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12 Apr 2021

Silent Confirmation Agreement Meaning

Author: admin | Filed under: Uncategorized

In cases where the issuing bank has not authorized or asked a bank to add its confirmation to a credit, designated banks, at the request of the beneficiaries, often add their tacit confirmation to these credits. Tacit confirmation is a purely contractual agreement between the designated bank and the beneficiary, which excludes the issuing bank and is not regulated by UCP 600. It often includes rights of appeal that are not approved by UCP 600 and requires the beneficiary to transfer or transfer to the designated bank its rights to the issuing bank under the credit. It is important that when banks add their tacit confirmation to the letters of credit, the terms of this agreement must be clearly defined in order to avoid such implicit obligations. More importantly, as confirmed by Fortis Bank SA/NV/Indian Overseas Bank, the designated bank should continue to rely, despite this tacit confirmation, on its clearly defined UCP rights, which require an issuing bank to repay a designated bank that has complied with or negotiated a corresponding submission and has forwarded these documents to the issuing bank. The confirming bank is the bank that adds its confirmation to a credit on authorization or request from the issuing bank. A tacit long-term solution is also not satisfactory, as there is no doubt that the defendant`s lawyers are already busy rephrasing the model agreement in order to exclude the unspoken conditions. The implicit conceptual solution is probably a one-off solution. Instead of following this simple and effective procedure, designated banks sometimes choose to enter into separate agreements with the recipient that purport to “validate” the credit under certain conditions. The conditions are always unfavourable to the beneficiary, the procedure is called “tacit confirmation”. In a creditor issued by a bank and received by a buyer, it is indicated that the bank will repay the payment if the buyer does not. Formal and silent confirmation letters are types of letters of credit.

A silent confirmation letter looks like an official loan. It also has the protection of a foreign bank that supports a domestic bank, but the national bank has the opportunity to negotiate terms and prices with the seller. The latest version of UCP 600, which codifies best practices in letters of credit, allows a designated bank from which the balance is made available by the issuing bank to add its confirmation upon request or authorization from the issuing bank. Confirmation means “a definitive commitment from the confirmation bank… honour or negotiate an appropriate presentation.” With respect to UCP600, only a confirmation bank and no designated bank is required to comply with a compliant submission. Recipients therefore prefer that a credit be confirmed to ensure that the bank does not have room for discretion with respect to mail-order credits when submitting such a project. The defendant has committed to credit the account upon presentation of the corresponding documents, which is subject to the provisions of the UCP. However, the agreement gave the defendant a right of appeal. This runs counter to the UCP`s conditions for bank confirmation.

“Silent confirmation,” although usually, is a dangerous and dangerous device. This situation is illustrated by Greenhill International Pty Ltd v Commonwealth Bank of Australia [2013] SADC 7. Open confirmation is the case when a bank issues requests confirmation from the advisory bank on the L/C.

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