Facts
This case concerns a dispute regarding the payment of a bank guarantee. In 1988, company M. (Turkey) sold steel pipes to S. (Jordan) for an amount of 11,115,000 US$, to be paid through a documentary credit opened by bank X. (Turkey) on the order of S. In return, M. had to provide S. with a letter of guarantee of 837,720 US$. Bank Y. (Istanbul) issued this irrevocable letter of guarantee in favor of S., on the condition that the documentary credit be received by Y. by July 30, 1988 and that M. confirm in writing its agreement with the terms of the credit.
M. sent a telex on July 21, 1988 to X. to confirm its acceptance of the documentary credit, while expressing reservations. However, this confirmation was not communicated to Y., the issuing bank of the guarantee, as required by the letter of guarantee. Subsequently, M. informed Y. that it did not accept the documentary credit. S. then demanded payment of the guarantee from bank O. (Geneva), which refused on the grounds that the condition of the letter of guarantee was not fulfilled.
Considerations
The Federal Tribunal upheld the appeal for reform filed by bank O. and dismissed S.'s action. It considered that the principle of documentary rigor also applies when the guarantee is subject to a condition within the meaning of Art. 151 et seq. CO. Thus, the bank can only pay if the documents presented strictly comply with the conditions of the letter of guarantee.
In this case, the disputed condition required that M. confirm in writing its agreement with the terms of…