[1] Whether the advice of the issuance of a letter of credit or the negotiation of a letter of credit without delivering the original letter of credit is lawful and effective (affirmative)

[2] The meaning of "purchase" as stipulated in Article 2 of the Uniform Customs and Practice for Documentary Credits 600 (UCP 600)

[3] In a case where Gap bank deposited the purchase price into Eul's separate deposit account according to Eul's credit negotiation request, and agreed that Eul bank would offset the existing non-paid credit negotiation price from the above account and withdraw the balance if the credit price was paid to Gap bank, the case affirming the judgment below that Gap bank immediately paid the actual price for the credit negotiation

[4] Whether the negotiating bank can be protected by the principle of independence and abstractness of the letter of credit in a case where the negotiating bank participated in or knew or had sufficient reasons to suspect the forgery of shipping documents (negative)

[1] In light of the provisions of Articles 2 and 9(a) of the UCP 600 amended Uniform Customs and Practice for Documentary Credits (UCP 600), the advising bank's notification of the issuance of the letter of credit means that the advising bank merely notifies the beneficiary of the fact of the issuance of the letter of credit and its contents, and does not necessarily require the presentation or delivery of the original letter of credit. Further, the negotiating means that the nominated bank purchases "bills and/or documents" itself, so it is not necessarily necessary to present or deliver the original letter of credit while negotiating. Therefore, even if the advising bank does not deliver the original letter of credit when it notifies the beneficiary of the issuance of the letter of credit, or the negotiating bank did not receive the original letter of credit when it negotiates the documents related to the letter of credit from the beneficiary

[2] In light of the provisions of Article 2 of the Uniform Customs and Practice for Documentary Credits 600 (UCP 600), the negotiation of documents can be conducted by a designated bank authorized to negotiate documents by means of cash, old cash, etc. to immediately pay the actual price to the beneficiary or to bear the obligation to pay the price. Here, the purchase by the latter method means can be substituted for the immediate payment of real price by bearing an unconditional and absolute obligation that the negotiating bank should definitely pay the price to the beneficiary at a specified date.

[3] In a case where Gap bank deposited the L/C negotiation funds into Eul's separate deposit account upon Eul's L/C negotiation request and then deposited them into the above account, and if the L/C negotiation funds were paid to Gap bank, Eul bank agreed to offset two existing L/C negotiation funds against the above account and to withdraw and use the balance, the case affirming the judgment below holding that since Gap bank deposited the negotiation funds into Eul's separate deposit account, it shall be deemed that Eul bank immediately paid the actual price for the L/C negotiation, and the above agreement is merely a separate agreement to offset Eul company's debt for redemption of the other L/C negotiation funds into the separate deposit account under the circumstance that Eul company bears the obligation for redemption of the other L/C negotiation funds, and thus, the effect of Gap bank immediately paid the actual price is not denied.

[4] A transaction by a letter of credit in essence is not a transaction by goods, and thus, the bank must confirm shipping documents with due care while complying with the terms and conditions of the letter of credit. The bank is not obligated to examine shipping documents actually. However, if shipping documents are forged (including alteration or false preparation), if the bank is a party involved in the transaction or knew of the forgery of documents in advance or there is sufficient reason to suspect such forgery, it is merely a fraudulent transaction under the pretext of a letter of credit transaction, and banks cannot be protected by the principle of independence and abstractness of the letter of credit.

[1] Articles 2 and 9(a) of the Uniform Customs and Practice for Documentary Credits / [2] Article 2 of the Uniform Customs and Practice for Documentary Credits / [3] Article 2 of the Uniform Customs and Practice for Documentary Credits / [3] Article 2 of the Uniform Customs and Practice for Documentary Credits / [2] Article 3 of the Uniform Customs and Practice for Documentary Credits / [3] Article 2 of the Uniform Customs and Practice for Documentary Credits / [4] Article 2 of the Uniform Customs and Practice for Documentary Credits / [3] Article 40 of the UCP / [4] Article 2 of the UCP / [3] Article 407 of the UCP / [4] Article 2 of the UCP / [4]

[2] [4] Supreme Court Decision 2000Da60296 decided Oct. 11, 2002 (Gong2002Ha, 2663)

Korea Exchange Bank (Law Firm LLC, Attorneys Park Jong-soo et al., Counsel for defendant-appellant)

China Bank Co., Ltd. (Attorney Hong-soo et al., Counsel for the defendant-appellant)

Seoul High Court Decision 2008Na104309 decided October 15, 2009

The appeal is dismissed. The costs of appeal are assessed against the defendant.

The grounds of appeal are examined.

