[1] The case holding that the special condition that "if the final purchaser fails to pay the price for the goods referred to in the credit within 75 days from the date of shipment of the bill of lading, the bill and documents accepted shall not be paid on the due date," which is added to an irrevocable documentary credit, does not constitute a non-documentary condition that cannot be determined by the documents attached to the letter of credit, but is valid under the principle of private autonomy

[2] The case holding that the meaning of the special condition that "if the final purchaser fails to pay the price for the goods referred to in the credit within 75 days from the date of shipment of the bill of lading, the bill and documents accepted shall not be paid for the due date" added to an irrevocable documentary credit shall not be deemed to be merely a reservation of the right to extend the due date for a considerable period of time on the grounds that the issuing bank may refuse to pay the price if the condition is not fulfilled as it is the language and text

[1] The case holding that the special condition that "if the final purchaser fails to pay the price for the goods referred to in the credit within 75 days from the date of shipment of the bill of lading, the bill and documents accepted shall not be paid on the due date," which is added to an irrevocable documentary credit, does not constitute a non-documentary condition that cannot be determined as to whether the conditions are fulfilled by the documents attached to the letter of credit, and is valid

[2] The case holding that the meaning of the special condition that "if the final purchaser fails to pay the price for the goods referred to in the credit within 75 days from the date of shipment of the bill of lading, the bill and documents accepted shall not be paid for the due date" added to an irrevocable documentary credit shall not be deemed to be merely a reservation of the right to extend the due date for a considerable period of time on the grounds that the issuing bank may refuse to pay the price if the condition is not fulfilled as it is the language and text.

[1] Articles 3, 4, 10, and 13(c) of the Uniform Customs and Practice for Documentary Credits (the fifth Revision, 1993) / [2] Articles 3, 4, 10, and 13(c) of the Uniform Customs and Practice for Documentary Credits (the fifth Revision, 193)

Daegu Bank Co., Ltd. (Law Firm Maho, Attorneys Yoon Ho-ho et al., Counsel for the plaintiff-appellant)

Han-il Bank Co., Ltd. (Law Firm Han-dong Law Office, Attorneys Yu-hee et al., Counsel for the plaintiff-appellant)

Filisung Amera Rocop (Law Firm Pacific, Attorneys Gangnam-gu et al., Counsel for the plaintiff-appellant)

Seoul High Court Decision 95Na39313 delivered on August 19, 1998

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal by the Defendant and the Intervenor are examined together.

1. The judgment of the court below

According to the reasoning of the judgment below, the court below acknowledged the facts as stated in its reasoning, and determined as follows as to the validity of the special condition (5) of the credit of this case.

In other words, since the fourth Uniform Credit Rule does not limit the conditions of the credit to the conditions of the credit in the document form, all non-documentary conditions cannot be deemed null and void or disregarded, but in light of the principle of independence of the credit stipulated in Articles 3 and 4 of the Uniform Credit Rules and the fact that Article 10 provides that the documents presented are in principle dependent only on whether the documents presented conform to the conditions of the credit in principle, the contents of the non-documentary conditions should be clear, and at least it should be limited to the cases where the beneficiary of the credit or negotiating bank is under the responsibility or control of the negotiating bank, and any disadvantage arising therefrom should be borne by the issuing bank. Accordingly, the conditions against this should be disregarded under the above Uniform Credit Rule.

However, in the instant case, although there is no mold for the acceptance of an irrevocable documentary credit in light of the text and form of the documentary credit, it cannot be said that the content of the documentary credit is clear as it lacks objective standards on the grounds that it is not possible to pay the price of the goods that can be determined by the intention of the applicant for the issuance of the documentary credit that the contents of the above conditions are the final purchaser, for instance, because the quality of the exported goods is different from the content of the contract or the price of the goods did not arrive within the agreed time limit, it cannot be said that the legal effect at this time is impossible to reject the payment of the documentary credit of the Defendant bank, the issuing bank, regardless of the credit's credit, the issuing bank's credit will be 75 days from the shipping date of the documentary credit, and thus, the negotiating bank will be able to completely avoid the issuing bank's duty of the documentary credit, and thus, it would not be able to avoid the issuing bank's delivery of the documentary credit, and it would be clear that the issuing bank will of the documentary credit at the same time be cancelled.

