## Facts

- A Danish buyer instructed Hambros Bank, Ltd. (Hambros) to issue an irrevocable sight documentary letter of credit in favor of J.H. Rayner and Company, Limited (Rayner) for a shipment described in the credit as “Coromandel groundnuts.”
- The credit required payment against presentation of specified shipping documents, including an invoice and bills of lading covering the shipment described in the credit.
- Rayner presented the required documents to Hambros.
- The invoice described the goods as “Coromandel groundnuts.”
- The bills of lading described the goods as “machine-shelled groundnut kernels,” and the invoice included the marginal marking “C.R.S.”
- Rayner argued that “C.R.S.” meant Coromandel and that, in the trade, “machine-shelled groundnut kernels” were understood to be the same commodity as Coromandel groundnuts.
- Hambros refused to honor the credit, stating that the documents did not match the description required by the letter of credit.
- Rayner sued Hambros for breach of the bank’s undertaking under the credit. The trial court entered judgment for Rayner, and Hambros appealed.

## Issues

1. Under a documentary letter of credit requiring documents covering “Coromandel groundnuts,” may the issuing bank dishonour when the bill of lading describes the goods as “machine-shelled groundnut kernels,” even if trade usage treats the descriptions as referring to the same goods and the invoice contains an abbreviation said to mean Coromandel?

## Decision

- The Court of Appeal held that Hambros was entitled to refuse payment.
- The court reversed the trial court’s judgment for Rayner and entered judgment for Hambros.
- Because the bills of lading did not on their face describe the goods in the terms required by the credit, the tender was nonconforming.
- The bank was not required to rely on trade usage, merchant understanding, or abbreviations to treat a different description as equivalent to the credit’s description.

## Legal Principles

- A letter of credit is independent of the underlying sale; the bank’s responsibility is governed by the credit’s terms rather than disputes about the goods or performance between buyer and seller.
- Banks deal with documents, not goods. The bank’s task is to examine whether the presented documents, on their face, match the credit.
- The standard is strict compliance: if the credit calls for documents covering goods described in a particular way, the bank may reject documents that use materially different wording, even if merchants would treat the wording as referring to the same commodity.
- A bank is not required to know or apply special trade meanings, abbreviations, or commercial shorthand to reconcile differences between the credit and the documents.
- The beneficiary bears the risk of discrepancies in document wording; if the documents do not match the credit, the bank may dishonour without incurring liability.

## Conclusion

J.H. Rayner and Company, Limited v. Hambros Bank, Limited holds that an issuing bank may lawfully dishonour a documentary credit where the documents do not strictly match the credit’s required description of the goods, and the bank need not accept trade usage or abbreviations as a substitute for facial conformity.


J.H. Rayner and Company, Limited v. Hambros Bank, Limited, 1 KB 37 (1943)