Beruflich Dokumente
Kultur Dokumente
*
G.R. No. 146717. November 22, 2004.
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* SECOND DIVISION.
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light of the purpose of the credit the payment of the credit would
constitute fraudulent abuse of the credit.
Same; Same; Same; Same; The independence principle
liberates the issuing bank from the duty of ascertaining
compliance by the parties in the main contract; As it is, the
independence doctrine works to the benefit of both the issuing bank
and the beneficiary.—As discussed above, in a letter of credit
transaction, such as in this case, where the credit is stipulated as
irrevocable, there is a definite undertaking by the issuing bank to
pay the beneficiary provided that the stipulated documents are
presented and the conditions of the credit are complied with.
Precisely, the independence principle liberates the issuing bank
from the duty of ascertaining compliance by
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TINGA, J.:
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14 Clause 8.2. Time for Completion. The Contractor shall complete all
the Works, including the Tests on Completion, in accordance with the
Program on or before the Target Completion Date. (Rollo, p. 125)
15 Vol. 1, Rollo, pp. 355-357.
16 8.7.1. If the Contractor fails to comply with Clause 8.2, the
Contractor shall pay to the Employer by way of liquidated damages
(“Liquidated Damages for Delay”) the amount of US$75,000 for each and
every day or part of a day that shall elapse between the Target
Completion Date and the Completion Date, provided that Liquidated
Damages for Delay payable by the Contractor shall in the aggregate not
exceed 20% of the Contract Price. The Contractor shall pay Liq
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uidated Damages for Delay for each day of the delay on the following
day without need of demand from the Employer.
17 Annex “L”, Rollo, pp. 383-402.
18 Annex “N”, Id., at pp. 406-409.
19 Annex “O”, Id., at pp. 412-423.
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sented and the conditions of the credit are complied with.
Precisely, the independence principle liberates the issuing
bank from the duty of ascertaining compliance by the
parties in the main contract. As the principle’s
nomenclature clearly suggests, the obligation under the
letter of credit is independent of the related and originating
contract. In brief, the letter of credit is separate and
distinct from the underlying transaction.
Given the nature of letters of credit, petitioner’s
argument—that it is only the issuing bank that may invoke
the independence principle on letters of credit—does not
impress this Court. To say that the independence principle
may only be invoked by the issuing banks would render
nugatory the purpose for which the letters of credit are
used in commercial transactions. As it is, the independence
doctrine works to the benefit of both the issuing bank and
the beneficiary.
Letters of credit are employed by the parties desiring to
enter into commercial transactions, not for the benefit of
the issuing bank but mainly for the benefit of the parties to
the original transactions. With the letter of credit from the
issuing bank, the party who applied for and obtained it
may confidently present the letter of credit to the
beneficiary as a security to convince the beneficiary to
enter into the business transaction. On the other hand, the
other party to the business transaction, i.e., the beneficiary
of the letter of credit, can be rest assured of being
empowered to call on the letter of credit as a security in
case the commercial transaction does not push through, or
the applicant fails to perform his part of the transaction. It
is for this reason that the party who is entitled to the
proceeds of the letter of credit is appropriately called
“beneficiary.”
Petitioner’s argument that any dispute must first be
resolved by the parties, whether through negotiations or
arbitration, before the beneficiary is entitled to call on the
letter
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62 Rollo, p. 493.
63 Aznar Brothers Realty Company v. Court of Appeals, G.R. No.
128102, 7 March 2000, 327 SCRA 359; Soriano v. Court of Appeals, 416
Phil. 226; 363 SCRA 725 (2001); Rodil Enterprises v. Court of Appeals,
G.R. No. 129609, 29 November 2001, 371 SCRA 79; Unionbank of the
Philippines v. Court of Appeals, 370 Phil. 837; 311 SCRA 795 (1999).
64 389 Phil. 20; 333 SCRA 472 (2000).
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67 Tantoy, Sr. v. Court of Appeals, G.R. No. 141427, April 20, 2001, 357
SCRA 329.
68 Bangko Silangan Development Bank v. Court of Appeals, 412 Phil.
755; 360 SCRA 422 (2001).
69 Tirona v. Alejo, G.R. No. 129313, October 10, 2001, 367 SCRA 17;
Manalo v. Court of Appeals, G.R. No. 141297, October 8, 2001, 366 SCRA
752.
70 Tantoy, Sr. v. Court of Appeals, supra note 67; Caviles v. Seventeenth
Division, Court of Appeals, G.R. No. 126857, September 18, 2002, 389
SCRA 306.
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SO ORDERED.
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Petition denied.
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