Nareerux Redux: The Ontario Court of Appeals Fashions Novel Letter of Credit Law
Wayne State University Law School
February 11, 2010
Wayne State University Law School Research Paper No. 10-01
This paper discusses issues raised by what one must hope is the now infamous case of Nareerux Import Co. v. Canadian Imperial Bank of Commerce, which the Ontario Court of Appeal has now affirmed in large part. This commentator’s criticism of the Ontario Superior Court’s judgment appeared at 24 Banking & Finance Law Review 551 (2009), and this paper has been submitted to the same journal for publication. Happily, the Ontario Court of Appeal reversed the lower court’s obvious error in failing to apply the ICC’s Uniform Customs and Practice for Documentary Credits to credits that incorporated the Uniform Customs explicitly; but, sadly, the Court of Appeal, followed the lower court’s lead in adding good faith observance and fiduciary duties to the issuer’s duties under the credit. The facts disclose that the beneficiary of the credits that enjoys the more than $10 million dollar benefit of these decidedly un-commercial judgments had engaged in the most supine commercial behavior. Yet, moved by concerns that reflect gross lack of appreciation for the realities of commercial letter of credit transactions, the courts have fashioned letter of credit law for Ontario that may raise the cost of letters in that important Canadian province with no discernible benefit to commercial parties.
Number of Pages in PDF File: 20
Date posted: February 12, 2010