## Facts

- Kodeco Electronics arranged for Perseroan Terbatas Bank Negara Indonesia (BNI) to issue a letter of credit to pay a Korean seller, Sung Jun Electronics (Sung Jun), as beneficiary.
- BNI mistakenly issued the letter of credit naming “Sung Jin Electronics” (Sung Jin) as the beneficiary rather than “Sung Jun Electronics.”
- Sung Jun sold (negotiated) the letter of credit to Hanil Bank (Hanil), which paid Sung Jun and took the credit in expectation of reimbursement upon presentation.
- Hanil presented the documents required by the letter of credit to BNI and demanded payment.
- BNI refused to pay, asserting the presentation did not strictly comply because the documents related to Sung Jun, while the letter of credit named Sung Jin.
- Hanil sued BNI in the United States District Court for the Southern District of New York seeking payment under the letter of credit.
- Hanil and BNI filed cross-motions for summary judgment on whether BNI could dishonor based on the beneficiary-name error.

## Issues

1. Whether an issuing bank may dishonor a letter of credit because the beneficiary name on the credit contains a minor misnaming/misspelling (“Sung Jin” instead of “Sung Jun”) when the presentation otherwise satisfies the credit and there is no real dispute about the beneficiary’s identity.
2. Whether an issuing bank may avoid payment by pointing to a beneficiary-name discrepancy that resulted from the issuer’s own drafting mistake, as against a good-faith negotiating bank seeking reimbursement.

## Decision

- The court granted summary judgment for Hanil and denied BNI’s cross-motion.
- The court held that BNI was obligated to honor the letter of credit and could not refuse payment based on the beneficiary-name mistake under the circumstances presented.
- The court treated the naming error as a clerical mistake that did not create genuine uncertainty about who was entitled to draw, and it did not permit BNI to escape its payment obligation.

## Legal Principles

- A letter of credit is an independent payment undertaking; the issuer’s duty to pay is evaluated by reference to the credit and the presented documents, not disputes in the underlying sale.
- “Strict compliance” requires conformity that matters to the documentary bargain, but it does not require dishonor for a purely clerical beneficiary-name variation that creates no real doubt about identity.
- An issuing bank generally bears the risk of its own drafting/typing errors in the credit; it may not use those errors as a technical defense to defeat payment where the transaction and the presentation clearly point to the intended beneficiary and there is no showing of fraud.
- A negotiating bank that takes the credit in good faith and presents conforming documents is entitled to payment/reimbursement; predictable honoring of credits supports commercial reliance on documentary payment.

## Conclusion

The Southern District of New York entered summary judgment for Hanil Bank, requiring BNI to honor the letter of credit despite BNI’s mistaken naming of the beneficiary as “Sung Jin” rather than “Sung Jun,” because the error was a clerical mistake that did not justify dishonor under letter-of-credit strict-compliance rules in the absence of genuine identity confusion or fraud.


Hanil Bank v. Perseroan Terbatas Bank Negara Indonesia, No. 96 Civ. 3201, 41 U.C.C. Rep. Serv. 2d 618 (2000)