What Is The Difference Between Honour And Negotiation?

[narisa]

Dear all

What is the difference between honour and negotiation ?

thks.

[ORUNMILA]

Dear all

Negotiation is a subset of Honour. However to honour acording to UCP ARTICLE 2 simply means to pay at sight, to incure a defered payment underking, and pay at maturity, to accept draft and pay at maturity or to negotiate, while negotiation simply mean tp purchase or buy accepted draft drawn on a bank other than the nominated bank and or other documents by agreeing or to make fund available to the beneficiary on or before the day in which reimbusement is due

i hope this help!

[nesarul]

Dear ,

...........or to negotiate,

Is it included in honour under UCP 600!!!!!!!!!
Regards
Nesar

[Navi]

Hi ORUNMILA,
.
I'd like to make a correction in light of nesarul's warning.

Negotiation is the purchase of drafts (not drawn on the nominated bank) and/or documents under a complying presentation by nominated bank, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which the payment is due.

Therefore, negotiation is not defined under "honour".

Regards

[Masoom Hasan]

Exactly, Navi has brought about the right point. Honour is completely separate from the concept of Negotiation.

Honour is a function that can be performed by -
A) issuing bank (sub-article 7a of the UCP 600),
B) confirming bank (if any) [sub-article 8 a (i) and 8 (b) of the UCP 600].

Negotiation is only possible if a credit states that it is available "by negotiation". Negotiation is a function which cannot be performed by the issuing bank. It can be performed by -
A) confirming bank (if any)[sub-article 8 a (ii) and 8 b of the UCP 600],
B) nominated bank (article 2 'definition of purchase' and article 12].

I think this will help for understanding the difference between 'honour' and 'negotiation'.

[asadmbm]

Honor VS Negotiation
(01) It means only Payment (01) It Means financing
(02) There is payment risk (02) There is financing Risk
(03) No default risk is here (03) Default risk is present here