189

2 Q.B.

1
[COURT OF APPEAL]

W. J. ALAN & CO. LTD. v. EL NASR EXPORT AND IMPORT CO.

1971 Nov. 22,23,24, 25,26,29, 30; Lord Denning M.R., Megaw
1972 Feb. 3 and Stephenson L.JJ.
Sale of Goods—Payment—Letter of credit—Coffee sold by Kenyan
sellers to Egyptian buyers at "shs.2j62/- per cwt."—Payment
by confirmed irrevocable letter of credit—Letter of credit
opened in sterling—Sellers accepting and operating letter of'
credit not conforming with contractual terms—Devaluation
of sterling before delivery completed—Whether currency
of account sterling or Kenya shillings—Whether currency of
i account varied or waived with sellers' acquiescence—Effect of
opening confirmed irrevocable letter of credit on buyers' obli-
gation to pay—Whether sellers entitled to claim more than
contractual sum by reason of devaluation
By two contracts dated July 12 and 13,1967, sellers of coffee
with a business in Kenya agreed to sell to buyers, an Egyptian
state trading corporation with an office in Dar es Salaam,
) Tanzania, two lots of 250 tons of coffee f.o.b. Mombasa. The
price clause was " shs.262/- . . . per cwt. . . ." and the payment
clause: " by confirmed irrevocable letter of credit to be opened
at sight one month prior to shipment.. .." Shipment under the
first contract was " during September/October " and under
the second " during October /November " 1967. The contracts
incorporated the terms of the London Coffee Trade Federation
which made English law the proper law of the contracts.
j The buyers resold the coffee to sub-buyers who opened an
irrevocable letter of credit in Madrid in sterling. The buyers
procured the transfer of the letter of credit " up to an amount
of £131,000 " in favour of the sellers to a bank at Dar which
on September 20 confirmed the credit to the sellers. The letter
of credit was expressed in terms of payment in sterling and did
not conform with the contracts in a number of respects; but
the sellers accepted the confirmation in those terms and began
t» to operate the credit, asked for an extension of the date, and
presented documents including invoices expressed in sterling
against payment in sterling.
When the final 221 tons under the second contract had been
loaded, the sellers prepared an invoice dated November 18,
again expressed in sterling, against payment of the price for
the 221 tons; but before they presented the documents sterling
was on November 18 devalued. By November 21 it was known
J that the Kenyan currency would not be devalued. The sellers
claimed that Kenya shillings were the currency of account in
the original contracts and that the buyers, having paid under
the letter of credit a price equivalent to 262s. sterling per cwt.,
were liable to pay such additional sum as would bring the price
up to 262 Kenya shillings at the current rate, a total of
" shs.165,530/45." The buyers claimed that their obligation
had been discharged because the currency of account of the
I original contracts was sterling, and that even if it was Kenyan
the sellers had by their conduct in relation to the letter of credit
agreed to vary or had waived the payment term by accepting
sterling. Orr J. held that the currency of account was Kenya
190
W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
shillings and that the buyers were liable to pay the additional
sum claimed. A
On appeal by the buyers: —
Held, allowing the appeal, (1) that the money of account of
the original contracts construed by their proper law was Kenya
shillings, the decisive factor being the expression of the price
in "shs.," an abbreviation appropriate to Kenya shillings but
not to shillings in sterling currency.
(2) But that the sellers by accepting payment under a sterling g
letter of credit had irrevocably waived their right to be paid in
Kenyan currency (or, per Megaw L.J. and Stephenson L.J., had
accepted a variation of the sale contract) so that when the
whole price had been paid under that letter of credit the buyers
had discharged their whole contractual obligation and could not
be required to pay more.
Per curiam. The effect on.the buyer's liability of establish-
ing a confirmed irrevocable letter of credit depends on the terms Q
of the particular sale contract. On the present facts (per
Megaw L.J. even if there had been no variation or waiver), once
the letter of credit was opened by the buyers and accepted by
the sellers through the bank, it operated as a conditional dis-
charge of the buyers' obligation to pay the price; and when the
payment was actually made under it the buyers were wholly
discharged from their contractual obligation.
Per Lord Denning M.R. (1) Where a contract of sale D
stipulates for payment by confirmed irrevocable letter of
credit, the letter when given and accepted (a) does not operate
as absolute payment unless the seller so stipulates; (b) does
operate as a conditional payment of the price analogous to the
giving of a bill of exchange or a cheque; (c) is not merely a
mode of payment (post, p. 212B-C).
(2) Where one party to a contract has by his conduct
induced the other party to believe that he will not insist on his E
strict legal rights under the contract, the party who has waived
his rights cannot afterwards insist on them if the other party
has acted on that belief differently from the way in which he
would otherwise have acted. It is not necessary for the other
party to show that he has acted to his detriment (post, p. 213A-C).
Decision of Orr J. [1971] 1 Lloyd's Rep. 401 reversed.

The following cases are referred to in the judgments: F

Ajayi v. R. T. Briscoe (Nigeria) Ltd. [1964] 1 W.L.R. 1326; [1964] 3 All
E.R. 556, P.C.
Bell v. Moss (1840) 5 Whart.(Pa.) 189.
Bonython v. Commonwealth of Australia [1951] A.C. 201, P.C.
Bruner v. Moore [1904] 1 Ch. 305.
Central London Property Trust Ltd. v. High Trees House Ltd. [1947]
K.B. 130; [1956] 1 All E.R. 256. G
D. & C. Builders Ltd. v. Rees [1966] 2 Q.B. 617; [1966] 2 W.L.R. 288; [1965]
3 All E.R. 837, C.A.
Furst (Enrico) & Co. v. W. E. Fischer Ltd. [1960] 2 Lloyd's Rep. 340.
Greenough v. Munroe (1931) 53 Fed.Rep. 2d 362.
Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd. [1964] A.C. 465; [1963]
3 W.L.R. 101; [1963] 2 All E.R. 575, H.L.(E.).
Hindley & Co. v. Tothill, Watson & Co. (1894) 13 N.Z.L.R. 13. H
Hughes v. Metropolitan Railway Co. (1877) 2 App.Cas. 439, H.L.(E.).
National Bank of Australasia Ltd. v. Scottish Union and National
Insurance Co. Ltd. [1952] A.C. 493, P.C.
 191
2 Q.B. W. J. Alan & Co. v. EI Nasr Export (C.A.)
National Mutual Life Association of Australasia Ltd* V. Attorney-General
* for New Zealand [1956] A.C. 369; [1956] 2 W.L.R. 532; [1956] 1
A11E.R.721.P.C.
Newman Industries V. Indo-British Industries {Govindram Bros. Ltd., Third
Parties) [1956] 2 Lloyd's Rep. 219.
Ornstein v. Hickerson (1941) 40 Fed.Supp. 305.
Ottoman Bank of Nicosia v . Chakarian [1938] A.C. 260; [1937] 4 All E.R.
570, P.C.
B Panoutsos V. Raymond Hadley Corporation of New York [1917] 2 K.B.
473; 22 Com.Cas 207, C.A.
Peacock v. Pursell (1863) 14 C.B.N.S. 728.
Plasticmoda Societa per Azioni v. Davidsons {Manchester) Ltd. [1952] 1
Lloyd's Rep. 527, C.A.
Rickards (Charles) Ltd. v. Oppenhaim [1950] 1 K.B. 616; [1950] 1 All
E.R. 420, C.A.
~ Saffron v. Societe Miniere Cafrika (1958) 100 C.L.R. 231.
Soproma S.p.A. v. Marine & Animal By-Products Corporation [1966] 1
Lloyd's Rep. 367.
Tool Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. [1955] 1
W.L.R. 761; [1955] 2 All E.R. 657, H.L.(E.).
Trans Trust S.PJl.L. v . Danubian Trading Co. Ltd. [1952] 2 Q.B. 297;
•> [1952] 1 All E.R. 970, C.A.
Urquhart Lindsay & Co. Ltd. v. Eastern Bank Ltd. [1922] 1 K.B. 318.
Vivacqua lrmaos S.A. v. Hickerson (1939) 190 Southern Rep. (Louisiana)
657.
Whitworth Street Estates {Manchester) Ltd. v. James Miller and Partners
Ltd. [1970] A.C. 583; [1970] 2 W.L.R. 728; [1970] 1 All E.R. 796,
H.L.(E.).
a Woodhouse A.C. Israel Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co.
Ltd. [1971] 2 Q.B. 23; [1971] 2 W.L.R. 272; [1970] 2 All E.R. 124;
[1971] 1 All E.R. 655, Roskill J. and C.A.

