to proceed with the contract. The language of the provision of the contract under consideration, the purpose to be accomplished by that provision, and the unreasonable inconvenience which would be caused to the plaintiff without corresponding benefit to the defendant by a requirement that the plaintiff was bound to extend the letter of credit immediately upon its expiration, though until then he had neither knowledge nor notice that delivery

Sale-expira

tion of letter

would not be made before that time, all

of credit-right point to the view that no such obligation rested

to cancel contract.

upon him. The purpose of the provision under consideration was to compel the plaintiff to furnish banking assurance that the defendant would be paid for merchandise delivered upon presentation of the bill of lading, in the contingency that "it is impossible" to make delivery before December 31. The existing letter of credit was without value to the defendant the instant that contingency arose, and it became evident that deliveries could not be made and payment claimed within the life of the letter of credit. From that instant and not merely at the expiration of the letter of credit, the defendant was without banking assurance that payment for goods delivered under the contract would be made upon presentation of bill of lading, and the defendant was then entitled to demand that the plaintiff should arrange an extension of the letter of credit. The defendant would naturally know that the impossibility had arisen before December 31; the plaintiff would ordinarily not know it before that date without notice from the defendant.

The provision requiring the extension of the letter of credit was inserted for the protection of the defendant. The defendant, desiring such protection, would naturally be expected to transmit to the plaintiff notice that the stipulated occasion had arisen for the giving of such protection. and would ordinarily not

leave the plaintiff to discover for himself that the occasion had arisen, after the lapse of days or weeks during which the defendant would have no banking credit of which it could ever avail itself. Obviously, under such circumstances, the plaintiff might reasonably assume that no occasion had arisen for the extension of the credit until he had received notice from the defendant that it was impossible to deliver the merchandise within the life of the letter of credit. The language of the provision that when the contingency arises the plaintiff would "make arrangements" for the extension of the letter of credit itself suggests that the extension would not follow immediately, but that the plaintiff would have reasonable time to make arrangements for such extension.

Contracts

Business men have a right to rely on the good faith and ordinary prudence of those with whom they deal. right to rely on They may properly good faith. be held to every obligation which a business man, acting in good faith and with prudence, would understand he had assumed, but contracts made between business men in the usual course of business should not receive a technical construction which would require a business man to keep at his elbow a counselor learned in the law to advise in every contingency what his legal rights and obligations may be. Neither

good faith nor ordinary prudence required the plaintiff to make any arrangements to extend the letter of credit at its expiration, unless he had received prior notice that its extension would be required. The defendant was in no worse position in regard to the banking credit on January 1 than it was on December 31, or on the first day it became impossible to deliver goods within the life of the letter of credit. neither time did it have any banking credit of which it could avail itself at the time the goods would actually be delivered. At both times it had only the promise of the plaintiff to make arrangements to extend the

At

existing letter of credit to cover such delivery, and the defendant may not claim that it is justified in its refusal to deliver the goods until the plaintiff has failed to carry out his promise after such notice as would reasonably lead the plaintiff to believe that the time to carry out the promise had arrived, and under such circumstances that plaintiff's failure to carry out his promise, even though inadvertent, brought possible material injury to the defendant. The plaintiff was justified in believing that he would receive some notice from the defendant before he was called upon to make arrangements to extend his letter of credit, not only because the knowledge of when the time had come to make such arrangements rested peculiarly with the defendant, but also because on December 31 only the defendant knew whether it intended ever to deliver the goods, and, if so, whether it would deliver the goods within eight weeks of the date of the contract, or whether the same causes which rendered delivery before January 1 impossible would also serve to extend the time for delivery under the contract. Irrevocable letters of credit are not ordinarily, if ever, issued or extended to cover an indefinite period, and the plaintiff might well believe that he would not be expected to make arrangements to extend the credit in this case until he had some notice as to the time to which it should be extended.

The subsequent notice by the bank that the letter of credit had expired and should be returned for cancelation in no wise changed the defendant's rights or obligation. It was not given by the bank as the agent of the plaintiff, but was a notice, which a bank might send out as a mere matter of routine for its own protection, that the outstanding letter of credit had no longer any force in the defendant's hands. For these reasons the defendant has established no justification for its refusal to deliver the merchandise according to its contract.

The claim that the plaintiff is not the proper party plaintiff requires little consideration. While both parties undoubtedly understood that the plaintiff was the agent of a disclosed principal, and that the contract was made for the benefit of the principal, yet the contract was made in the plaintiff's name, and all dealings of the defendant were with of agent to the plaintiff, maintain and tion. the plaintiff may therefore properly bring the action for breach of contract in his own name.

Parties-right

ac

It follows that the judgment should be modified so as to grant a new trial, with costs to the appellant to abide event.

Judgment accordingly.

Hiscock, Ch. J., and Cardozo, Pound, McLaughlin, Crane, and Andrews, JJ., concur.

vision in the contract of sale relating thereto.

