Wade entered into contract to sell irrigation equipment

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Reference no: EM132226241

Wade entered into a contract to sell irrigation equipment to Ribadalgo, its Ecuadorian distributor. Ribadalgo obtained an irrevocable letter of credit in the amount of $400,000 from Banco General Runinahui, S.A. (Banco), a bank in Quito, Ecuador. The letter of credit provided that Wade was to ship by July 30, 1992. Wade was to present documents for payment “no later than 15 days after shipment, but within the validity of the credit.” The expiry date of the letter of credit was August 21, 1992. Partial shipments were acceptable. The letter of credit stated that it was governed by the UCP. Citibank confirmed the letter of credit. Wade shipped a portion of the goods on July 7. On July 21, just before the document presentment deadline, Wade presented the requisite documents to Citibank for payment. Two days later, on July 23, Citibank informed Wade that the documents contained discrepancies and that it therefore would not honor Wade’s request for payment. In response, Wade forwarded amended documents to Citibank on July 24 and July 27. Although Citibank conceded the documents as amended contained no discrepancies, it nevertheless rejected them as untimely because they were not received within fifteen days of the July 7 shipment date as required by the credit. Additionally, on July 17, the Ecuadorian government issued an order freezing all Ribadalgo’s assets and precluding payment on any lines of credit made available to Ribadalgo due to alleged drug trafficking. Four days later, Ecuadorian banking authorities entered an order barring Banco from making payment under the letter of credit. In turn, Banco advised Citibank not to honor any request for payment made by Wade thereunder.

1) Is Wade entitled to payment under the letter of credit from Citibank?

2) Wade argues that the documents did not have to be conforming before the presentment deadline, but only before the expiry date of the credit. Analyze if Wade is correct.

3) Why do you think Citibank rejected the documents on July 21? Critically conclude if Wade can do something about it.

Reference no: EM132226241

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