The following additional cases were cited in argument:

Anderson (D. P.) & Co. Ltd. v. Lieber Code Co. [1917] 2 K.B. 469.
Ascherson v. Tredegar Dry Dock & Wharf Co. Ltd. [1909] 2 Ch. 401.
P Bank of Taiwan v. Schild (1932) 268 N.Y.Suppl. (Supreme Court) 331.
Bank of United States v. Seltzer (1931) 251 N.Y.Supp. 637.
Goldsbrough Mort & Co. Ltd. v. Hall (1949) 78 C.L.R. 1.
Hadley {Felix) & Co. v . Hadley [1898] 2 Ch. 680.
Hone {A Bankrupt), In re, Ex parte Trustee v. Kensington Borough
Council [1951] Ch. 85; [1950] 2 All E.R. 716.
, Ian Stach Ltd. v. Baker Bosley Ltd. [1958] 2 Q.B. 130; [1958] 2 W.L.R. 419;
J
[1958] 1 A11E.R. 542.
James v. Williams (1848) 13 Meeson & Welsby 828.
Liebeskind v. Mexican Light & Power Co. Ltd. (1941) 116 Fed.Rep. 971.
Malas {Hamzeh) & Sons v. British Imex Industries [1958] 2 Q.B. 127; [1958]
2 W.L.R. 100; [1958] 1 All E.R. 262, C.A.
Marreco v. Richardson [1908] 2 K.B. 584, C.A.
fj Sinason-Teicher Inter-American Grain Corporation v. Oilcakes and Oilseeds
Trading Co. Ltd. [1954] 1 W.L.R. 1394; [1954] 3 All E.R. 468, C.A.
Smith v. Mercer (1867) L.R. 3 Ex. 51.
Wolmershausen v. Gullick [1893] 2 Ch. 514.
192
W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
APPEALS from Orr J.
By a notice of motion dated June 21, 1968, the claimants, W. J. Alan
& Co. Ltd., coffee merchants carrying on business in Kenya, sought to
set aside an award dated May 15, 1968, made by a committee of appeal
of the London Coffee Trade Federation, on grounds of error of law on its
face, wrongful refusal of jurisdiction, and technical misconduct, in an arbi-
tration in which the committee made an award in favour of the respondents,
El Nasr Export and Import Co., an Egyptian state trading corporation to B
whom the claimants had sold a quantity of coffee f.o.b. Mombasa.
When the hearing began before Orr. J. on November 23, 1970, the
parties had agreed, for reasons not relevant to the report of the appeals,
that the claimants should bring an action against the respondents in respect
of the same transaction, and under that agreement the claimants had issued
a specially indorsed writ; and a defence, counterclaim and reply were _
delivered in the action for the purpose of dealing with all the issues in a
single judgment.
By the writ and statement of claim as amended the sellers claimed that
by a contract (" the contract") in writing dated July 13, 1967, numbered
3447 they agreed to sell and the buyers agreed to buy 250 tons Bukoba
Robusta f.a.q. coffee, price 262 shillings per hundredweight f.o.b. Mombasa,
October/November 1967 shipment, payment by confirmed irrevocable letter D
of credit; and that the contract was made through Nairobi coffee brokers
and duly signed by such brokers and by each party. They claimed that
the currency of account under the contract was Kenya, alternatively
East African, shillings, and said that they would further rely on section
19 (1) and (2) of the Central Bank of Kenya Act, No. 15 of 1966. They
claimed further that pursuant to the contract they delivered the coffee
E
on board Mombasa, tendered shipping documents, and that the buyers
had paid part of the price of the coffee under the contract, but that a
balance of shs. 169,821.25 Kenya, alternatively East African, shillings
remained due and owing.
They claimed a declaration that the money of account under the con-
tract was Kenya, alternatively East African, shillings and payment of
the sterling equivalent of shs. 169,821.25 Kenya, alternatively East African, p
shillings and interest thereon under the Law Reform (Miscellaneous Pro-
visions) Act 1934, which remained due and owing.
By their amended defence and counterclaim the buyers admitted para-
graphs (1), (2) and (4) of the statement of claim but denied the claim about
the currency of account, said that they also would rely on section 21
of the Kenyan Act, and maintained that the currency of account under the
contract was sterling. *•*
By paragraph (3) they denied that the sum claimed was due by them,
and asserted that their sole obligation as to payment under the contract
was to open a confirmed irrevocable letter of credit at sight one month
prior to shipment—which they did; alternatively, if the letter of credit did
not accord with the terms of the contract they claimed that the sellers had
accepted it in variation or waiver of the terms of the contract by reason g
of the matters set out under paragraph (4) (infra) or alternatively that the
sellers were estopped by their conduct, as set out under paragraph (4), from
denying that the letter of credit conformed to the terms of the contract.
 193
2 Q.B. W. J. Alan & Go. v. El Nasr Export (C.A.)
Alternatively they claimed that full payment had been made to the sellers
' in sterling according to the terms of the contract.
By paragraph (4) they claimed that if the currency of account in the
contract was Kenya or East African shillings it had been varied by
mutual agreement between the parties in the circumstances and as a
result of the facts and matters set out, viz.: (a) the opening of the letter
of credit by the buyers in sterling; (b) the acceptance of the letter of credit
[ by the sellers; (c) the issue by the sellers of invoices demanding payment in
sterling; (d) the presentation of subsequent documents by the sellers in-
cluding the invoices against the letter of credit; and (e) the extension of
the period of the letter of credit to November 25, 1967.
They claimed alternatively by paragraph (5) that the sellers were
estopped by the matters pleaded under paragraph (4) from further con-
tending that the money of account was other than sterling or alternatively
' that they could not at the material times object to payment for the coffee
measured otherwise than in sterling.
By paragraph (6) they claimed alternatively that the sellers by reason
of the matters aforesaid waived such rights (if any) as they might have
had under the original contract to have the price measured otherwise than
in sterling.
i By their counterclaim the buyers relied on the award in their favour
in the arbitration which is not relevant to the appeal.
At the hearing before Orr J. no oral evidence was called in the action.
The parties relied on the affidavits and documents adduced on the motion,
and certain other facts were common ground between them.
Orr J., on December 21, 1970, gave a reserved judgment in favour of
the sellers in the action, holding that on the application of English law and
the true construction of the contract the currency of account was Kenya
shillings; that the mere opening of a confirmed irrevocable letter of credit
in accordance with the terms of the contract did not of itself absolve
the buyers from paying the price; that by accepting payment under the
particular irrevocable letter of credit the sellers had not agreed to alter the
currency of account from Kenya shillings to sterling; and that the plea of
estoppel was not established, for there was no clear and unambiguous
representation by the sellers and no evidence that the buyers had acted
to their detriment as a result of any representation by the sellers; and
accordingly that the buyers were liable to pay the additional price claimed.
The buyers appealed against Orr J.'s order on the motion in con-
nection with the arbitration (not relevant to the report) and against his
declaration on the action that the money of account under the contract
was Kenyan and that judgment be entered for the sellers in the sum of
£11,689. The grounds of appeal were (1) that the judge was wrong to hold
that the money of account under the contract was Kenyan. (2) He was
wrong in holding that if the money of account was Kenyan, it had not been
varied by agreement between the parties to sterling by reason of the
following facts: (a) the opening of confirmed irrevocable letters of credit
by the buyers and the acceptance of them by the sellers; (b) the issue of
notices by the sellers demanding payment in sterling; (c) the presentation
of documents by the sellers against the letters of credit; (d) the extension
of the period of the letters of credit to November 25, 1967. (3) The judge
2 Q.B. 1972—7
 194
W. J. Alan & Co. v. EI Nasr Export (C.A.) [1972]
was:wrong in holding that the plaintiffs did not waive any rights under
the contract to have the price measured other than in sterling. (4) He A
was wrong in holding that the opening of confirmed irrevocable letters
of credit was not the sole obligation for payment under the contract.
The sellers entered a respondents' notice of additional grounds on
which Orr J.'s judgment on the arbitration issue should be affirmed;
but in the events which happened those grounds are irrelevant to the
report. B

