ARTICLE 19: PARTIAL PAYMENTS
Clause a:
“In respect of clean collections, partial payments may be accepted if and to the extent to which and on the conditions on which partial payments are authorised by the law in force in the place of payment. The financial document(s) will be released to the drawee only when full payment thereof has been received.”
Explanation: This clause allows for partial payments in clean collections, provided that the law in the place where payment is to be made permits such partial payments. Clean collections involve the collection of financial documents without accompanying commercial documents (like invoices or bills of lading). The key point here is that even if a partial payment is made, the financial documents (such as drafts or promissory notes) will only be handed over to the drawee (the party expected to pay) once the full payment is received.
Example: A bank in India is handling a clean collection for a draft of $10,000 drawn on a drawee in the USA. The drawee offers to make a partial payment of $6,000, but under US law, partial payments on such drafts are not permissible. As a result, the bank must refuse the partial payment. If US law did allow partial payments, the bank would still need to hold the financial document until the full $10,000 is paid.
Clause b:
“In respect of documentary collections, partial payments will only be accepted if specifically authorised in the collection instruction. However, unless otherwise instructed, the presenting bank will release the documents to the drawee only after full payment has been received, and the presenting bank will not be responsible for any consequences arising out of any delay in the delivery of documents.”
Explanation: This clause deals with documentary collections, where both financial and commercial documents are presented for payment. Partial payments can only be accepted if the collection instruction (instructions from the seller or remitting bank to the presenting bank) explicitly allows it. Even then, unless the collection instruction states otherwise, the presenting bank should not release the documents to the drawee until full payment has been made. The bank is also not liable for any delays in document delivery that result from this process.
Example: A seller in Germany exports goods to a buyer in Brazil under a documentary collection of $50,000. The collection instruction specifies that partial payments are acceptable. The buyer makes an initial payment of $30,000. However, the presenting bank in Brazil cannot release the shipping documents (e.g., bill of lading, invoice) to the buyer until the remaining $20,000 is paid, unless the collection instruction specifically allows for the documents to be released against partial payment.
Clause c:
“In all cases partial payments will be accepted only subject to compliance with the provisions of either Article 17 or Article 18 as appropriate. Partial payment, if accepted, will be dealt with in accordance with the provisions of Article 16.”
Explanation: This clause emphasizes that any partial payment, whether in clean or documentary collections, must comply with the relevant provisions of Article 17 (which deals with clean collections) or Article 18 (which deals with documentary collections). Moreover, any accepted partial payment must be processed according to the rules outlined in Article 16, which addresses issues related to the presentation of documents and payment.
Example: If a partial payment is accepted for a documentary collection under Article 18, it must follow the procedures for handling documents as per Article 16. For instance, if Article 16 requires that the documents be delivered to the drawee against payment, and a partial payment is accepted, the presenting bank must ensure that this requirement is still met. The documents should not be handed over unless the full payment conditions outlined in Article 16 are satisfied.