Article-37-UCP-600-Disclaimer for Acts of an Instructed Party

This article provide general indemnification for the choice of another bank, failure of instructions to be carried out by that bank, collection of unpaid fees and charges, and obligations and responsibilities imposed by foreign laws and usages.

 Article-37-UCP-600-Disclaimer for Acts of an Instructed Party

A. A bank utilizing the services of another bank for the purpose of giving effect to the instructions of the applicant does so for the account and at the risk of the applicant.

When a bank transmits instructions to another bank it is at the risk of the applicant.

B. An issuing bank or advising bank assumes no liability or responsibility should the instructions it transmits to another bank not be carried out, even if it has taken the initiative in the choice of that other bank.

This sub-article explains that any action or omission of other banks (advising bank/confirming bank/next advising bank) even it is chosen by issuing bank or other bank in lack of proper instruction, will not be liable or responsible in case that particular bank does not act and the information or credit not be carried out further.

C. A bank instructing another bank to perform services is liable for any commissions, fees, costs or expenses ("charges") incurred by that bank in connection with its instructions. If a credit states that charges are for the account of the beneficiary and charges cannot be collected or deducted from proceeds, the issuing bank remains liable for payment of charges. A credit or amendment should not stipulate that the advising to a beneficiary is conditional upon the receipt by the advising bank or second advising bank of its charges.

This sub-article is regarding charges that have been incurred by a party under a credit that cannot be collected as instructed. In many cases a credit is not utilized and a presentation never been made, however, an advising bank has already advised and in case charges was on account of beneficiary, same will be collected from the issuing bank account.

If an advising bank or second advising bank agree to advise a documentary credit, the issuing bank is ultimately liable, as instructing party, for any uncollected charges of the advising or second advising bank. Reimbursement of these charges from the applicant will be a separate agreement between the issuing bank and the applicant.

A credit or amendment must not be include wording such as “this credit is only be advised once advising bank receives its charges”.

D. The applicant shall be bound by and liable to indemnify a bank against all obligations and responsibilities imposed by foreign laws and usages. 

It indicates that the applicant indemnifies each bank for all obligations and responsibilities imposed by foreign laws and usages – that is, the laws and usages of the country of the other banks – if these are different from those of the country of the issuing bank.

Note: This article has been covered to safeguard a bank if its acting in a good faith and information provided is not been relayed or carry forwarded further, charges not been collected from the beneficiary or liable party indicated in the credit and foreign law and usages.