## Facts

- Dessaleng Beyene agreed to sell Mohammed Sofan two prefabricated houses, financed through a letter of credit issued by Yemen Bank for Reconstruction and Development (YBRD) in Beyene’s favor.
- Irving Trust Company served as the confirming bank and notified Beyene of the letter of credit’s conditions; Beyene used National Bank of Washington (NBW) as his collecting bank.
- NBW presented documents to Irving, including a bill of lading requiring identification of the person to be notified upon the goods’ arrival.
- The bill of lading listed the notify party as “Mohammed Soran” rather than “Mohammed Sofan.”
- Irving informed NBW of discrepancies, treated the misspelling as a defect, and sought (but did not obtain) authorization from YBRD to pay despite the discrepancy.
- Irving refused to honor the letter of credit; Beyene and Jean M. Hanson sued for wrongful dishonor.
- The district court granted summary judgment for Irving based on nonconforming documents; plaintiffs appealed.

## Issues

1. Whether the misspelling of the notify party’s name on the bill of lading constituted a material discrepancy under the strict compliance rule, permitting the confirming bank to dishonor the letter of credit.
2. Whether Irving waived the discrepancy or was estopped from asserting it by its conduct and communications with NBW and YBRD.

## Decision

- The Second Circuit affirmed summary judgment for Irving.
- The court held the “Soran”/“Sofan” discrepancy was material and defeated strict documentary compliance, relieving Irving of any duty to honor the credit absent issuing-bank authorization.
- The court held plaintiffs failed to raise a genuine issue of material fact on waiver or estoppel because Irving consistently treated the misspelling as a discrepancy and did not intentionally relinquish it.

## Legal Principles

- A bank’s obligation on a letter of credit is confined to the credit’s terms and the facial conformity of presented documents, not the underlying sales transaction.
- Under strict compliance, banks may reject documents containing material discrepancies and are not required to investigate whether an apparent error is harmless in fact.
- A discrepancy is material if it creates meaningful uncertainty or risk for the bank or applicant, including risk affecting delivery and the applicant’s reimbursement obligation.
- Waiver or estoppel requires clear evidence of intentional relinquishment or conduct reasonably inducing reliance; attempts to obtain the issuing bank’s approval to pay despite defects do not, without more, establish waiver.

## Conclusion

The court treated a misspelled notify-party name on a bill of lading as a material documentary defect, enforcing strict compliance in letter-of-credit practice and rejecting waiver or estoppel absent clear proof that the confirming bank agreed to pay despite the discrepancy.


Beyene v. Irving Tr. Co., 762 F.2d 4 (2d Cir. 1985)