For an example, your correspondent bank opened an “operative letter of credit” through your bank by telex, which was duly advised to the beneficiary. When the documents, which were drawn in compliance with the terms of the said L/C as received by you were presented, the issuing bank rejected the documents on the ground that the consular invoice had not been submitted.
On investigation, it was found that there had been a teletransmission error and the telex message did not contain this stipulation. What is the liability of the issuing bank and negotiating bank with specific reference to UCPDC?
Article 16 of UCP states that banks assume no liability or responsibility for the consequences arising out of delay and/or loss in transit of any messages, letters or documents, or for delay, mutilation or other errors arising in the transmission of any telecommunication.
The effect of this Article is that in the given case the letter of credit becomes as it was received by the negotiating bank. The negotiating bank can claim reimbursement from the issuing bank by tendering documents as per L/C received by telex, i.e , with the consular invoice.
The issuing bank is likewise not responsible for the mutilation in the transmission and can claim payment from the applicant for the documents received.