particular person, for his purposes only, and on its face not intended to be shown to or relied upon by anyone else. Consequently no one else may invoke an estoppel.74 When, therefore, the addressee assigns or puts up the letter as security, the only legal right of the pledgee would seem to be a right to the possession of the paper. Without the paper, the addressee cannot enforce his rights against the issuer nor negotiate bills. Thus the right of possession of the paper is a valuable one and by its mere possession the pledgee is in a position to exert pressure upon the pledgor for his security. The case is legally like the deposit of title deeds in English law,75 and suggests the question whether the pledgee of a letter of credit obtains any lien in equity. But what has the addressee-pledgor to give him? Certainly he has nothing in praesenti on any of the theories considered. Turning to the theory of the letter as an acknowledgment of money received and held to the use of addressee, we get a like result. True, in an ordinary case of money had and received, there is a debt enforceable in a money count, which debt may be assigned. But here the money is held to the use of the addressee upon condition and there is no assignable debt until the condition is performed. Nor is the result different upon a theory of the letter as an instrument of the law merchant. For the letter by its very terms does not contain a power of negotiation as in the case of commercial paper payable to order or bearer. Consequently the position of the assignee for security seems to be simply that of one who for his security has possession and right of possession of a document without which the pledgor thereof cannot realize a valuable possibility. When the possibility has come to fruition in an actual claim in praesenti, equity might then consider the pledgee of the letter an equitable lien-holder.76 But this could scarcely happen without the production of the instrument, so that possession of it and consequent control of the situation is the pledgee's real security. In a case like Krakauer v. Chapman 77 the theory of money held by the issuer to the use of the addressee would be advantageous to the pledgee. If the addressee may sometimes have a claim against the 74 Fletcher Guano Co. v. Burnside, 142 Ga. 803, 83 S. E. 935 (1914); Robbins v. Bingham, supra. 75 3 POMEROY, EQUITY, 3 ed., § 1264. 76 Ibid., § 1237. 77 16 App. Div. 115, 45 N. Y. Supp. 127 (1897). issuer in praesenti without complying with impracticable terms of the letter, yet obviously he could not sue and enforce that claim without the letter. In such a case, on established principles, the pledgee of the paper would have an equitable lien.78 Where business changes take place the case is more difficult. For reasons already set forth there is no help in such a case on theories of offer, or guarantee, or contract for the benefit of a third person. If we think of the letter as an acknowledgment of money held to the use of the addressee upon condition, we must ask whether the condition can be performed. And this resolves itself into a question whether the buyer-seller contract may be assigned. If that contract can be assigned to and enforced by the business successor, it is submitted that the latter may perform the conditions of the letter and enforce it. Ordinarily when such business changes take place the parties no doubt will take care to make an express agreement obviating such questions. But if the buyer-holder should seek to take advantage of the situation to escape from his contract and hence refuse to enter into or sanction a new agreement, the point might well be important. In case of sub-contracts, what has been said as to pledge of the letter by the addressee becomes applicable. The addressee, where there is a sub-contract given by him, may deposit the letter with the sub-contractor which will raise the same questions as the deposit of the letter for security. Where there are a number of sub-contracts, so that this course is not possible, the addressee might deposit the letter with a trustee for the benefit of the sub-contractors according to their several interests. But the usual plan is to deposit the letter with a bank as security and ask the bank to issue new letters of credit addressed to each of the several sub-contractors. A letter which is expressly made assignable raises questions like those which arise upon a general letter. Such an instrument amounts to a letter addressed to the addressee or to such person or persons as he may turn it over to. Or, if the letter is in the form of authority to draw, it amounts to a power conferred on the addressee to designate those who may avail themselves of the offer. Letters sometimes contain express powers of designation of this 78 Harrison v. McConkey, 1 Md. Ch. 34 (1847); Ruckman v. Ruckman, 33 N. J. Eq. 354 (1880); Pringle v. Pringle, 59 Pa. St. 281 (1868); Pierce v. Bank, 129 Mass. 425 (1880); Hill v. Stevenson, 63 Me. 364 (1873). sort. They raise no difficulties on the offer theory, as the terms of the offer provide how the offeree shall be ascertained. They raise no difficulties on the theory of the letter as an acknowledgment of money held to the use of the addressee, for the letter expressly empowers the person to whose use the money is held on condition, to designate the others to whose use it may be held on like conditions, and it is a representation that the money is held to such uses on which any one so designated may reasonably rely and may thus raise an estoppel in his favor. So much for so-called questions of assignability. Suppose that the buyer-holder becomes insolvent and the security of the issuer fails after the seller-addressee has done a substantial part of the work of manufacture, but before he has made deliveries and drawn on the issuer, and the issuer in this interval seeks to cancel. On the offer theory this brings up the much mooted question of an offer requiring by its terms a series of acts to constitute acceptance, which offer is revoked after part of the series of acts has been performed, to the prejudice of the offeree, but