| Company "A" opened a usance credit through a "C" bank. But the credit didn't have clause whether it is revocable or irrevocable credit. After awhile the company "A" notified to the seller of the unilateral cancellation of the credit through the opening bank "C". However, the seller refused to consent on the cancellation and demanded payment for the exported products as per agreement. But the opening bank rejected to meet the payment declaring that the unilateral cancellation is possible since the credit had no indication for revocable nor irrevocable clauses.
Case study
1. Credits permitting revocable or irrevocable
According to the No. 5 of U.C.P. 500, if a credit does not indicate a clause about the possibilities of revocable or irrevocable, the transaction is taking base on the irrevocable. Therefore, the opening bank is prohibit to process unilateral cancellation without the consent of the beneficiary if it is irrevocable credit.
2. The difference between credits permitting revocable or irrevocable
The irrevocable credit is possible for unilateral cancellation by a opening bank without a consent of a confirming bank or a seller. Except, the payment has to made toward to the credit that has been purchased and undertook. The irrevocable credit is referring a credit that is possible for cancellation with a definite consent of a seller or a confirming bank.
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6-Revocable v. Irrevocable Credits.
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