When can a bank avoid paying under an irrevocable letter of credit?
The judge in this Australian Supreme Court case1 concluded that there are at least three circumstances where a bank does not have to pay: • in the case of fraud; • where it is clear from the underlying contract that there would be no call on the credit where there was a bona fide dispute; or • where there was unconscionable conduct under certain sections of the Trade Practices Act (which are broadly similar to sections 9 and 11 of the Fair Trading Act 1986 of New Zealand).