S. A. Stamler Q.C. and James• Kingham for the buyers. The first ques-
tion is: what was the currency of account? The buyers say it was either
originally sterling or if it was Kenyan or East African it was varied by
conduct so as to estop the sellers from saying it was anything but sterling,
The second question is the extent to which the opening by the buyers of
a confirmed irrevocable letter of credit in accordance with the contract of ^
sale/purchase is a discharge of their contractual obligations. That raises
three subsidiary questions: (1) the general principles of law about discharge
of liability by a letter of credit; (2) whether the letter of credit in question
was in accordance with the original contract; and (3) if not, can the sellers
complain, in view of their conduct which amounted to variation or waiver
or estoppel? D
Orr J. found (1) that the currency of account was Kenya shillings; and
held (2) that though the opening of a letter of credit discharges the buyer
from the original obligation to pay the price and though there was here
a conditional discharge it did not help the buyers because of the quality
of the condition. The buyers say that in the events which happened there
was an absolute discharge when they opened the letter of credit in July,
and that if it was conditional the only condition was that it should be E
honoured when presented—which it was. There are only two English cases
in which the subject matter of a letter of credit has been considered, though
there are Commonwealth and United States decisions both ways. The
tenor of the decisions shows that in commercial practice letters of credit
are treated as a discharge of the buyer's obligation.
On currency of account in general, the money of account which is the p
measure of the obligation is a matter of the substance of the contract and
not necessarily the same as money of payment: Woodhouse A.C. Israel
Cocoa Ltd. S.A. v. Nigerian Produce Marketing Co. Ltd. [1971] 2 Q.B. 23.
To determine the money of account you ascertain the proper law and apply
itscanons of construction. The English canons of construction (which apply
in this case) require dealing with the document constituting the contract,
considering the admissible surrounding circumstances, and if there is still G
doubt, looking at subsequent conduct. [Reference was made to Dicey
and Morris, Conflict of Laws, 8th ed. (1967), rule 152, p. 875.]
The factors in favour of sterling are: (I) the document is itself in
English and uses English commercial terms; (2) the parties were sellers in
Kenya and buyers in Dar with delivery at Mombasa; (3) the word
'.' shilling" was an English unit of currency and in 1967 many prices were | j
quoted in shillings on the London Stock Exchange; (4) the units of measure-
ment were English; (5) the contract imported the London Coffee Federation
. rules which put it in an English commercial setting; (6) payment was by
 195
2 Q.B. W. J. Alan & Co. v. El Nasr Export (C.A.)
confirmed irrevocable letter of credit in an international trade setting; (7)
the unchallenged evidence was that in Tanzania letters of credit were
opened in sterling only, so that if the place of payment might at buyer's
option be Tanzania that favours sterling as the currency of account. The
fact that Kenya and East Africa also use shillings as a unit of currency is
a neutral factor. Those points cover the documents and the surrounding
circumstances known to the parties when the contract was made, but
j exclude subsequent conduct.
The basic reason for using letters of credit is to give the sellers a.
reasonably accessible bank and the buyer's obligation is to have it con-
firmed by a solvent paymaster bank at such a place. Those requirements
were satisfied here by the place of payment including Tanzania where
payment meant sterling currency.
„ On subsequent conduct, the sellers on September 20, 1967, adopted
" the letter of credit provided, which quantified the obligation in sterling so
that if the original contract was in Kenya shillings there was a plain
variation or if it was not a variation there was a waiver. [Reference was
made to Liebeskind v. Mexican Light & Power Co. Ltd. (1941) 116
Fed.Rep. (2d) 971, 973; Panoutsos v. Raymond Hadley Corporation of
New York [1917] 2 K.B. 473; Enrico Furst & Co. v. W. E. Fischer Ltd.
D [1960] 2 Lloyd's Rep. 340; Ajayi v. R. T. Briscoe (Nigeria) Ltd. [1964] 1
W.L.R. 1326, 1330; GoldsbroughMort & Co. Ltd. v. Hall (1949) 78 C.L.R.
1; Bonython v Commonwealth of Australia [1951] A.C. 201, 218-219;
National Bank of Australasia Ltd. V. Scottish Union and National Insurance
Co. Ltd. [1952] A.C. 493 and National Mutual Life Association of
Australasia Ltd. v. Attorney-General for New Zealand [1956] A.C. 369.]
On the second question, and on the assumption that the currency of
account was Kenya shillings, what is the effect of the stipulation that the
payment is to be by confirmed irrevocable letter of credit? Letters of
credit have been widely developed 'in the 20th century and in modern
commerce "a confirmed letter of credit is an independent obligation in the
form of an assurance of payment coming from the banker and not the
buyer. That gives rise to three possibilities: (i) once the buyer has procured
F a letter of credit he is absolutely discharged from his obligation to pay the
price—though there may be an implied warranty that the bank he has
provided is solvent: (ii) it is a conditional discharge, or, alternatively, it
suspends the buyer's obligation for a time, in which case the buyer has a
primary obligation to open the letter of credit stipulated for in the contract
arid if he does not do so he is liable in damages; but once he has done
that, his obligations in respect of the price are suspended just as if he had
3
given bills of exchange and replaced them pro tem by the obligations
assumed by the bank so that during the period of suspension the seller can
look only to the banker for payment. "Pro tem" is the period of the
agreed currency of the letter of credit. In the present case it was extended
to November 25, 1967, at the request of the seller, and all the seller had
to do was to present the documents and get payment. If the bank complies
[j with its obligations it discharges its independent undertaking and extin-
guishes any right of recourse to the buyer. If the bank fails to comply
with its obligations then either the condition is broken or the suspension is
lifted and the seller may have recourse to the buyer, as with a bill of
196
W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
exchange. To decide whether the bank's primary obligation and the
buyer's residual obligation have been discharged, the court should look A
not at the contract of sale/purchase but at the independent contract which
is the letter of credit. If the original contract has one money of account
and the letter of credit contract another, the letter of credit currency is
decisive. In the present case the second contract is the relevant one and it
is clear on its face that it was performed in sterling when performance was
called for by the sellers. B
The third possibility is that though the buyer procures a letter of credit,
it leaves his obligation to pay the price unaffected because it is only a
mode of payment—mere machinery, as the judge decided.
There are ten authorities which show a steady progress towards the
view that the opening of a confirmed irrevocable letter of credit is an
absolute discharge of the buyer's obligations, beginning with Bell v. Moss _
(1840) 5 Whart. (Pa.) 189, a United States case which regarded a letter of c
credit as a mode of payment or at best a guarantee; but apart from its age
the report does not show what the contract was, and it does not represent
the modern view; Hindley & Co. V. Tothill, Watson & Co. (1894) 13
N.Z.L.R. 13, decides that once the buyer has discharged his primary
obligation, the primary responsibility moves to the bank with which the
letter of credit has been opened and recourse may only be had to the D
buyer in certain events; Bank of United States v. Seltzer (1931) 251 N.Y.
Supp. 637, treated a letter of credit as a conditional and temporary dis-
charge; Greenough v. Munroe (1931) 53 Fed.Rep. 2d 362; Bank of Taiwan
V. Schild (1932) 268 N.Y.Suppl. (Supreme Court) 331, which supports
absolute discharge; Vivacqua Irmaos S.A. V. Hickerson (1939) 190 Southern
Rep. (La.) 657 and Ornstein v. Hickerson (1941) 40 Fed.Supp. 305, which
do not assist either way save to show that there is no reason why a buyer E
should pay twice when he has put a bank in funds and it goes bankrupt;
Saffron V. Societe Miniere Cafrika (1958) 100 C.L.R. 231, per Dixon L.J.
obiter, supporting " absolute" discharge but the ratio of which is con-
ditional discharge; Newman Industries v. Indo-British Industries (Govin-
dram Bros. Ltd., Third Parties) [1956] 2 Lloyd's Rep. 219, per Sellers J.
supporting conditional discharge; and Soproma S.p.A. V. Marine & Animal p
By-Products Corporation [1966] 1 Lloyd's Rep. 367, where McNair J.'s
whole tenor, and the ratio of his judgment, was that while the letter of
credit is alive the seller must go to the bank and cannot present the
documents direct to the buyer. That is strongly relied on. [Reference was
also made to Malas (Hamzeh) & Sons v. British Imex Industries [1958]
2 Q.B. 127; Ian Stach Ltd. V. Baker Bosley Ltd. [1958] 2 Q.B. 130; to
Gutteridge, The Law of Bankers' Commercial Credits, 4th ed. (1968), G
p. 29, supporting " conditional" and saying that express terms are needed
if it is to be absolute; Davis, The Law Relating to Commercial Letters of
Credit, 3rd ed. (1963), pp. 47-55, supporting " conditional"; and Paget
The Laws of Banking, 7th ed. (1966), pp. 621-622, formulated in terms of
suspense and the right of recourse; Hart, The Law of Banking and Stock
Exchange Transactions, Vol. 2, 4th ed. (1931); Modern Law Review 1961, jj
Vol. 25, p. 530; Finkelstein, The Law Relating to Commercial Letters of
