Brief Fact Summary. Samuel Rappaport Family Partnership, (Appellant), brought suit after Meridian Bank, (Appellee), refused to honor a sight draft. Appellant appeals the trial court holding that Appellee properly dishonored the sight draft due to the presentment’s failure to comply with the strict terms of the letter of credit.
Synopsis of Rule of Law. The death of a person mentioned in a letter of credit does not cause an ambiguity in the provisions of the letter but rather renders performance of the letter of credit impossible.
Clear contractual terms that are capable of one reasonable interpretation must be given effect without reference to matters outside the contract.View Full Point of Law
Issue. Whether the death of Marvin Orleans rendered ambiguous the question of the continuing vitality of the requirement of the letter of credit regarding the presentation of a certificate signed by him.
Held. No. Marvin Orleans’ death did not render the requirement ambiguous but rather rendered performance impossible.
Concurrence. The law of letters of credit follows a rule of strict compliance. Once Marvin Orleans died, the letter of credit became worthless. It was Appellant’s burden to discover this. He cannot blame Appellee for his failure.
Discussion. The purpose of letters of credit is to assure prompt payment upon the presentation of conforming documents. Finding an ambiguity due to death of a person mentioned in the letter would require issuers to determine whether all such people are living and adjust the requirements of the letter accordingly. This would result the assurance of prompt payment and lead to uncertainty regarding the requirements necessary to obtain payment. Thus it would impair the basic utility of letters of credit.