1. Definition

Article 2 & Article 8 of UCP 600 [ICC Publication No. 600] defines it:

A Confirmed Letter of Credit is one where, at the request or authorization of the Issuing Bank, a second bank - the Confirming Bank - adds its definite undertaking to honour or negotiate a complying presentation, in addition to that of the Issuing Bank.

Simple structure:

Importer (Applicant) -> Asks -> Issuing Bank (in Importer's country) issues LC -> Requests -> Advising Bank in Exporter's country -> If it adds confirmation, it becomes Confirming Bank -> Beneficiary (Exporter)

Once confirmed, you have two independent payment promises: Issuing Bank + Confirming Bank.

Cost: Confirmation charges 0.5% to 2.5% per annum of LC value, borne by applicant unless agreed otherwise.

2. Legal Nature - 3 Key Principles

A) Autonomy Principle

LC is independent from the underlying sale contract. Banks deal in documents, not goods. UCP 600 Article 4 & 5.

B) Strict Compliance Principle

Documents must strictly comply with LC terms. Even a minor typo can lead to rejection. UCP 600 Article 14.

C) Definiteness of Confirmation

Under UCP 600 Article 8, confirmation cannot be withdrawn or amended without beneficiary's consent. Once confirmed, the Confirming Bank is directly liable.

3. Obligations of Confirming Bank - UCP 600 Article 8

This is the core law:

1. If LC is payable at sight: Must pay immediately on complying presentation.
2. If LC is for deferred payment: Must pay on maturity.
3. If LC is for acceptance: Must accept draft and pay on maturity.
4. If LC is for negotiation: Must negotiate without recourse.

Even if the Issuing Bank goes bankrupt or refuses to reimburse, the Confirming Bank MUST pay. Its recourse is against the Issuing Bank, not the exporter.

4. Difference: Unconfirmed vs Confirmed

5. Detailed Case Laws - Indian and English

This is where students lose marks. These are the leading cases you must cite:

A) Foundation Cases on Nature of Confirmed LC

1. Hamzeh Malas & Sons v British Imex Industries Ltd 2 QB 127
Facts: Buyer opened confirmed irrevocable LC. Later said goods were defective and tried to stop payment.
Held: Lord Jenkins said - An irrevocable LC, especially confirmed, is a definite undertaking of the banker. It cannot be revoked like a normal contract. Once confirmed, it is a new independent contract between confirming bank and beneficiary. This is the locus classicus for irrevocability.[1958]

2. Federal Bank Ltd. v V.M. Jog Engineering Ltd., AIR 2000 SC 316 - LEADING INDIAN CASE
Facts: Federal Bank was confirming bank for an LC issued by an Indian bank. Buyer alleged fraud by seller. Federal Bank refused to pay.
Held by Supreme Court of India:

Confirming bank's liability is absolute and independent. It must pay on presentation of complying documents, even if buyer alleges fraud in underlying goods. Only exception is proven fraud by beneficiary to the knowledge of the bank. Issuing bank's inability to pay does not excuse confirming bank. Court relied on UCP 400 (now UCP 600).

This is the most cited case in India for confirmed LCs.

B) Autonomy and Fraud Exception

3. Sztejn v J. Henry Schroder Banking Corp, 31 NYS 2d 631 (1941) - US Origin of Fraud Exception
Exporter shipped rubbish instead of bristles. Court held fraud unravels all, including LC. Confirmed bank need not pay if it has clear evidence of fraud by beneficiary.

4. United City Merchants Ltd. v Royal Bank of Canada 1 AC 168 [The American Accord]
Facts: Seller shipped goods, but loading broker fraudulently antedated Bill of Lading. Beneficiary was innocent.
House of Lords held: Fraud exception applies ONLY to fraud by beneficiary himself, not by third party. Confirming bank must pay if beneficiary is innocent, even if document contains fraud by third party. Documents are to be examined on their face.[1983]

5. Power Curber International Ltd. v National Bank of Kuwait SAK 2 Lloyd's Rep 394
Facts: Confirmed LC required documents to be presented in Kuwait. Confirming bank in Kuwait refused citing Issuing Bank didn't reimburse.
Held: Lord Denning - Confirming Bank's undertaking is independent. It cannot use Issuing Bank's breach as defense. It must pay beneficiary and then sue Issuing Bank.[1981]

C) Strict Compliance in Confirmed LC

6. Standard Chartered Bank v Sin Chung Co. (1990) - Hong Kong
Documents had slight discrepancy in invoice value. Confirming bank rejected.
Held: Doctrine of strict compliance applies with equal force to confirming bank. It is entitled and bound to reject non-complying documents.

7. Seaconsar Far East Ltd. v Bank Markazi Jomhouri Islami Iran 1 Lloyd's Rep 236
Court held confirming bank must examine documents with reasonable care under UCP, but cannot go beyond documents to check actual performance.[1993]

8. Credit Agricole Indosuez v Muslim Commercial Bank Ltd. 1 Lloyd's Rep 275
Facts: Pakistani issuing bank collapsed. London confirming bank paid beneficiary. Then claimed reimbursement.
Held by English Court of Appeal: Confirming bank which pays on complying documents is entitled to reimbursement from issuing bank even if issuing bank alleges fraud by applicant. Confirmation makes confirming bank's payment final vis-a-vis beneficiary.[2000]

D) Indian Cases on Confirmation Liability

9. UCO Bank v Mrs. Shahinda A. Hassan, AIR 1989 Guj 157
Gujarat High Court held that when an Indian bank confirms a foreign LC, it acts as principal debtor, not as agent of foreign bank.

10. Tarapore & Co. v Tractors Export, Moscow, AIR 1970 SC 891
Though about unconfirmed LC, Supreme Court laid down fundamental principle for India: Letter of credit is independent of sale contract. Buyer cannot injunct confirming bank from paying on ground of breach of sale contract.

11. Texmaco Ltd. v State Bank of India, AIR 1979 Cal 44
Calcutta High Court held that confirming bank cannot delay payment on ground that it has not received cover amount from issuing bank. It must pay from its own funds.

6. When Can Confirming Bank Refuse to Pay? - 3 Defenses Only

Indian and English courts allow only these:

1. Non-complying presentation: Documents not as per LC terms - UCP 600 Article 14, 15, 16.
2. Fraud by beneficiary: Clear, established fraud of which bank has notice before payment - Sztejn exception, followed in Federal Bank case.
3. Illegality: Payment prohibited by law, e.g., UN Sanctions, OFAC sanctions - e.g., Bolivinter Oil SA v Chase Manhattan Bank 1 Lloyd's Rep 251 - LC to be performed in country where it is illegal is unenforceable.[1984]

What is NOT a defense:

• Buyer says goods are defective - NO
• Buyer has gone insolvent - NO
• Issuing bank has not paid confirming bank - NO (Power Curber)
• Fluctuation in exchange rate - NO

7. Practical Procedure for Exporter

1. Insist on clause: "This L/C is to be confirmed by [Your Bank Name], India at applicant's cost"
2. Check confirmation is silent or open? Open confirmation means advising bank is authorized to confirm. You need to pay fee.
3. After confirmation, check SWIFT MT700/MT710 - Field 49 must say "CONFIRM".
4. Present documents to confirming bank, not issuing bank, before expiry.

Drafting Tip for Exam: Always quote UCP 600 Article 8(a): "Provided that the stipulated documents are presented to the confirming bank... and constitute a complying presentation, the confirming bank must honour."