Credit (1930, republished in 1964); and Corpus Juris Secundum (Sales)
Vol. 77, para. 1018.]
 197
2 Q.B. W.J.Alan*Co.v.ElNasrExport(C.A.)
On the analogy with bills of exchange, see Chalmers, Bills of Exchange,
v
13th ed. (1964), p. 338 and Smith v. Mercer (1867) L.R. 3 Ex. 51. In general,
once a bill of exchange is given and honoured it is deemed to have been paid
at the date of giving and not at the date of honouring. [Reference was also
made to In re Hone (A Bankrupt), Ex parte Kensington Borough Council
[1951] Ch. 65; Hadley (Felix) & Co. v. Hadley [1898] 2 Ch. 680; Marreco
v, Richardson [1908] 2 K.B. 584, 592; Wolmershausen v. Gullick [1893] 2
3 Ch. 514 and Ascherson v. Tredegar Dry Dock & Wharf Co. Ltd. [1909]
2 Ch. 401.]
Norman Tapp Q.C. and Michael Gettleson for the sellers. On the first
question the evidence is overwhelming that the original currency was
Kenya shillings or at least East African shillings and certainly not sterling.
Apart from the abbreviation to " shs " which is not English, the only con-
nection with the United Kingdom which these contracts had was the
C incorporation of the London Coffee Federation Rules which made English
the proper law of the contracts. If English law is applied it is clear that
the parties intended Kenya shillings; and that is fortified by the provisions
of section 21 of the Central Bank of Kenya Act, No. 15 of 1966, which not
only provided that all money transactions in Kenya were to be in Kenya
currency but also for the method of settlement. On the importance of
3 keeping separate the concepts of money of account and money of payment,
see per Lord Denning M.R. in Woodhouse A.C. Israel Cocoa Ltd. S.A. v.
Nigerian Produce Marketing Co. Ltd. [1971] 2 Q.B. 23, 54.
[The Court indicated their view that the original currency of account
was Kenya shillings.]
The next question is whether (a) there was a subsequent variation
by agreement by which sterling was substituted for Kenyan currency;
E or whether the sellers (b) waived the Kenyan measurement in circum-
stances which made it impossible for them to restore that measure-
ment on November 21 after devaluation and final shipment; and (c) were
estopped from relying on the Kenya measurement thereafter. It is not
necessary to deal separately with estoppel which is a pure technicality and
covered by the argument on variation or waiver: see Ajayi v. R.T. Briscoe
p (Nigeria) Ltd. [1964] 1 W.L.R. 1326, 1330 and Tool Metal Manufacturing
Co. Ltd. v. Tungsten Electric Co. Ltd. [1955] 1 W.L.R. 761, on warnings
on extending the principle of waiver.
On the question of waiver there must be waiver of a right and not mere
suspension of a remedy; the subject-matter of waiver must be suspension
of contractual right, and this did not occur in the present case. Even
if the sellers by their conduct led the buyers to believe that they would
J
not insist on the right to say that they would not go on with the contract
as varied in the non-conforming letter of credit they did not say: " We
shall treat sterling as the currency of account"; so the extent of their
waiver was such as not to help the buyers. It was a mere indulgence,
and before a party granting an indulgence is fixed with it, the other
party must have altered his position to his disadvantage in reliance on the
^ conduct. The court requires clear evidence of detriment, and here no
detriment to the buyers was shown by the sellers' conduct before they gave
reasonable notice the moment devaluation came.
It is to be noted that the letter of credit opened on July 15 did not
198
W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
conform with the original contracts in several respects; that it was not
issued by the buyers but by their sub-buyers in Madrid; and that it was "•
pure chance that it was opened in sterling and not in Spanish pesetas. It
could have been confirmed either in sterling or in the local currency.
[Reference was made to Schmitthoff, The Export Trade, 5th ed. (1969),
pp. 201-202.]
In a case like the present the seller is a party to three independent
contracts—the original sale contract with the buyer; the contract with the JJ
issuing banker for the irrevocable credit; and the contract with the con=
firming banker (who may be the same as the issuing banker). [Reference
was made to Molds (Hamzeh) & Sons v. British Imex Industries [1958] 2
Q.B. 127.] It may be that when the non-conforming letter of credit was
opened and the sellers acted on it without calling on the buyer to rectify
its non-conformity they lost their right temporarily to say that no letter of
credit had been opened which accorded with the obligations in the original C
contracts, and if they did nothing thereafter they would lose the right to
repudiate: see Panoutsos v. Raymond Hadley Corporation of New York
[1917] 2 K.B. 473. This is a long way from saying that the currency of
account in the sales contract is " waived." But reliance is placed on Tool
Metal Manufacturing Co. Ltd. v. Tungsten Electric Co. Ltd. [1955] 1
W.L.R. 761, as showing that the sellers could restore the previous position j)
by giving reasonable notice during the currency of the letter of credit. These
sellers were entitled under the second contract to a letter of credit open until
mid-December and by their cables on November 21/22 they gave reasonable
notice to the buyers that the measure of payment under the sale contract
was Kenya shillings; that was sufficient to- get rid of the temporary waiver.
[MEGAW LJ. But surely "when the sellers presented invoices expressed
to be in sterling that involved an amendment of the sale contract:] E
- Not to the extent of altering the currency of account. Variation is a
matter of contract. "If a clear and unequivocal representation is needed
for estoppel (see the Woodhouse case [1972] 2 Q.B. 23), equally unequivocal
evidence of mutual agreement to vary is needed to support a variation. If
a non-conforming credit when acted on is said to vary the contract of sale,
the cases on waiver and right of revival have missed the point. Those p
cases were rightly decided on waiver, and variation has no place here. It
must be considered in the context of the seller's necessarily receiving local
currency. "Variation Of currency cannot be spelt'out'of the letter of credit
in sterling showing a sterling rate per ton (offer) and tendering sterling
invoices (acceptance), for (i) the credit was an independent contract and
the.bank was not acting as agent of the buyers for the purpose of making
contractual amendments to the terms of sale; (ii) even if the bank was G
agent, the confirmation was not ah offer to vary the terms of sale but merely
notification that sterling would be available at a time and place stated
against specified documents including the sterling invoice; (iii) if it was
variation, it must have been of all the credit or nothing, and as-sterling
was so out of line with the contract there could beno variation at all; (iv) if
this is variation, any accepted non-conforming credit would constitute JJ
variation and the courts have erroneously looked to waiver in the past;
(v) there was no unequivocal acceptance. The invoices merely show that
the sellers did what was necessary to get the money in the simplest way;
 199
2 Q.B. W. J. Alan & Co. v. El Nasr Export (C.A.)
and (vi) with the world-wide uncertainty as to sterling it was highly unlikely
that the sellers would forgo East African money of account for no
reciprocal benefit. They could have reversed the sterling letter at .any
time until December 15* particularly in view of section 21 of the Kenya
Act, the contract terms, and the fact that this was a continuing obligation
to pay by instalments. Subsequent conduct cannot be looked at to support
the claim that there had been waiver of the money of account:
B see Whitworth Street Estates {Manchester) Ltd. v. James Miller
and Partners Ltd. [1970] A.C. 583, per Lord Reid, Lord Hodson
and Lord Wilberforce at pp. 603, 606 and 614-615. [Reference was
was also made to National Mutual Life Association of Australasia Ltd. v.
Attorney-General for New Zealand [1956} A.C. 369, 384-385.} In the
independent contract between the buyers and the sellers there^was no
waiver or offer to change the currency of account (which is a matter of
C substance) and in the absence of agreement to change it in that contract,
the currency remained Kenyan. In relation to the independent contract
in the letter of credit the banker does not act as the buyers' agent with
authority to negotiate a variation of the original contract or communicate
an offer by the buyers to change the currency of account. On the facts there
was no detriment to the buyers by the sellers' conduct before they gave
p their notice to restore the currency of account in the original contract and
therefore they are entitled to the additional sum representing the difference
between sterling and Kenya currency after, devaluation.
On the next question, which involves the three alternative submissions on
the effect of a letter of credit, there has undoubtedly been considerable deve-
lopment of this worldwide mode of payment in the 20th century so that 19th
century cases and textbooks do not help much. The buyers interpret the
E authorities in one way, the sellers in another; but the court is in a position
to lay down first principles on the subject, having regard to what will be
commercially convenient. The court should look at the general features
of a letter of credit, consider the merits of the case, look at the authorities
to see where they lead on balance, and decide whether there is anything
which justifies the analogy with a bill of exchange. The tenor of authority
P does not support the view that the opening of a letter of credit constitutes
conditional or absolute payment. The cases cited, with the exception of
Saffron v. Societe Miniere Cafrika, 100 C.L.R. 231, are not concerned with
the opening of a letter of credit but with the situation after the draft has
been accepted by the bank and the seller gets into his hands negotiable
