Company A has opened a stand by L/C through a C bank for bad bank of their affiliates located in overseas. When establishing the L/C, they did not indicate the revocable possibility. As the company A became dishonored, the C bank sent a cancellation cable without an agreement of the A company which is the beneficiary.
However, when C.M.B, the bank which provided bad bank based on the stand by L/C in overseas requested the payment to the C bank, the C bank turn the payment request down saying since the credit did not indicate revocable possibility, they are considering the credit as revocable credit therefore, sent cancellation without an agreement.
Case study
In the case, it is necessary to see if a standby L/C is U.C.P.(Uniform Customs and Practice for Commercial Documentary Credits) applicable. If U.C.P. is applicable, the question now is whether to assume the standby credit without the revocable indication as a revocable credit or a irrevocable credit. And the applicable range of U.C.P. for the standby credit could also be another consideration.
1. Condition to apply U.C.P. on standby credit
According to the 1 of Uniform Rules for contract Guarantee 500, the rule can be also applied on the standby credit to the extent to which they may be applicable. The problem now is then, what is "to the extent to which they may be applicable" and it means, on the base of the nature of the matter, all the terms that the standby credit can be applied can be applicable with this rule.
2. A standby credit without irrevocable indication
According to the U.C.P 500, a standby credit without the irrevocable indication is consider as a revocable credit. However, according to the U.C.P. 400, since it can be considered as a revocable credit and now that the case is applicable with U.C.P. 400, the cancellation can be done without the consent of the beneficiary.
(I.C.C. pub 489. Case NO. 168)
3. The extent to which the U.C.P. may be applicable on standby credit.
A standby credit is not preconditioned of the shipping. Therefore, the rules of the U.C.P. for the shipping documents regarding related rules, payment taking over, usance methods are not be considered as the applicable rules.
Cautions
When opening a standby credit, you must mention applicable clauses of U.C.P.and stand by L/C rather than a simple Guarantee clauses.
unlike a standby credit, a Demand Guarantee of Guarantee must have a applicable clauses (Uniform Rules for contract Guarantee. pub 325)" and in terms of D/A or D/P transactions, there must be a clause mentioning "Uniform rules for collection I.C.C pub 522".
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1- Application of U.C.P. 
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