ABSTRACT
The ability of the seller to carry out the transaction is, therefore, dependent on the buyer providing the letter of credit: and for this reason the seller stipulates that the credit should be provided at a specified time,
well in advance of the time for delivery of the goods. What is the legal position of such a stipulation? Sometimes it is a condition precedent to the formation of a contract, that is, it is a condition which must be fulfilled before any contract is concluded at all. In those cases the stipulation “subject to the opening of a letter of credit” is rather like a stipulation “subject to contract”. If no credit is provided, there is no contract between the parties. In other cases a contract is concluded and the stipulation for a credit is a condition which is an essential term of the contract. In those cases the provision of the credit is a condition precedent, not to the formation of a contract, but to the obligation of the seller to deliver the goods. If the buyer fails to provide the credit, the seller can treat himself as discharged from any further performance of
the contract and can sue the buyer for damages for not providing the credit. The question is, what was the nature of the stipulation in this case? When the buyers sent their order, they stated in writing…that “a credit will be opened forthwith”. It was suggested that the buyers were not making any firm promise on their own account, but were only passing on information which had been given to them by their American buyers. The Judge did not accept that suggestion and I agree with him. The statement was a firm promise by the buyers by which they gave their personal assurance that a credit would be opened forthwith….it is clear that the stipulation for a credit was not a condition precedent to the formation of any contract at all. It was a condition which was an essential term of a contract actually made.