pieces of paper which he can present to the bank, and get payment undet
the confirming contract. It is the negotiable instrument, not the opening
G of the credit, which makes payment conditional, as the cases show. Once
the seller has performed his part of the bargain the buyers remain liable to
pay the price. . - , • - - •
The mere opening of an irrevocable letter of credit is neither conditional
nor absolute payment. It is only a means by which payment is to take
place at a future date as provided by the contract. It is an essential feature
TT of a letter of credit that it is neither negotiable nor assignable. It is a
contract between the bank and the seller by which the bank will either pay
the amount of the credit against presentation of the stipulated documents
or will accept' a time bill; and it'fixes the place for presentation of the
200
W. J. Alan & Co. v. El Nasr Export (C.A.) (1972]
documents. It is simply a contract additional to the contract of sale which
the buyer has provided, in accordance with the contract of sale, whereby
a third party—the bank—will pay the price on the buyers' behalf. The
time to consider its effect is the time when the draft is met, not when the
letter of credit is opened. That is not payment at all; it does not affect the
buyers' obligation to pay. On merit, apart from legal principle, the view
that it is no discharge, either absolute or conditional, is quite fair. If
there is a loss because the designated bank goes bankrupt, the loss should B
fall on the buyer—it is another instance of where one of two innocent
parties has to suffer.
The idea that a letter of credit constitutes a conditional payment and not
a mere mode of payment has crept into the textbooks and it stems from (a)
the false, analogy with bills of exchange and (b) confusion between the
issue of the credit and the grant of a negotiable security. That is not a true
analogy, for a bill of exchange is a negotiable instrument like cash, and ^
the essence of it is that it suspends the debt or other rights and relates back
to the date when it was given, whereas the opening of a letter of credit does
not give the seller anything of value or any right to payment until he has
shipped the goods and presents the appropriate documents to the bank as
the paymaster. Where the bill of exchange is not negotiable, there is no
conditional payment: see James v. Williams (1848) 13 M. & W. 828 and \y
Benjamin on Sale, 8th ed. (1950), p. 787; thus the analogy breaks down. If
the opening of a letter of credit is either an absolute or a conditional dis-
charge it is out of line with Newman Industries V. lndo-British Industries
(Govindram Bros. Ltd. Third Parties) [1956] 2 Lloyd's Rep. 219 and also
with Sinason-Teicher Inter-American Grain Corporation v. Oilcakes and
Oilseeds Trading Co. Ltd. [1954] 1 W.L.R. 1394 and all the New York cases.
Orr J. was right in saying that in the Soproma case [1966] 1 Lloyd's Rep. E
367. McNair J. expressing a provisional view only and that if the effect of
a letter of credit as an absolute or conditional discharge was the basis of
his decision it was out of line with authority. If the court agrees that the
cases oited were concerned with the giving of the draft and not the mere
opening of the letter of credit all the observations supporting " conditional
payment" fall to the ground. [Reference was made seriatim to the cases p
cited for the buyers.] The statement of the law by Finkelstein on The
Law Relating to Commercial Letters of Credit, p. 155, treating the issuing
of the credit and acceptance of the draft as separate, is adopted. [Reference
was made to Davis, Law Relating to Commercial Letters of Credit, 2nd ed.
(1954); Gutteridge, Law of Bankers' Commercial Credits, 3rd ed. (1955);
4th ed. (1968); and section 53 (1) of the Bills of Exchange Act 1882.]
Applying the sellers' view on the effect of the letter of credit to the G
present case, unless the buyers can establish that the opening of a conform-
ing letter of credit by him is his sole obligation as to payment or that it
conditionally discharges his obligations and the conditions are such as to
preclude an adjustment of the price if the amount recovered under the
letter of credit is more or less than the true contract price at the time the
sellers receive the money, the buyers must fail. If the opening of the „
letter of credit is absolute payment by the buyers the sellers will be in
trouble on waiver since they waived the non-conformity with the contract
and cannot say that an absolute payment can be reopened. But if it is
 201
2 Q.B. W. J. Alan & Co. v. EI Nasr Export (C.A.)
. anything more than a mode of payment and is conditional discharge the
sellers rely on their conduct on November 21/22 as withdrawing the waiver
and restoring their right to have the full price in Kenya currency.
Stamler Q.C. in reply. Neither in waiver nor estoppel is it necessary
for the other party to show that degree of detriment formulated as showing
that he is worse off than he would have been if the indulgence had never
been granted. It is enough that the other party acted on the belief that
B waiver was intended. [Reference was made to Rickards {Charles) Ltd. v.
Oppenhcdm [1950] 1 K.B. 616; Plasticmoda Societaper Azioni V. Davidsons
(Manchester) Ltd. [1952] 1 Lloyd's Rep. 527; the Panoutsos case [1917] 2
K.B. 473; and the Tool Meted-case [1955] 1 W.L.R. 761.} What was waived
in the present case was the right under the contract itself, and not the
remedy for a breach. On the facts there was a variation of the money of
account and a consensual acceptance. Variation involves taking something
^ different, not something less! On November 21 the sellers had lost the
right to revive the original contract because they could not then put the
buyers back in the same position. There is no need to show detriment;
acting on the waiver is enough. If detriment is essential, there was detriment,
for instance, in three lots of charges and charges for extended time when
otherwise there would have been only one set of charges. Even if the
j sellers had the right of revival they never exercised it but continued to
operate the new currency of account.
On the proposition for the sellers that the letter of credit is a mere
mode of payment, it is plain on the authorities that it is more than that: see
per Diplock J. in Ian Stach Ltd. v. Baker Bosley Ltd. [1958] 2 Q.B. 130,
139. There was ample evidence that the bank was acting as the buyers'
agent for the purpose of offering different terms in the letter of credit which
^ was opened and confirmed. If it was an offer made on behalf of the
buyers it was accepted by the sellers expressing the amount on the invoices
under the second contract in terms of £262 a ton and not a shilling from
beginning to end. On the suggestion that one could not talk of variation
because the letter of credit was so different from the contract terms, the
answer, is that the greater the differences the more likely it is that there is
p a variation by which the sellers agreed to accept a different currency—and
there is no evidence that sterling was regarded as so much less satisfactory
than Kenya currency that its acceptance should be treated as a mere waiver.
Where there was a different kind of coffee and a different currency for a
different period, it was a once-for-all variation in toto or at least waiver.
The letter of credit had to be read into the contract, and not vice versa.
If there was no variation of the currency of account but mere waiver, that
S waiver affected the currency of account and the sellers did not try to revive
their rights to call for a Kenya shillings letter Of credit until it was too late.
The analogy with bills of exchange is not false for it is the
analogy drawn by all the courts in the authorities, including the High
Court of,Australia, and also the textbook.writers. The essential analogy
is between a letter of credit given by a bank and a bill of exchange
a on a party where the acceptor is someone other than the buyer. The
common elements are that where the buyer under the contract procures
a third party to undertake an obligation direct to the seller, thereby giving
the seller recourse to his rights against the third party, there is a discharge
202
W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
(not payment), either absolute or conditional. Payment will not take place
till later. The moment the letter of credit is issued and confirmed the A
confirmers have undertaken obligations to the seller and are bound from
that moment.
In the end everything turns on the wording of the contract. A letter
of credit is a thing of value from the moment it is opened: see per Denning
L.J. in Trans Trust S.P.R.L. v. Danubian Trading Co. Ltd. [1952] 2 Q.B.
297, 305. It is no different from the bill of exchange given for a debt B
already due, for it is the discharge of the buyer's pre-existing obligation to
procure it which is an essential term of the contract of sale for breach of
which the buyer can be sued in damages. Finkelstein has the same
dichotomy as Davis in the textbooks. The authorities cited do not all
turn on the draft having been accepted. The Soproma case [1966} 1 Lloyd's
Rep. 367 is in effect a decision in favour of " absolute discharge " with a
reservation about an implied warranty that the Confirming bank is sound. C
While the letter of credit operates the sellers cannot go to anyone except
the bank. If it goes wrong the sellers have the same rights as any seller
has when a contract goes wrong. It is clear that the original money of
account was varied; alternatively that there was waiver which precludes
the sellers from asking for a Kenya shillings letter of credit. The letter
of credit became an absolute discharge when the payment was made after jy
the final shipment; or at least it was a conditional discharge, and when
the final payment was made the buyers were absolutely discharged from
their contractual obligations and do not owe any more.
Cur. adv. vult.

