Payment Under Reserve

If the bank to which documents are presented by a Beneficiary under a Letter of Credit contends that the documents do not comply with the terms of the Letter of Credit, the bank may nevertheless be willing to make payment under the Letter of Credit to the Beneficiary against an indemnity issued by the Beneficiary or 'under reserve'. If the Applicant is not willing to take up the documents as presented by the Beneficiary, the bank will seek to recover the payment under the Letter of Credit by claiming under the indemnity issued by the Beneficiary.

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