In the reported case (SHIRAI V. BLUM, ante, 603) modifying (1924) 207 App. Div. 605, 202 N. Y. Supp. 540, the buyer sought to recover damages for breach of a contract of sale because of the seller's failure to deliver the merchandise. It appeared that one of the terms of the contract was that the buyer would establish an

irrevocable letter of credit in the seller's behalf, that a letter of credit was established, and that later it was agreed that if it was impossible for the seller to ship the goods before the letter of credit expired the buyer would provide for an extension thereof. No shipments were made, and the bank requested the return of the letter of credit for cancelation. The defendant complied with such request, and no extension was granted on its expiration. Subsequently the plaintiff wrote the defendant that the letter of credit had been extended, and requested that the goods be shipped. The defendant refused to ship them on the ground that the contract had been canceled, and in an action by the buyer to recover damages for such refusal alleged that the failure to extend the letter of credit when it expired, coupled with the request by the bank to return the letter of credit, constituted a material breach of the contract which justified the defendant in regarding it as abandoned without notice to the plaintiff. It is held that under the contract the plaintiff was not required to arrange for an extension of the letter of credit in the absence of a notice that its extension would be required, and that the defendant had shown no justification for its refusal to perform. It was also held that the notice given by the bank to the defendant of the expiration of the letter of credit was not given by the bank as the agent of the plaintiff, but was sent out as a matter of routine for its own protection. In the same case it is also declared that the purpose of a provision for a letter of credit in a contract of sale is to provide complete assurance to the seller that he will be paid whenever he complies with his contract.

In Isaiou Trading Corp. v. Standard Rice Co. (1924) 208 App. Div. 20, 202 N. Y. Supp. 849, the action was by the buyer against the seller to recover damages for alleged failure to deliver a quantity of rice, for which the former was to pay $3,912.10 on delivery thereof. The defendant, on receipt of a copy of the bought and sold note executed by the brokers, notified the 38 A.L.R.-39.

The

plaintiff that it did not see its way clear to make the delivery unless the plaintiff established a bank guaranty or confirmed credit in New York for the amount of said purchase. plaintiff agreed to accept the condition imposed and to establish the bank credit required. Further facts appear in the following extract from the court's opinion: "The credit was opened with the New York Trust Company and expired on July 10, 1921. Plaintiff informed the defendant that as soon as they heard from the bank that the credit had been transferred they would let the defendant know. The New York Trust Company, for reasons which do not appear, declined to transfer said credit. Plaintiff having failed to establish the promised credit, the defendant, on July 7, 1921, as its final ultimatum, informed plaintiff that defendant would accept a letter of credit if the same was delivered at defendant's office by noon of the day following, July 8, 1921. The plaintiff failed to deliver said letter of credit at the defendant's office at the hour appointed, but about 1 o'clock in the afternoon of that day a representative of the brokerage firm acting for the parties did deliver at the defendant's office a letter of credit issued by the Fifth National Bank of New York for $3,912. In the letter addressed to the defendant and signed by the assistant cashier of said bank, to the effect that the bank consented to pay defendant, upon presentation of usual shipping documents, the said sum covering the cost of the rice, it was specifically stated that said rice was 'for immediate shipment (not later than July 13) from New Orleans on the steamship Jefferson City on its present trip.' Thereby a new condition was arbitrarily imposed as to the date of shipment. Defendant never acquiesced thereto, and indeed could not have complied with such condition, because, as shown by the evidence, defendant's warehouse, where said rice was stored, was so situated that it would have been physically impossible for defendant to have delivered said rice f. a. s. New Orleans within the time specified in plaintiff's letter of

credit. Defendant never having acquiesced in such condition, there was no completed contract between the parties. The defendant refused, when the same was thus presented, to accept said letter of credit upon the ground that the same was not delivered within the time specified, and refused to deliver the rice covered by the brokers' note, whereupon the present action. was brought, and in the municipal court the plaintiff recovered judgment for $759.50 damages. Upon appeal to the appellate term the judgment of the municipal court was affirmed, and upon consent of this court an appeal from the determination of the appellate term was taken. The evidence fairly discloses that the brokers' note covering the shipment of rice was never a complete contract between the parties; that it was tentative only; and that the condition imposed by the seller, namely, that the plaintiff establish a bank credit covering the amount of the purchase, never was in fact fulfilled; that the final offer of the defendant to deliver said rice upon plaintiff's furnishing at or before 12 o'clock noon of July 8, 1921, of said bank credit, was not met by the plaintiff, and that the defendant was legally justified in refusing to accept the letter of credit tendered by the plaintiff at an hour later than that specified, for an amount less than the price of the rice; and that a further condition was finally imposed by the plaintiff to which defendant never agreed. This being so, we think the plaintiff did not prove facts sufficient to constitute a cause of action."