February 3, 1972. The following judgments were read. E

LORD DENNING M.R. This case started off as an arbitration—but has
finished up as a full-scale action, It concerns the effect of devaluation on
a contract of sale and, in particular, on a letter, of credit which was given
for the price. ,',...•
There are two contracts of sale here. One is dated July 12, 1967, the
other July 13, 1967. The sellers were coffee producers in Kenya called F
W. J. Alan & Co. Ltd. of Nairobi. The buyers were an Egyptian state
trading company with offices in many countries, but, in this case, the trans-
action was conducted, by the office at Dar es Salaam, Tanzania. The
sales were negotiated by brokers in Nairobi. Each contract was for the
sale of 250 tons of coffee. The price was 262 shillings a cwt. At that
time the Kenya shilling and the sterling shilling were of equal value. So Q
it did not seem to matter whether the currency of account was Kenyan
currency or sterling currency. The material terms were:
First contract for 250 tons of coffee
"No. 3445. Nairobi, July 12, 1967.
Sellers: Messrs. W. J. Alan & Co. Ltd., Nairobi. >
Buyers: Messrs. El Nasr Export & Import Co., Dar
es Salaam. • ' .' .
Quantity: 250 tons.
 203
2 Q.B. VV.J. Alan&Co. v.ElNasrExport(C.A.) Lord Denning M.R.
Price ;i . Shs; 262/- (two hundred sixty-two) per cw.t. of
K
1121b. nettf.o.b. Mombasa.
Shipment: During September 1967/October 1967 at sellers'
From Mombasa option, but sellers agree to co-operate with
buyers to ship in accordance with their instruc-
tions if possible.
Payment: By confirmed, irrevocable letter of credit to be
opened at sight one month prior to shipment as
stipulated in this contract.
Special' Destination and shipping instructions to be de-
conditions: clared by 15 days prior to shipment.
This contract is made under the terms and conditions of the
C London Coffee Trade Federation."
It was signed by the brokers and by the sellers and buyers.

Second contract for another 250 tons of coffee

This was in exactly the same form and language, but the date was
" Nairobi*. July 13, 1967." The number was 3447. The shipment was
) " During October/November 1967 at sellers' option."
The terms and conditions of the London Coffee Trade Federation
contained these stipulations:
" Payment
" 28. Payment shall be made at the time stipulated and the buyers
must always take up the documents when in conformity with the con-
E ditions of, the contract. The documents shall include the complete
set of clean ' on board ' or' shipped ' bills of lading....
"29. The property in the coffee remains.in the.sellers until it has
been paid for, in full, in accordance with the contract, even if the sellers
have already parted with the goods or with the documents which
represent them.
" Opening of credit
F ." 3,0, (a) If payment is to be made by means of a letter, of credit, the
creditshall be opened in strict conformity with the terms of the con-
tract (by cable or by air mail) in time to enable ;the beneficiary to
utilise it from the first day of the period stipulated for shipment.
(b) In all cases the validity.of letters of.credit must exceed by at least 15
days.the. ultimate date stipulated for shipment."
3 There was also a clause providing for any dispute to be determined by
arbitration in London, and for the contract to be interpreted according to
the law in force in England., In addition, the Central Bank of Kenya Act
1966 (No: 15 of 1966) contained these provisions: .
" 19. ' (1) The unit of currency of Kenya shall be the Kenya shilling
which.shall,be divided into one hundred cents.
fj " 21. All monetary obligations or transactions entered into or made
in Keriya^shall be deemed to be expressed and recorded, and shall be
. settled,' in "Kenya- currency unless otherwise provided for by law or
agreed upon between the parties."
204
Lord Denning MJl. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
The Schedule said that " shilling " (or its abbreviated form " sh.") means
A
the Kenya shilling.

