Clause (a)
Clause: Except as otherwise provided by Article 38, a credit can neither be amended nor cancelled without the agreement of the issuing bank, the confirming bank, if any, and the beneficiary.
Explanation: This clause states that a letter of credit cannot be changed or cancelled unless all parties involved—the issuing bank, the confirming bank (if one exists), and the beneficiary—agree to the changes.
Example: Suppose Company A (the beneficiary) received a letter of credit issued by Bank X (the issuing bank) with Bank Y as the confirming bank. If Bank X wants to reduce the expiration date of the letter of credit, both Company A and Bank Y must agree to this change. Without their agreement, the expiration date remains unchanged.
Clause (b)
Clause: An issuing bank is irrevocably bound by an amendment as of the time it issues the amendment. A confirming bank may extend its confirmation to an amendment and will be irrevocably bound as of the time it advises the amendment. A confirming bank may, however, choose to advise an amendment without extending its confirmation and, if so, it must inform the issuing bank without delay and inform the beneficiary in its advice.
Explanation: Once an issuing bank issues an amendment, it is bound by it. A confirming bank has the option to confirm the amendment, in which case it is also bound by it once it advises the beneficiary. If the confirming bank chooses not to confirm the amendment, it must notify the issuing bank and the beneficiary promptly.
Example: If Bank X (issuing bank) issues an amendment to increase the credit amount and Bank Y (confirming bank) agrees to this change, Bank Y is bound by this amendment once it advises the amendment to Company A (beneficiary). However, if Bank Y decides not to confirm the increased amount, it must inform both Bank X and Company A immediately.
Clause (c)
Clause: The terms and conditions of the original credit (or a credit incorporating previously accepted amendments) will remain in force for the beneficiary until the beneficiary communicates its acceptance of the amendment to the bank that advised such amendment. The beneficiary should give notification of acceptance or rejection of an amendment. If the beneficiary fails to give such notification, a presentation that complies with the credit and to any not yet accepted amendment will be deemed to be notification of acceptance by the beneficiary of such amendment. As of that moment the credit will be amended.
Explanation: The original terms of the credit stay valid until the beneficiary accepts the amendment. The beneficiary should notify the advising bank of acceptance or rejection of the amendment. If the beneficiary does not notify, and present documents as per the amended credit terms, then it will be considered acceptance of the amendment.
Example: If Company A does not respond to the amendment issued by Bank X to extend the shipment date, but later presents shipping documents that comply with the extended date, it will be assumed that Company A has accepted the amendment.
Clause (d)
Clause: A bank that advises an amendment should inform the bank from which it received the amendment of any notification of acceptance or rejection.
Explanation: The advising bank must notify the issuing bank about the beneficiary’s acceptance or rejection of the amendment.
Example: If Bank Z (advising bank) receives an acceptance of an amendment from Company A, it must inform Bank X (issuing bank) about this acceptance.
Clause (e)
Clause: Partial acceptance of an amendment is not allowed and will be deemed to be notification of rejection of the amendment.
Explanation: The beneficiary cannot accept only parts of an amendment. If the beneficiary attempts to partially accept an amendment, it will be treated as a rejection of the entire amendment.
Example: If an amendment increases both the credit amount and the shipment period, Company A cannot accept only the increased credit amount and reject the extended shipment period. Such partial acceptance will be considered a rejection of the entire amendment.
Clause (f)
Clause: A provision in an amendment to the effect that the amendment shall enter into force unless rejected by the beneficiary within a certain time shall be disregarded.
Explanation: Any clause in an amendment stating that it will automatically take effect unless the beneficiary rejects it within a certain timeframe is invalid and ignored.
Example: If Bank X issues an amendment stating that the new terms will be effective unless Company A rejects it within 10 days, such a provision will be disregarded, and the amendment will not be automatically accepted after 10 days.