In Albert de Bary Jr. v. Agar-Bernson Corp. (1924) 208 App. Div. 645, 204 N. Y. Supp. 18, it appeared that the plaintiff and the defendant had entered into a contract for the delivery of 1,500 tierces of lard. The contract provided that the defendant should deliver to plaintiff the lard in question, to be shipped immediately from the west at a price of 22 cents per pound, and the plaintiff further agreed that it would cause "subsidiary credit" to be opened in favor of the defendant with the Guaranty Trust Company. The plaintiff accepted this

contract and wrote the defendant a letter, with a postscript reading as follows: "P. S. When originally placing this order with us, our Berlin people informed us that credit would be opened at the Guaranty Trust Co. of New York. On September 27 we cabled back to them to advise the Guaranty Trust when opening such credit to pay against sight draft attached to railroad bills of lading, etc. On the 30th they confirmed to us that they would instruct the Guaranty Trust accordingly, so that there is absolutely no question about this credit being opened. We are cabling at once that we have executed their order, by urgent wire, and immediately upon receipt of our wire by them, they will cable the Guaranty Trust the opening of this credit in our favor. Long before you will be ready to submit railroad bills of lading this credit will have been opened." The action was for failure to deliver the balance of the goods under the contract. The position of the defendant was that the plaintiff had never established the "subsidiary credit" called for by the contract, and that therefore it had not performed its part. The defendant called a witness from the Chemical National Bank, who testified that a subsidiary credit is based on another credit, and would have to be in some form of writing; that it "is usually issued for the purpose of giving the third party a contract under which he is insured that the financial institution issuing that subsidiary credit will honor his drafts;" that "if we issue a credit it is never a credit, in our understanding, until we have written it up and signed it;" that the credit here "is a plain commercial letter of credit, but I would not consider it a subsidiary credit." The court said: "We are of the opinion that the purchaser of the lard contemplated that plaintiff in its turn would establish a letter of credit in favor of defendant with the Guaranty Trust Company, which would be based upon the letter procured by the foreign house in favor of plaintiff. The expert testimony produced by both parties tended rather to sustain.defendant's conten

tion than that of plaintiff, and to show that plaintiff had not established the subsidiary credit called for by the contract."

In Arctic Ice & Coal Co. v. Southgate (1923) 287 Fed. 48, it appeared that a contract for the sale of sugar contained the following provision: "Payment-Buyer to open immediately confirmed irrevocable credit in favor of sellers, through the Trust Company of Norfolk, for full amount of invoice. Payable net cash in Norfolk in United States currency on presentation of dock receipt or bill of lading." The plaintiff prepared the contract of sale. and sent it to the Arctic Ice & Coal Company by mail to be executed. With the contract it sent the form of a letter of credit, to be filled out and signed as required by the contract. The letter was filled out and signed on June 2, 1920, by the defendant Atlantic Bank & Trust Company and sent to the Trust Company of Norfolk. The letter was in these words: "On behalf of the Arctic Ice & Coal Company, of Greensboro, N. C., we desire to open a credit through your trust company, in favor of Messrs. T. S. Southgate & Co., Norfolk, Va., in the amount of $10,752, payment to be made in par funds against shipping documents on presentation covering 200 sacks of Java white sugar (about 224 pounds each) shipment August or September from India or Java, via New York. This credit is to be made under our guaranty and to expire September 15, 1920.

If agreeable, please notify Messrs. T. S. Southgate & Co. of this credit." The Atlantic Bank & Trust Company wrote a separate letter of the same date, reiterating that its obligation was that of guarantor, and saying: "Our understanding of this guaranty being that this amount becomes available to T. S. Southgate & Co. upon their delivery to you of shipping documents described therein, and that we in turn cover these advances to you upon your delivery to us of these shipping documents." Subsequently, without the knowledge of the banking company, the provision in the contract of sale "on presentation of dock receipt or bill of lading" was

changed to "on presentation of delivery order." It was held that as the bank was not a party to the change, and had no notice thereof, it was not liable. The court said: "The letter of credit was based on the contract of sale, and there can be no doubt that the shipping documents referred to therein were the same shipping documents mentioned in the contract of sale, and defined therein as 'dock receipt or bill of lading.' This was the only contract ever made by the Atlantic Bank & Trust Company, and the evidence of its vice president and cashier that it was not a party to any change of the contract, and that it had no notice of any change, is undisputed. Evidently, therefore, the plaintiff had no cause of action against Atlantic Bank & Trust Company until it presented the dock receipt or bill of lading the shipping documents called for by the contract of sale. These documents were of great value as security to the bank, and it had a right to demand them as condition of payment. Since neither a dock receipt nor bill of lading for the sugar was ever presented, it follows that the Atlantic Bank & Trust Company was not liable."

In Second Nat. Bank v. Columbia Trust Co. (1923) 30 A.L.R. 1299, 288 Fed. 17, it appeared that S. Fisher & Company entered into a written contract with Gordon, Woodroffe, & Company, whereby Gordon sold to Fisher 100 tons of Java white sugar, to be shipped "from Java during September," and bill of lading "to be considered proof of date of shipment." Payment was to be made as follows: "Net cash against invoice for approximate net shipped weights and delivery order under banker's confirmed letter of credit for $40,500 to be established in our favor with the Columbia Trust Company, New York, immediately. Any difference between approximate net shipped weights and net landed weights to be adjusted on receipt of weigh master's certificate of weights. Credit to be in force until 31st December, 1920, and extended if required." Pursuant to the terms of payment requiring a "confirmed letter