## Facts

- Kerr-McGee Chemical Corporation agreed to sell diammonium phosphate to Sabar Chemical Corporation.
- Sabar arranged for Park Bank to issue a $1,002,000 letter of credit naming Kerr-McGee as beneficiary and incorporating the Uniform Customs and Practice for Documentary Credits, 1983 Revision (UCP 400).
- After shipment of 6,015.24 metric tons, the parties agreed to extend payment time by 30 days in exchange for a 1% price increase; the credit was amended to reflect a higher per-ton invoice price but the credit amount remained $1,002,000.
- Kerr-McGee first presented documents with a sight draft and invoice totaling $1,014,590.53; Park Bank dishonored because the draft exceeded the credit amount.
- Kerr-McGee re-presented with a revised sight draft for $1,002,000, but the invoice still stated $1,014,590.53; Park Bank dishonored again, citing that the invoice exceeded the credit amount and that the invoice and draft were inconsistent.
- Kerr-McGee sued; after Park Bank failed, the FDIC became receiver and was substituted as defendant; the case proceeded on stipulated facts and cross-motions for summary judgment.

## Issues

1. Under UCP 400, whether an issuing bank that dishonors a presentation on specified grounds may later rely on different, previously unstated discrepancies to justify continued dishonor.
2. Whether summary judgment for the FDIC was proper where the bank’s second dishonor relied on grounds not stated in the initial dishonor notice.

## Decision

- The Eleventh Circuit reversed the district court’s summary judgment for the FDIC and remanded.
- The court held that, under UCP 400, an issuing bank must state all reasons for dishonor when the documents are first presented.
- Because Park Bank’s initial dishonor notice did not include the later-asserted invoice/draft inconsistency and invoice-over-credit objections, the bank (and the FDIC as receiver) could not rely on those new grounds.

## Legal Principles

- When a letter of credit incorporates UCP 400, the issuing bank’s refusal must be accompanied by timely notice specifying all discrepancies relied upon for dishonor.
- Failure to state a discrepancy in the initial notice of dishonor precludes the issuing bank from asserting that discrepancy later as a basis to dishonor the same presentation or a cure attempt based on the initial notice.
- The notice requirement serves the documentary credit function by enabling the beneficiary to evaluate objections promptly and cure them without facing shifting grounds for refusal.

## Conclusion

The court held that UCP 400 requires an issuing bank to provide a single, complete statement of discrepancies at the first dishonor; because the bank added new grounds on a later refusal, the FDIC could not defend dishonor on those newly asserted discrepancies, and the case was remanded for further proceedings.


Kerr-McGee Chem. Corp. v. Fed. Deposit Ins. Corp., 872 F.2d 971 (11th Cir. 1989)