A. M. O. Akinsanya V. United Bank For Africa Limited (1986)

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KAYODE ESO, J.S.C.

This appeal involves a most important aspect of commercial law. It deals with Bankers Commercial Credits, an aspect of law that arises in connection with international trade. From in between the First World War, and the Second World War, and more so, since the second world war, financing of international trade has been done mainly through Bankers.

This is necessary, especially as international commerce has been instrumental in “squeezing” the world into a commercial size, and thus making international trade and commerce indeed much easier than domestic commerce. As far back as towards the end of the second world war, Scrutton L.J. had stated the principle of confirmed credit with adequate clarity. The Lord Justice said, of commercial credit, in Guaranty Trust Company of New York V. Hannay (1918) 2 KB 623.

“The enormous volume of sales of produce by a vendor in one country to a purchaser in another has led to the creation of an equally great financial system intervening between vendor and purchaser, and designed to enable commercial transactions to be carried out with the greatest money convenience to both parties. The vendor, to help the finance of his business, desires to get his purchase price as soon as possible, after he has dispatched the goods to his purchaser; with this object, he draws a bill of exchange for the price, attaches to the draft the documents of carriage and insurance of the goods sold and sometimes an invoice for the price, and discounts the bill – that is, sells the bill with documents attached to an exchange house. The vendor thus gets his money before the purchaser would, in ordinary course, pay; the exchange house duly presents the bill for acceptance, and has, until the bill is accepted, the security of a pledge of the documents attached and the goods they represent.

The buyer on the other hand, may not desire to pay the price till he has sold the goods. If the draft is drawn on him, the vendor or exchange house may not wish to part with the documents of title till the acceptance given by the purchase is met at maturity. But if the purchaser can arrange that a bank of high standing shall accept the draft, the exchange house may be willing to part with the documents on receiving the acceptance of the bank. The exchange house will then have the promise of the bank to pay, which if in the form of a bill of exchange, is negotiable, and can be discounted at once. The bank will have the documents of title as security for its liability on the acceptance, and the purchaser can make arrangements, to sell and deliver the goods.”

An equally clear statement of this branch of the law will be found in the case of Pavia & Co. S.P.A. v. Thurmann-Nielsen 1952 2 Q.B. 84 where Denning L.J., as he then was, dealt with the increasing sale of goods across the world. He said –

“The sale of goods across the world is now usually arranged by means of confirmed credits. The buyer requests his banker to open a credit in favour of the seller, and in pursuance of that request the banker, or his foreign agent, issues a confirmed credit in favour of the seller. This credit is a promise by the banker to pay money to the seller in return for the shipping documents. Then the seller, when he presents the documents, gets paid the contract price. The conditions of the credit must be strictly fulfilled; otherwise the seller would not be entitled to draw on it.”

However, before I discuss the law further, I would like to set out the facts of this case, then deal, first with one matter arising out of an application by Chief Williams (S.A.N.) learned Senior Advocate representing the Respondents, that is, the United Bank for Africa Ltd., in this case, seeking enlargement of time within which the Respondents may file their notice of Appeal on the decisions by the learned Justice of the Court of Appeal on the issue of jurisdiction, of the trial Court, to deal with this matter.

A.M. O. Akinsanya trading in the name and style of Rocky Merchants, a company with headquarters in Lagos, having decided to import 10,000 metric tons of cement, struck a deal with a Swiss company, known as the Association for Economicatone Industrial Development in the Middle East and African Country (otherwise known as ASDECAMO, for short) and after the deal, he approached and contracted with the United Bank for Africa Ltd. to open a letter of credit for the transaction in favour of ASDECAMO. ASDECAMO will hereinafter in this judgment, be referred to as the Swiss Company or ASDECAMO indiscriminately.

Hereinafter, in this judgment, A.M.O. Akinsanya, aforesaid, will be referred to as the Appellant, while United Bank for Africa will be referred to as the Respondent. The letter of credit was for $570,000 and the application for the letter of credit was tendered as Ex.B. The particulars tendered are that the letter of credit was to be “irrevocable/confirmed” and the amount $570,000 was to be available to the Swiss Bank at sight once ”

accompanied by the following documents …. combined Certificate of Origin, value and invoice “FORM C’ in triplicate including original.

Commercial invoice

Certificate of Origin.

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