Comments on ICC Banking Commission Opinion TA954

Factual Background of TA954

On 24 December 2013, a bank (Issuer) issued a Standby Letter of Credit (SBLC) subject to UCP 600 in favor of a government entity using beneficiary-required text. The SBLC contained auto-extension wording as follows:

"This letter of credit is effective December 24, 2013 and shall expire on December 24, 2014 but such expiration date shall be automatically extended for a period of at least one (1) year on December 24, 2014 and on each successive expiration date unless, at least 120 days before the current expiration date, we notify both the beneficiary, at the above referenced address, and applicant by certified mail that we have decided not to extend this letter of credit beyond the current expiration date. In the event you are so notified, any unused portion of the credit shall be available upon presentation of your sight draft for 120 days after the date of receipt by both applicant and beneficiary as shown on the signed return receipts."

In August 2024, Issuer sent non-extension notices by certified mail to both Beneficiary and Applicant. Based on the return receipts, Beneficiary received its notice on 26 August 2024, that is, 120 days before the then-current expiration date but Applicant did not receive its notice until 28 August 2024. Applicant sought to waive the notification and have the SBLC expire on 24 December 2024. Issuer is reluctant to cancel its LC even as Beneficiary never drew against the SBLC nor indicated any disagreement with the notice of non-extension.