LEGAL PRACTICE COURSE
City, University of London
Commercial Law and Practice
Agreement and indemnity relating to the opening of documentary credits
The attached document is from the Encyclopaedia of Forms and Precedents, copyright
LexisNexis.
Please review the attached document and answer the following questions:
1. What is the purpose of the document?
To authorise the Bank to pay and reimburse, indemnify for any damages
2. Who would be party to this?
Buyer (applicant for credit) and issuing bank
3. Is the precedent to be used for one or more than one documentary credit?
Allows for a multiple credit facility→ it says ‘from time to time, such documentary
credits’→ therefore, if used on a one-time basis, need to amend this throughout
and be careful
4. Do UCP apply to the agreement?
Clause 20→ yes
5. What action will the Bank take if the Buyer fails to reimburse the Bank
-Can sell the goods which are subject to credit (clause 9)
-Sue buyer for the short fall
→2 possible actions
6. If the Buyer fails to reimburse the Bank and the goods are sitting in a warehouse what
problem will the Bank face if the Buyer has not paid the warehousing costs? How
will this be overcome?
Problem is warehouse owner will have a lien over the goods, and the solution is
the bank to pay the warehouse owner→ (clause 5)
7. Will this agreement cover any unforeseen losses of the Bank and not just direct
losses?
Yes→ clause 3→ very widely drafted, not just limited to the amount of credit
itself→ very beneficial for the bank to recover unforeseen losses
8. What is the purpose of clause 12?
Ensure bank receives full reimbursement and ensure any taxes are paid (not done
by deduction from anything owed to bank)→ very common→ want all of money not
net of tax
docs_086850347.docx 1/8
, LEGAL PRACTICE COURSE
9. If this agreement is to be executed by a company how would you amend
clause 13?
The provisions of this agreement and indemnity shall not be determined or
affected by any change in our constitution. (or) by the death of any one or more
of us but in the event of any such death the notice of termination referred to in
clause 14 below may be given by any survivor or survivors of us or by the
personal representatives of any one or more of us who have died]10.
10. Is this agreement to be executed as a deed or under hand?
-Remember under hand= by a simple contract
-Clause 10→ needs to be executed as a deed→ attorney needs to be appointed
-Remember where one off letter of credit, the relevant indemnity provisions may be
added to the text of the letter of credit itself, to avoid needing a separate agreement
D3
A Documentary Letter of Credit (LC) is a written undertaking, given by a bank on behalf of an
Importer (buyer), to pay the Exporter (seller) a given sum of money within a specified time,
providing that the Exporter presents documents which comply with the terms laid down in the
LC→ LEARN THIS EXPLANATION SO CAN TELL CLIENT THIS
When drafting the payment clause in an international supply agreement:
Think about purpose of clause
Have a checklist for contents
Check client’s instructions – do you need further information?
Comply with drafting criteria at all times
Agreement and indemnity relating to the opening of
2/8 docs_086850347.docx
City, University of London
Commercial Law and Practice
Agreement and indemnity relating to the opening of documentary credits
The attached document is from the Encyclopaedia of Forms and Precedents, copyright
LexisNexis.
Please review the attached document and answer the following questions:
1. What is the purpose of the document?
To authorise the Bank to pay and reimburse, indemnify for any damages
2. Who would be party to this?
Buyer (applicant for credit) and issuing bank
3. Is the precedent to be used for one or more than one documentary credit?
Allows for a multiple credit facility→ it says ‘from time to time, such documentary
credits’→ therefore, if used on a one-time basis, need to amend this throughout
and be careful
4. Do UCP apply to the agreement?
Clause 20→ yes
5. What action will the Bank take if the Buyer fails to reimburse the Bank
-Can sell the goods which are subject to credit (clause 9)
-Sue buyer for the short fall
→2 possible actions
6. If the Buyer fails to reimburse the Bank and the goods are sitting in a warehouse what
problem will the Bank face if the Buyer has not paid the warehousing costs? How
will this be overcome?
Problem is warehouse owner will have a lien over the goods, and the solution is
the bank to pay the warehouse owner→ (clause 5)
7. Will this agreement cover any unforeseen losses of the Bank and not just direct
losses?
Yes→ clause 3→ very widely drafted, not just limited to the amount of credit
itself→ very beneficial for the bank to recover unforeseen losses
8. What is the purpose of clause 12?
Ensure bank receives full reimbursement and ensure any taxes are paid (not done
by deduction from anything owed to bank)→ very common→ want all of money not
net of tax
docs_086850347.docx 1/8
, LEGAL PRACTICE COURSE
9. If this agreement is to be executed by a company how would you amend
clause 13?
The provisions of this agreement and indemnity shall not be determined or
affected by any change in our constitution. (or) by the death of any one or more
of us but in the event of any such death the notice of termination referred to in
clause 14 below may be given by any survivor or survivors of us or by the
personal representatives of any one or more of us who have died]10.
10. Is this agreement to be executed as a deed or under hand?
-Remember under hand= by a simple contract
-Clause 10→ needs to be executed as a deed→ attorney needs to be appointed
-Remember where one off letter of credit, the relevant indemnity provisions may be
added to the text of the letter of credit itself, to avoid needing a separate agreement
D3
A Documentary Letter of Credit (LC) is a written undertaking, given by a bank on behalf of an
Importer (buyer), to pay the Exporter (seller) a given sum of money within a specified time,
providing that the Exporter presents documents which comply with the terms laid down in the
LC→ LEARN THIS EXPLANATION SO CAN TELL CLIENT THIS
When drafting the payment clause in an international supply agreement:
Think about purpose of clause
Have a checklist for contents
Check client’s instructions – do you need further information?
Comply with drafting criteria at all times
Agreement and indemnity relating to the opening of
2/8 docs_086850347.docx