Furthermore, even if the above special condition clause (5) is valid, the defendant bank notified the plaintiff bank of the fact of acceptance and maturity of the bill of exchange and shipping documents, the defendant bank did not refuse to pay the letter of credit, and the defendant bank requested the plaintiff bank to extend the maturity of the bill of exchange and shipping documents pursuant to the special condition clause (5) of the letter of credit of this case, rather than refusing to pay the letter of credit of this case, and the bank director of the Bank Supervision of the Bank of Korea notified all the financial institutions of the prohibition of granting the above special condition clause (5) of the letter of credit of this case. In light of the above special condition clause (5) is not a condition for the issuing bank's exemption from the obligation to pay the letter of credit of this case, but rather against the final purchaser's failure to pay the goods within the due date, it is reasonable to deem that the defendant bank reserved the right to extend the maturity of the bill of exchange and shipping documents for a considerable period of time. In this case, since all the transaction at issue was due for a considerable period of time, the defendant bank cannot refuse to pay the letter of credit of credit of this case.

2. Judgment of the Supreme Court

However, it is difficult to accept the judgment of the court below for the following reasons.

A. According to the reasoning of the judgment below and the records, the letter of credit of this case, which was opened by the defendant as the beneficiary of the non-party corporation code (hereinafter referred to as "the code of the non-party corporation") upon the defendant's request, contains a special condition (5) that, if the final purchaser does not pay the price for the goods referred to in the letter of credit within 75 days from the shipping date of the bill of lading, the bill and the documents accepted are not paid due. The above special condition (5) inserted into the letter of credit of this case is a non-party wab Co., Ltd. (hereinafter referred to as "wab") under the condition that the letter of credit of this case would be non-party 2's request for the issuance of the non-party 2's letter of credit, and the above condition would be non-party 2's request for the issuance of the letter of credit of this case's non-party wab's non-party 2's letter of credit, and the defendant's defendant would not be held liable for the above import condition of the letter of credit of this case.

Therefore, insofar as the Plaintiff, a negotiating bank, fails to assert and prove that such special condition has been fulfilled, the Defendant is not obligated to pay the amount of the credit to the Plaintiff. Furthermore, as long as such special condition is deemed valid, the Defendant’s refusal to pay the amount of the credit by asserting the non-performance of such special condition cannot be deemed as contrary to the principle of good faith or the principle of good faith.

B. In addition, the meaning of Paragraph (5) of the special condition in this case is a special condition that recognizes that the issuing bank may refuse to pay the letter of credit in cases where the conditions are not fulfilled in accordance with the original purport of the language and text, or in cases where the parties to the credit transaction in this case added the above special condition provisions, and as long as the shipping documents are sent to the applicant and the issuing bank exceeds the direct right to the goods by allowing the applicant to trade only a copy, the issuing bank shall not have the direct right to do so. Thus, the issuing bank shall not be deemed to have reserved the right to postpone the payment of the letter of credit for a reasonable period of time, in light of the following: (a) the opening bank permitted the 75-day period of time to allow the applicant to trade with the copy; and (b) the issuing bank shall not be deemed to have reserved the right to withhold the payment of the letter of credit in cases where the conditions are not fulfilled in accordance with the original purport of the language and text; and (c) the circumstance cited in the ground of appeal by the plaintiff alone alone is insufficient.

C. Nevertheless, the court below did not err in the misapprehension of legal principles as to the validity of the non-document special condition of the letter of credit, or in misunderstanding of facts as to the contents of non-document special condition of the non-document special condition of the letter of credit, since the defendant bank merely reserved the right to extend the payment maturity for a considerable period of time in preparation for a case where the final purchaser fails to pay the goods by the due date, even if the letter of credit is valid. Since all the payment maturity of the transaction at issue was extended for a considerable period of time, the defendant bank cannot refuse payment of the letter of credit under Paragraph (5) of the special condition. Thus, the ground of appeal pointing this out is with merit.

3. Therefore, without further proceeding to decide on the remainder of the grounds of appeal, the judgment below is reversed, and the case is remanded to the court below. It is so decided as per Disposition by the assent of all participating Justices

Justices Seo-sung (Presiding Justice)