The letter of credit

The letter of credit is of the first importance. It was as follows:
" The National Bank of Commerce, Tanzania. Dar-es-Salaam.
September 20,1967
B
" W, J. Alan & Co. Ltd., P.O. Box 1979, Nairobi.
" Dear Sirs,
" 1 . We request reference to telegraphic advice" (September 14)
" of the transfer of letter of credit to you under instructions from . . .
El Nasr Export & Import Co., of . . . Dar es Salaam, who are the
original beneficiaries of an irrevocable transferable letter of credit
established by a bank in Madrid. C
" 2. We have now received a mail confirmation of this credit and
we quote below the terms of the letter of credit.
" By order of M/s. El Nasr Export & Import Co., of P.O. Box 2281,
Dar es Salaam, and for their account we transfer an irrevocable
documentary credit established in their favour by Banco Exterior de
Espana, Madrid, being their reference No. Credito 282539/S up to an
amount of £131,000/- (sterling one hundred and thirty-one thousand *-*
pounds) valid until October 5, 1967, inclusive for payment negotiation
in Dar es Salaam available at sight against delivery of the following
documents:
1. Commercial invoice . . . issued to the name of M/s. El Nasr
Export & Import Co.
2. Full set of bill of lading . . . issued . . . to Conisaria General E
de Abastecimientos y Transportes...
3. Certificate of quality . . .
4. Certificate of origin . . .
5. Certificate phytosanitary . . .
6. Certificate issued . . . at the shipping port for account of the
beneficiaries stating weight and quality of the goods.
F
7. Copy cable to be sent to El Nasr . . . Dar es Salaam for insurance
purpose stating number of bags nett and gross weight of the
shipped coffee relating to:
500 long tons De Cafe Robusta FAQ de Tanzania (packed in
bags, etc.) at the price of sterling £262 per long ton f.o.b. ship-
ment in September on the vessel Vinland Saga from f.o.b.
Mombasa and /or Dar es Salaam to Barcelona. G
Payments on account for partial shipment may yet be admitted.
" 3. Please note that any charges arising out of this transaction are
for account of beneficiary. Insurance covered by buyers.
" 4. The original credit advised to El Nasr . . . bears our confirma-
tion as per instructions of our Madrid correspondents.
Yours faithfully,
The National Bank of Commerce,
Tanzania."
 205
2 Q.B. W. J. Alan & Co. v. El Nasr Export (C.A.) Lord Denning MJL
It is quite plain that that credit did not conform to the original
contracts of sale in many respects. In particular:
1. It was for 500 tons, instead of two separate parcels of 250 tons each.
2. It was for shipment in September by the vessel Vinland Saga
instead of the first 250 tons September/October 1967, and the second 250
tons October/November 1967.
3. It was for payment in sterling, and not in Kenya shillings.
B 4. It was not available from thefirstday of the shipment period.
5. It was only valid until October 5, 1967, instead of October 15, 1967
(per first contract), and December 15,1967 (per second contract).
The first shipment
Nevertheless, although the letter of credit did not conform to the contract
2 of sale, the sellers were content to draw on it and make use of it. On
September 19, 1967, they shipped on the Vinland Saga at Mombasa 88 tons
of coffee, and on September 20 another 191 tons of coffee on the same
ship, making 279 tons for carriage to Barcelona. That was presumably
250 tons under the first contract and 29 tons under the second contract.
They invoiced this coffee to El Nasr, The first invoice was dated
September 20, 1967, for Kenya shs.461,283.75 converted to sterling
3
£23,064 3s. 9d. The second invoice was dated September 27, 1967, for
sterling £50,057 15s. lOd. The sellers sent the documents to their bank,
the Ottoman Bank in Nairobi. The Ottoman Bank sent them to the buyers'
bank, the National Bank of Commerce, Tanzania. They noted some dis-
crepancies, but, on receiving the necessary indemnity from the sellers, the
Tanzanian bank paid the amount in sterling to the sellers' bank, Nairobi,
2 where it was credited in Kenya shillings. At this time Kenya shillings
were worth the same as sterling shillings—so the currency did not matter.

The second shipment

The letter of credit, as originally issued, was only valid until October 5,
1967, and only for the one vessel—the Vinland Saga. So it was not
p available for the second shipment unless extended in date and to another
vessel. This shipment was to be for the outstanding 221 tons in the
second contract. There were many cables passing between October 8,
1967, and November 10, 1967, between the sellers and the buyers, and the
various banks. As a result, the credit was extended up to November 25,
1967, for shipment by the Maria Teresa.
On November 16, 1967, the sellers shipped 221 tons of coffee at
5 Mombasa on the Maria Teresa. A bill of lading was issued for it. All
the documents were prepared for presentation. The sellers made out an
invoice No. 28, dated November 18, 1967, for the 221 tons at a price in
sterling of £57,877 15s. 9d. They headed it: "Drawn under Banco
Exterior de Espana, Madrid, Irrevocable Letter of Credit No. 282539/S."
But then, before they sent the documents to the bank, they heard that
j sterling had been devalued. They waited to see if Kenyan currency would
also be devalued. It was not. So they took the invoice which had been
prepared, and inserted in it these words: "Part payment of balance
due—contract No. 3447 of 13/7/67." The sellers handed the invoice
206
Lord Denning M.R. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
containing those words, with the shipping documents and a draft payable
at sight, to their own bank: in Nairobi. That bank sent them to the A
buyers' bank in Dar es Salaam. The buyers' bank refused to accept the
draft so long as the invoice contained those words: " Part payment of
balance due—contract No. 3447 of 13/7/67." So the sellers made out a
revised invoice omitting those words: and on November 18, 1967, sent
it to their bankers, together with a sight draft in sterling. Their bankers
collected the amount in sterling of £57,877 15s. 9d. But that sterling was g
at the time (owing to devaluation of sterling) only worth shs.987,734.50 in
Kenyan currency. The sellers claimed that they ought to be paid an
extra shs. 165,530.45, because they said that the contract of sale was in
Kenyan currency of shs.262 a ton.

