[1975] 1 W.L.R. 315; [1975] 1 All E.R. 1071; [1975] 1 Lloyd's Rep. 444.
These notes were last updated 21 Mar 96.
Back to list of cases, Back to home page , International trade page
The plaintiffs were purchasers of a consignment of records and cassettes from a French company, "Promodisc", payment to be by confirmed irrevocable credit. Conforming documents were tendered, but by then it had become clear that the cartons shipped contained largely rubbish. The purchasers had ordered 8,625 records and 825 cassettes. The cargo was packed in 94 cartons, but of these two were found to be empty, five were filled with rubbish or packing, and 28 were only partly filled. 275 records and 518 cassettes were actually delivered, but of the 518 cassettes only 25 per cent. were delivered to order.
Nevertheless the buyers failed to restrain the confirming bank from paying under the credit. It was alleged, but could not be proved, that the sellers were fraudulent.
Back to start of case , Back to list of cases , Back to home page , International trade page
It is not easy to prove fraud, particularly in the short time before payment becomes due under a documentary credit, and fraud must be attributed to the seller, not to a third party such as a freight forwarder or loading broker.
The courts appear to assume that the parties to international sale contracts are more interested in promoting the negotiability of bills of lading, and insulating banks from any concern over disputes under the sale contract, than in preventing fraud.
In Discount Records itself, the report suggests that the victims (buyers) might have had a contractual action against the issuing bank, arising from an independent breach, and might therefore have been adequately protected, but in the absence of such an action their position would be very weak. Promodisc were presumably in breach of contract, and if the allegations that had been made were correct, had committed the tort of deceit. For fraudulent misrepresentations, fraudulent breaches of contract and the tort of deceit, normal rules of remoteness do not apply, and in Doyle v. Olby (Ironmongers) Ltd. [1969] 2 QB 158, the Court of Appeal held that the object of damages in fraud, unlike contract, is that the damages should compensate the plaintiff for all the loss he has suffered, i.e., for all the actual damage directly flowing from the fraudulent inducement. However, in many cases this will be rather theoretical. Promodisc was a French company, which may have had neither offices nor assets in the United Kingdom, and the plaintiffs had no useful property to protect them. (Property in the money would have passed to Promodisc.)
These notes were last updated 21 Mar 96.
Back to start of case , List of cases , Back to home page , International trade page
Talk on maritime fraud, international trade home page.
These notes were last updated 21 Mar 96.
Back to start of case , Back to list of cases , Back to home page
SLAPNT@cf.ac.uk