainty of contractual obligations is paramount particularly in determining rights regarding payment and redress in CIF contracts. The sales invoice serves this purpose in international goods contracts in stipulating quantity and price (Todd, 2003).
With regard to the certificate of origin, under CIF contracts, the part of the seller’s primary obligation is to insure goods, delivery them to the shipping company and arrange for freight of goods (Bridge, 2007). Once this is done, the seller’s obligation is then to send the bill of lading and insurance policy along with the invoice and certificate of origin to the bank. These documents are generally as part of commercial practice norms delivered to bank against payment of the seller as goods will pass to the buyer upon delivery of the documents (Chitty, 2007).
Moreover, the certificate of origin serves as an important role in completing part of the documentary requirements under CIF contracts (Wilson, 2007). A standard shipping note is a note addressed by the shipper to the chief officer of a vessel requesting them to receive on board certain goods, along with a receipt for signature, which is referred to as the “mate’s receipt” (Wilson, 2007).
This is then surrendered by the shipper for the bill of lading as therefore important in confirm receipt of goods on board as part of the seller’s obligations under CIF contracts (Wilson, 2007). The Export Cargo Shipping Instruction effectively serves a multi-purpose function in international commercial contracts by providing instructions regarding export services and specific responsibility for such services (Wilson, 2007).
The overriding purpose is to save exporters time and money and serves an importance purpose in the project management of goods movement in international goods by carriage at sea (Wilson, 2007). A waybill is traditionally a document issued by a carrier giving details and instructions relating to the shipment of a consignment of goods (Bridge, 2007). Typically it will set out the name of the consignor and consignee and sets out the destination of the route and method of shipment. It does not however serve as evidence of title (Bridge, 2007).