Extension to the maturity date of a term credit
Scenario - adapted from ICC Opinion R721
Whilst not a common occurrence, on occasion the maturity date of an accepted draft or a deferred payment commitment under a documentary credit needs to be extended.
It was suggested that, provided all parties agree, this should not be a problem; however, UCP does not specifically address the issue.
The question that was raised was whether or not the rights and protections of UCP 600 continue to apply in the event that such an extension occurs. Furthermore, are the circumstances different between acceptance and deferred payment scenarios?
The undertaking of an issuing bank is addressed in UCP 600 article 7 in that it must provide reimbursement at maturity for a credit available by acceptance or deferred payment. Such undertaking will extend to any re-acceptance of a draft or extension of a deferred payment undertaking.
As a first consideration, it is likely that local law will need to be addressed in order to ascertain if a replacement draft or a new deferred payment undertaking is required.
Should it be the case that there is no legal requirement, either the draft can be re-accepted or the deferred payment undertaking amended to reflect the new maturity date.