Article-36-UCP-600-Force Majeure

Force majeure is a French term that literally means “greater force.” It is related to the concept of an act of God, an event for which no party can be held accountable, such as a hurricane or a tornado.

Article-36-Force Majeure

-A bank assumes no liability or responsibility for the consequences arising out of the interruption of its business by Acts of God, riots, civil commotions, insurrections, wars, acts of terrorism, or by any strikes or lockouts or any other causes beyond its control.

It may be a case that a bank is unable to fulfil its obligations to examine documents in a timely manner or to honour, negotiation or send refusal due to events outside their control. In this respect, this article indicates that a bank assumes no liability or responsibility for such circumstances that include natural events like typhoons, earthquakes, lock out or flood etc.

In this case if the beneficiary is unable to make a presentation to the nominated bank or issuing bank by the expiry date or latest presentation date because of a force majeure concerned bank is closed, when the presentation can be made, the documents will be discrepant.

-A bank will not, upon resumption of its business, honour or negotiate under a credit that expired during such interruption of its business.

Last para of this article clears that a bank will not be liable to resume its business, honour or negotiate under a credit if that is already expired due to force majeure event, and particular presentation will be treated as discrepant.

Example: LC States: 41a-Available with XYZ Bank China by Sight; and 31d- 10-June-20xx, China.

Beneficiary tried to present the document on 09-June-20xx, however, XYZ Bank was close in china from 07-June-20xx for uncertain period due to high COVID cases, and beneficiary was not able to present the document, chinese government remove the restriction for lock down and allows all banks to open from dated 15-June-2022, presentation is being made on dated 16-June-20xx.

In the above scenario, once bank XYZ opens from dated 15-June-20xx is not liable to resume the business from the date where they left before lock down exempting the period lost due to lock down, and may treat the credit an expired credit. However, in such a practical situation a bank will not do that until applicant is not being impacted, an applicant may chose to pay through issuing bank waiving the marked discrepancies or a non-existent credit.

An extension of the expiry date stipulated in the documentary credit or the latest date for presentation, as mentioned in sub-article 29(a), does not apply in the case of ‘Force Majeure’.

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Chandan Kumar Yadav
My name is Chandan Kumar Yadav CDCS, CSDG, CITF, PGDIBO,AML-KYC, CCFE, MLIBF, CSF, 6SIGMA a trade finance professional with an experience of 11 years whereas worked with several stages of letter of credit, bank guarantee and on other payments methods of trade transactions such as documentary collection, open accounts, SBLC etc., I have a fair understanding of Trade Based Money Laundering as well, Blogging related to Trade Finance is my passion and I want to share which I know and learn from others, I have worked with Wells Fargo, Yes Bank Limited and Bank of America, India which helped me to gain knowledge, view of Trade Finance and importance of International Trade in world's economy. Trade Finance is thumping product, everyday we are learning something new so in order to keep learning I started this as one of the platform. . Let's Learn Together

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