Sztejn v. Henry Schroder Banking Corp Case:

Sztejn v. Henry Schroder Banking Corp Case: The Sztejn v. Henry Schroder Banking Corporation case, which was decided by Judge Shientag is considered as a landmark case that contributed to the development of English case law with regards to the fraud exception. The applicant of the letter of credit in the case sought a court injunction against the issuing bank in order to stop it from paying on documents that were presented by the seller.

This applicant for the case argued that the shipped goods were not the items he had contracted for whose beneficiary was a merchant in India. Generally, the ruling of the case was a necessary element in preserving the efficiency of the Letter of Credit law as a vital instrument for financing trade. Fraud in the Transaction: The main basis of the Sztejn v.

Henry Schroder Banking Corp case was allegations that shipped goods were not the ones contracted for as the applicant sought an injunction that could prevent the bank from making payment on documents. The plaintiff sought this measure based on a letter of credit that was presented to secure the price of purchasing certain merchandise.

According to the complainant, the documents accompanying the drafts were fraudulent since they did not represent the real merchandise but they were rather fraudulent cover boxes that were packed with worthless goods by the seller of the material ("Sztejn v. J. Henry Schroder," n.d.). The letter of credit was issued to Transea by Schroder's correspondent bank in India that lead to Transea placing 50 cases of goods on board a steamship.

Transea proceeded to procure a bill of lading from the steamship company and received the customary invoices, which described the bristles requested by the letter of credit. The applicant alleged that Transea instead packed the fifty crates with worthless material and rubbish such as cowhair in order to replicate genuine merchandise and deceive Schwarz and the plaintiff.

Based on the applicant's allegations, Transea went on to draw a sketch under the letter of credit to the Chartered Bank and presented it as well the fraudulent documents to the correspondent bank in India for collection for Transea's account. In its part, the Chartered Bank at Cawnpore, India, delivered the draft together with the documents to Schroder for payment. Therefore, the entire process up to the point of seeking for payment from Schroder through fraudulently prepared draft and documents the major contributing factor to the case.

As a result, the plaintiff sought for a ruling that would declare the letter of credit and draft invalid and for injunctive release to stop the payment of the draft. Basic Principle of Letter of Credit Law in the Case: Notably, the reasoning of the case demonstrates that the underlying transaction between the seller and buyer was the cause of fraud.

The court basically accepted that allegations by the buyer that the seller deliberately failed to ship the appropriate goods resulting in the primary transaction to be stained with fraud (Gao & Gao, 2002, p. 104). According to the applicant's submissions to the court, the case sought to challenge the principle of independence of Letter of Credit Law. The fraud rule was applied in this case on the basis that the principle of the independence of the bank's obligation under the law of.