Q&A – 29 August 2016
Bank refuses to stop LC
I opened a letter of credit (LC) in favour of a supplier in Asia who was to supply me certain goods. The contract was a cost insurance and freight (CIF) contract. When the bill of lading and other documents were presented to the bank in Tanzania, I immediately called my bank to get them stop the payment as I had information the goods were of an inferior quality. Despite having written an official letter, the bank proceeded to release the funds. My assumption was right as the goods indeed turned out to be of an inferior quality. The bank has refused to refund me my money. The supplier claims that the goods I ordered is what they delivered. My lawyer says we cannot sue the bank which doesn’t make sense to me. What should I do?
DF, Dar
In a CIF contract your bank is supposed to release the funds as soon as the supplier has complied with the terms of the contract which includes providing the original invoice, an insurance policy and the bill of lading.
Unless it is expressly stated in the contract that the bank shall not release funds until a certificate as to quality is issued, which does not seem to be the case here, the bank is not duty bound to check or wait for any such verification.
There is a plethora of cases on the above and with the information you have given us, we agree with your lawyer that it is very unlikely that you will be able to recover from your bank. Unfortunately your cause of action lies against the supplier of the goods and not the bank and we recommend that you proceed in that direction.
If you have information that the bank was involved in the mischief or that the fraud was known to the bank, you might have a parallel cause of action against the bank. Your lawyer can guide you further after understanding the entire case.
Claim rejected, no insurable interest
I am a real estate broker and earn a half months rent every year for property that I manage to lease on behalf of my clients who are ultimately the landlords. Few months ago one of the most prime properties that I had been involved in got gutted by fire. I have insurance against loss of business and had fully declared the source of income. The insurance company has come back saying I did not have insurable interest in the transaction and hence my claim has been rejected. My lawyers agree with the opinion of the insurer. What are your views?
PW, Dar
The concept of insurance is that you cannot insure something that does not belong to you, or in which you do not have an interest. For example you cannot insure someone else’s house and have the insurance policy in your name. Even though initially the insurance company may collect the premium, at the time of the claim they will repudiate the claim since you do not have an interest in the property, what the insurers term insurable interest.
Coming to your question, it seems that you have a contract right which may actually be an insurable interest, even though you do not have rights specifically in the property that was gutted down by fire. This may sound like a radical opinion but you need to look at your insurance policy from this new angle.
The problem here is to develop a working guide for determining just what interrelation between contract performance and existence of the property insured suffices to constitute compliance with the requirement of insurable interest.
There are few cases allowing an insurable interest based on contract right without property right- your case seems to be one such case. We believe you have a good chance of pursuing this matter successfully against the insurance company.
Contract breach
I entered into a contract with a fellow restaurant owner who I bought over, not to open a restaurant to compete with me. This was the deal from the beginning and we both agreed on it. It has been exactly six months and a new restaurant has mushroomed. The restaurant owner from whom I purchased denies that it is his- however it is quite clear that he is running it. He is physically there every day and I have witnessed this myself. Can I get an injunction to stop him from operating that restaurant?
LO, Dar
We have a couple of observations here. It is unclear if your contract disallowed him to open a restaurant or disallowed him to work in any restaurant. We raise this because he can easily come in and tell you that he is not in breach of the contract as he has not opened a restaurant but is merely working there. You may want to carefully look into this.
We now address the question of whether you can get an injunction against him. Our opinion is that it is very unlikely you will be successful in getting an injunction or sue the former restaurant owner. This is because that particular clause not to open a restaurant will likely be held by a Court to be in restraint of trade and against public policy. If he is a entrepreneur or chef, what do you expect him to do? Your attorneys can interpret the entire contract and guide you further but from the facts you have given us we believe your chances of success are quite slim.