before acceptance is complete.79 Courts have usually been able to avoid this question by straining construction of the transaction so as to make it a bilateral contract, treating the partially completed acceptance as part performance of a bilateral contract. But if the offer theory of letters of credit is adhered to, this way of escape is not open in the present case since by our hypothesis the letter is but an offer and the action of the addressee admits of no other possible construction than that of acts falling short of acceptance. Moreover, they are acts in performance of the contract with the buyer-holder and not acts directly in acceptance of the issuer's offer. Protection of the seller-addressee in such a case clearly requires a theory of the letter as acknowledging that money has been received and is held to his use or else a theory of the letter as a substantive transaction of the law merchant. A situation similar on principle where the letter is conditioned on instalments of delivery has already been discussed. Let us carry back the foregoing situation one step further. Suppose the buyer-holder, perhaps to make a more advantageous contract elsewhere, seeks to pull out from the sales contract before 79 McGovney, "Irrevocable Offers," 27 HARV. L. Rev. 644. the seller-addressee has done anything toward performance, and so procures the issuer to attempt cancellation of the letter. It would seem that the letter might be canceled on the offer theory, even though it is stated to be irrevocable, since if we concede that a collateral agreement not to revoke an offer will make it irrevocable, there is nevertheless no consideration here for such agreement. Also it would seem that the letter under the theory of its being an acknowledgment of money had to addressee's use, might be canceled, unless the addressee can meet the burden of showing that the issuer actually received the money to his use, for the letter would be an admission only and no estoppel would be available. A contrary result would be reached on the theory of the letter as a notification of a contract between holder and issuer for the benefit of addressee, in jurisdictions where it is held that there can be no rescission by the contracting parties after the third-party beneficiary has been notified. This sort of situation calls for a theory of the letter of credit as a self-sufficing instrument of the law merchant. What is the position of the issuer in case of controversies between the buyer-holder and the seller-addressee as to performance of the sales contract and construction of its conditions? The issuer could hardly become involved in such controversies nor incur risk because thereof if the letter were drawn with judgment, and liability thereunder were expressly made to depend on a few plain simple conditions. But this question may easily become important under some of the forms in current use which seem to incorporate the contract by reference and so make its terms conditions of the letter. If the issuer is in the position of one who has received money from A to the use of B upon a condition, it is obvious that circumstances may arise in which B will claim the money on the ground that the condition has been fulfilled while A will claim it on the ground that the condition has failed. In that event there is a typical case for interpleader, which would afford the issuer full protection were both holder and addressee within the jurisdiction. As the holder is usually abroad, the case is not so simple. But could not the issuer bring his bill of interpleader against the addressee and holder in a court where he could reach addressee and by notifying holder obtain a decree which would at least settle the rights of the addressee and bind the holder so far as the domestic forum is concerned? 80 Short of this, the issuer's protection must be the conditions of the letter of credit and his security contract with the holder whereby he is protected so long as he abides by and exacts its conditions. It should be observed that in this situation the interests of both issuer and addressee are best subserved by a theory of the letter as showing that issuer holds money to the use of addressee. On such a theory, interpleader may clearly be resorted to, while on other theories of the letter the technical requirements of interpleader would raise many difficulties. it A letter of credit may or may not fix an expiration date, though may be assumed that the contract between buyer and seller will always contain a time provision. Three possibilities suggest themselves: The letter of credit may expressly fix a date when the credit shall expire, or it may fix no date of expiration, or it may fix no such date but may contain a statement that it is to "expire by limitation." Questions may arise where the buyer-holder and seller-addressee afterwards modify the provisions of the sale contract as to time of performance. If the letter of credit expressly fixes a time, the addressee, on any theory of the letter, may not avail himself of the credit unless he complies with its terms within the time fixed. In mercantile contracts time is an essential term,81 and whether the expiration date named in a letter be regarded as a limitation of an offer, or a condition precedent in an acknowledgment of money held to addressee's use, the result would be the same. If no time is fixed much would depend on which theory is adopted. On the offer theory, no time being fixed, the offer would remain open for a reasonable time, and it would seem that in the absence. of any other indication the limits of what is reasonable would be determined by the time provisions of the buyer-seller contract. On the guarantee theory the sales contract would be the principal obligation and it would follow that any time modification thereof without the issuer's knowledge and consent would release his liability. On the theory that the letter of credit is a notification of a contract between holder and issuer for benefit of addressee, we should have to be governed by that contract, if we could ascertain 80 Stevenson v. Anderson, 2 Ves. & B. 407 (1814). |