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SUBJECT MATTER: Special Laws Letters of Credit Independence Principle Case Summary

This document summarizes a Supreme Court case from the Philippines about two letters of credit opened by Transfield to secure its obligation to construct a hydro-electric power station by a deadline. Transfield was unable to meet the deadline allegedly due to force majeure and sought a preliminary injunction to prevent the respondent banks from paying on the letters of credit and to prevent the project owner from calling on them. Both the trial court and appellate court denied the injunction. The case discusses the independence principle of letters of credit, where banks assume no liability or responsibility regarding issues between the parties in the underlying contract.

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18 views1 page

SUBJECT MATTER: Special Laws Letters of Credit Independence Principle Case Summary

This document summarizes a Supreme Court case from the Philippines about two letters of credit opened by Transfield to secure its obligation to construct a hydro-electric power station by a deadline. Transfield was unable to meet the deadline allegedly due to force majeure and sought a preliminary injunction to prevent the respondent banks from paying on the letters of credit and to prevent the project owner from calling on them. Both the trial court and appellate court denied the injunction. The case discusses the independence principle of letters of credit, where banks assume no liability or responsibility regarding issues between the parties in the underlying contract.

Uploaded by

Anonymous AOCRjX4
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Transfield Philippines, Inc. v. Luzon Hydro Corp.

GR No. 146717 (22 November 2004)


Tinga J. kmd

SUBJECT MATTER: Special Laws; Letters of Credit; Independence Principle


CASE SUMMARY:
Transfield, as a contractor, undertook to construct a hydro-electric power station and complete the same on or before June 1,
2000. To secure the performance of its obligation. Transfield opened 2 letters of credits from ANZ Banking Group and Security
Bank in favor of Luzon. Nonetheless, Transfield was unable to complete the project on the target date allegedly due to force
majeure. Both Transfield and Luzon filed before separate arbitration tribunals, ICC and CIAC respectively, to determine whether
force majeure would justify the delay. Pending the arbitration proceeding, Transfield filed a complaint for preliminary injunction
against the respondent banks to restrain them from paying on the securities and also against Luzon to prevent it from calling on
the securities. RTC issued a TRO but denied the application for writ of preliminary injunction. CA affirmed RTC. N.B. When the
TRO expired, Luzon was able to withdraw from ANZ.
DOCTRINES:
Under the independence principle, banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness,
falsification or legal effect of any document, or for the general and/or particular conditions stipulated in the documents or
superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition,
packing, delivery, value or existence of the goods represented by any documents, or for the good faith or acts and/or omissions,
solvency, performance or standing of the consignor, the carriers, or the insurers of the goods, or any other person.
The independence principle liberates the issuing bank from the duty of ascertaining compliance by the parties in the main
contract.

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