1. On the first and second grounds for appeal

Article 60 of the Uniform Customs and Practice for Documentary Credits (UCP 600) provides that "the Credit refers to any arrangement, regardless of its name, for which it is impossible to cancel that the issuing bank agrees to make payment for a complying presentation," and Article 9 (a) provides that "the Credit and any amendment to the Credit shall be notified to the beneficiary through the advising bank," and Article 2 of the Uniform Customs and Practice for Documentary Credits (CP 600) provides that "the issuing bank shall inform the beneficiary of the credit and any amendment to the Credit and its terms and conditions without bearing any obligation in respect of settlement or negotiation." Article 2 provides that "the issuing bank shall not, at the time of the issuing bank's presentation for the complying presentation, make payment to the nominated bank or prior to the issuing bank, or by the issuing bank's presentation for the presentation of bills of exchange (which is not a nominated bank) and/or documents, and that "the issuing bank shall not, in light of the terms and conditions of the Credit and the issuing bank's advice or presentation of the original Credit and the issuing bank's advice or presentation of the documents."

The court below held that the defendant's U.S. branch's notice of issuance of the letter of credit (hereinafter "first letter of credit") ("the letter of credit No. 1 omitted) that the defendant's U.S. branch's U.S. branch's beneficiary on July 20, 2007 as the beneficiary was valid and that the plaintiff had the first letter of credit effectively purchased the first letter of credit. The judgment of the court below is just in light of the above legal principles, and there is no error in the misapprehension of legal principles as to the notice of issuance of a letter of credit or the negotiation of a letter of credit, as otherwise alleged in the

2. On the third ground for appeal

In light of the provisions of Article 2 of the Uniform Customs and Practice for Documentary Credits 600 (UCP 600), the purchase of documents can be conducted by a designated bank authorized to purchase documents by means of cash, cash, old deposit, etc. to the beneficiary immediately pay the actual price or bear the obligation to pay the price. Here, the purchase by the latter method refers to a case where the negotiating bank can immediately pay the actual price by bearing an unconditional and absolute obligation that the negotiating bank should definitely pay the price to the beneficiary at a specified date (see Supreme Court Decision 2000Da60296, Oct. 11, 2002).

According to the reasoning of the judgment below, the court below held that since the defendant's dong Branch deposited US dollars 819, 293, 15 on August 27, 2007 with the L/C No. 2 (hereinafter "Second L/C No. 2") of the 6th UCP which applies to the L/C No. 2 ("Second L/C"), the payment of the price is to be made immediately by means of cash, check, bank transfer, account transfer, etc., and that the plaintiff was to purchase the Second L/C at the request of M/C purchase on August 20, 207, with the intention to purchase the Second L/C and the required documents were presented to the plaintiff on August 27, 2007, the court below held that since the plaintiff immediately paid the purchase price to the second L/C account of 200 U.S. dollars 819, 293, 293, 293, etc., the plaintiff paid the purchase price to the plaintiff without delay in the two separate L/C.

In light of the above legal principles and records, the above judgment of the court below is just and acceptable, and there is no error in the misapprehension of legal principles as to the negotiation of credit, as otherwise alleged in the ground of appeal.

In addition, the remaining grounds of appeal do not err in the selection of evidence and fact-finding which belong to the exclusive jurisdiction of the court below, and it is difficult to be deemed legitimate grounds of appeal, and further, the judgment of the court below is not erroneous in violation of logical and empirical rules or exceeding the bounds of the principle of free evaluation of evidence.

3. On the fourth and fifth grounds

A transaction by a documentary credit in essence is not a transaction by goods, and thus, the bank must exercise due care to confirm whether the shipping documents conform to the terms and conditions of the credit. The bank is not obligated to actually examine the shipping documents. However, if the shipping documents are forged (including alteration or false preparation), if the bank is a party involved in the transaction or knew of the forgery of documents or there is sufficient reason to suspect such forgery, it is merely a fraudulent transaction under the pretext of the credit transaction, and the bank cannot be protected by the independence and abstractness principle of the credit (see Supreme Court Decision 2000Da60296, Oct. 11, 2002).

According to the reasoning of the judgment below, the court below determined that the adopted evidence alone was insufficient to recognize that the transaction by the second letter of credit constitutes fraud, or that the requirements of the second letter of credit were forged, and that the plaintiff was related to or was aware of such circumstances at the time of purchase, or that there was sufficient reason to suspect such facts, and that there was no other evidence

In light of the above legal principles and records, the above determination by the court below is just and there is no error of law by misapprehending the legal principles as to the scope of fraudulent transaction of credit or the duty to examine documents of negotiating banks, as alleged in the grounds of appeal.

In addition, the remaining grounds of appeal are merely an error of the lower court’s finding evidence and fact-finding, and it is difficult to be deemed legitimate grounds of appeal. In light of the records, the lower court did not err in its judgment against logical and empirical rules or exceeding the bounds of the principle of free evaluation of evidence.

4. Conclusion

Therefore, the appeal is dismissed, and the costs of appeal are assessed against the losing party. It is so decided as per Disposition by the assent of all participating Justices.

Justices Lee Sang-hoon (Presiding Justice)