Currency of account
An important question is: what was the money of account as distinct
from the money of payment? I explained the difference between them in
the recent case of Wood house A.C. Israel Cocoa Ltd. S.A. v. Nigerian
Produce Marketing Co. Ltd. [1971] 2 Q.B. 23, 54. At the time
when the contracts of sale were made it did not matter what was the
money of account: because Kenya shillings and sterling shillings were
worth the same. But on and after November 18, 1967, it did matter. The D
sellers say that the money of account was Kenya shillings and that they
are, therefore, entitled to the price as measured in Kenyan currency, and
not in sterling: whereas the buyers say that the money of account was
sterling from die beginning.
We were referred to the leading cases on this subject, such as Bonython
V. Commonwealth of Australia [1951] A.C. 201; National Bank of p
Australasia Ltd. v. Scottish Union and National Insurance Co. Ltd. [1952]
A.C. 493 and National Mutual Life Association of Australasia Ltd. v.
Attorney-General for New Zealand [1956] A.C. 369, to which I would add
the valuable discussion in the latest edition of Dr. Mann's book The Legal
Aspect of Money, 3rd ed. (1971), pp. 217-228.
Sufficient for present purposes to say that we must apply the proper
law of the contract—in this case English law—and then, as a matter of F
construction, decide what was the currency of account. Mr, Stamler
submitted that the currency of account was sterling. He stressed the many
points connecting the contract with England, and with sterling, referring
us to an affidavit of the manager of the buyers. But I find myself in entire
agreement with the judge. The contract was made in Kenya, the sellers
were in Kenya, the delivery and shipment were to be in Kenya, and by
the law of Kenya all transactions entered into in Kenya were to be in
Kenyan currency. Then there is the decisive point that the price is stated
" shs.262/- per cwt." That way of writing shillings is the clearest indica-
tion possible that the money of account was Kenyan: just as £N was in
the Woodhouse case (at p, 29).
Mr. Stamler made some reference to subsequent conduct—but when
the contract is clear and. unambiguous, it would not be right to let it be
influenced by subsequent conduct. That may go to variation of the con-
tract, or to waiver, but not to its initial construction: set Ottoman Bank
 207
2 Q.B. W. J. Alan & Co. v. El Nasr Export (OA.) Lord Denning M.R.
of Nicosia v. Chakarian [ 1938] A.C. 260, 272 and Whitworth Street Estates
*• (Manchester) Ltd.W< James Miller and Partners Ltd. [1970] A.C. 583. ..
If I am right in, holding that the money: of account was Kenyan
currency, then, in order to conform with the contract, the letter of credit
should, I imagine, have been expressed in Kenya shillings and confirmed
by a bank in Kenya. But that was not done. It was expressed in sterling.
What is the consequence? .
3
The issues
The buyers say that the sterling credit was decisive: because, at the
time it was given and accepted, it amounted to payment of the price.
Alternatively they say that the money of account was varied by agreement,
or that the sellers waived payment in Kenyan currency and accepted
2 sterling instead.
The first point, whether the letter of credit amounted to payment, is of
much importance: but it does not arise if the second point is good. We
are all agreed that the second point is good. So it is not strictly necessary
to go into the first point. But both counsel have done much research on
it. They presented their arguments in full before us and with great ability.
They invited us to express our views, whatever the outcome. I propose
^ to do so. In any case, the discussions have helped me in coming to a
decision. And I think it would be a pity if the work of counsel were lost
and forgotten. There is a good precedent, too. In Hedley Byrne & Co.
Lid. v. Heller & Partners Ltd. [1964] A.C. 465, it was unnecessary for the
House to consider whether there was a duty to use care in making state-
ments: but they did so. So I will try, albeit on a lower level, to do likewise.
E
The meaning of the commercial terms
In any consideration of letters of credit, it is important to know the
meaning of the terms used by commercial men. I can do this best by
explaining the course of business here. This is a typical case of the use
of commercial letters of credit. Here we have a seller of coffee in Kenya.
P He sells it to a buyer in Tanzania. That buyer resells it to a second buyer
in Spain.
The Kenyan seller is not willing to part with the goods or the documents
relating to them unless he is assured of payment. So, he stipulates with
his Tanzanian.buyer that payment is to be made by " confirmed irrevocable
letter of credit": see Trans Trust S.P.R.L. v. Danubian Trading Co.
Ltd. [1952] 2 Q.B. 297, 304. That means that the Tanzanian buyer must
* establish in favour of the Kenyan seller a letter of credit by which a banker
promises to pay the price—or to accept drafts for the price—in exchange
for the shipping documents relating to the goods, for example, the bill of
lading, invoice and so forth. The letter of credit must, of course, be
" irrevocable." A " revocable " letter of credit is not of much use to the
seller, because the banker, on the buyer's instructions, might then revoke
j it at any time. The" letter of credit must, in addition, be "confirmed."
That is to say, it must be confirmed by a banker who is readily accessible
to the seller (that is, in Nairobi or Dar es Salaam): because the seller
wants to be able to go to such a banker and get payment against documents.
208
Lord Denning M.R. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
The seller may stipulate for payment in cash or by drafts accepted by the
A
confirming banker. Such drafts may be "at sight," that is, payable on
demand, or after a fixed period, such as 90 days after sight.
The Tanzanian buyer did not himself go to his own banker to establish
the credit. He resold the coffee to a Spanish buyer and stipulated that the
Spanish buyer should establish a " transferable " letter of credit in his
favour. The intention of the Tanzanian buyer was, of course, to transfer
so much of it as was necessary to meet his obligations to the Kenyan B
seller. The Spanish buyer then went to his bank in Madrid and asked
them to issue a transferable irrevocable letter of credit in favour of the
Tanzanian buyer. The Madrid bank would, of course, insist on the
Spanish buyer providing them with the necessary funds or otherwise giving
them security to back the credit. On being so satisfied, the Madrid bank
issued their own transferable irrevocable letter of credit in favour of the .-,
Tanzanian buyer. The Madrid bank were the "issuing bank" and, by
issuing the letter of credit, they gave their own promise to honour it in
exchange for documents in accordance with its terms.
The Tanzanian buyer, armed with that credit from the Madrid bank,
went to his own bank in Dar es Salaam and told them that he wanted to
" transfer " to the Kenyan seller so much of it as was necessary to meet
his obligations to the Kenyan seller. He also asked them to " confirm " it; D
that is to say, to add to it (in addition to the promise of the Madrid bank)
a promise on their own account that they would honour it on presentation
of the documents. The Tanzanian bank would, of course, require the
Madrid bank to put them in funds or otherwise satisfy them that their
" confirmation " would be backed by the Madrid bank.
The Tanzanian bank then issued their confirmation to the Kenyan g
seller. They were the " confirming " bank. By it they promised to pay
the Kenyan seller the price of the goods against delivery of documents in
accordance with the terms set out therein. The payment was to be cash
or by drafts payable at sight.
These promises by the issuing banker and by the confirming banker
are, of course, enforceable against the bank by the seller.
It turned out, however, that the credit (as issued by the Madrid bank
and confirmed by the Tanzanian bank) was not in conformity with the
contract of sale made by the Kenyan sellers with the Tanzanian buyers.
It was a " non-conforming " credit. It did not fully conform in regard to
the first shipment. But the sellers shipped 279 tons, presented the
documents to the " confirming bank " and obtained payment in sterling.
The letter of credit did not conform at all in regard to the second shipment.
It did not, for instance, conform as to the date of shipment or the name
of the vessel. Nor was it expressed in Kenyan currency (which was the
currency in the contract of sale), It was expressed in sterling. In con-
sequence, arrangements were made so as to get over the non-conformity.
All concerned agreed in the arrangements. The date of the shipment was
extended: and another vessel was named. But no one asked for the
currency to be altered so as to conform. The price stated in the credit
was expressed in sterling and remained in sterling throughout. The Kenyan
 209
2 Q.B. W. J. Alan & Co. v. El Nasr Export (C.A.) Lord Denning M.R.
sellers shipped the goods in that knowledge, and obtained the documents
relating to them. All this was done before sterling was devalued.
But before the Kenyan sellers presented the documents for the second
shipment to the confirming bank sterling was devalued. The Kenyan
sellers then presented the documents to the confirming bank and obtained
payment in sterling in accordance with the credit. Now they claim to be
entitled to more. They say that they were and are entitled to have the
J price measured in Kenyan currency: that the proceeds of the credit go in
reduction of that price: but do not discharge it altogether: and that they
are entitled to the balance.

The effect of a letter of credit

When an irrevocable letter of credit is issued by one bank and confirmed
-, by another, it may be a " conforming " credit; that is, one which conforms
exactly to the contract of sale: or it may be a " non-conforming " credit;
that is, one which does not conform exactly to the contract of sale, but is
afterwards modified or accepted as being satisfactory to all concerned. It
then becomes equivalent to a " conforming credit." In any such case the
question arises whether the credit is to be regarded as absolute payment of
the price, or as conditional payment of it, or as no payment at all but only a
) means by which payment may be obtained; that is, as collateral security.
This must be a matter of the true construction of the contract: but, in
order to construe it, it is important to bear in mind what the consequences
are in each case.
Absolute payment
g If the letter of credit is absolute payment of the price, the consequences
are these: the seller can only look to the banker for payment. He can in
no circumstances look to the buyer. The seller must present the documents
to the banker and get payment from him in cash or get him to accept sight
or time drafts. If the banker does not take up the documents, the seller
will retain them, resell and sue the banker for damages. If the banker
takes up the documents in exchange for time drafts, and the banker after-
F wards becomes insolvent, the seller must prove in the liquidation. He
cannot sue the buyer.
There is an observation in the High Court of Australia which suggests
that a confirmed irrevocable letter of credit may amount to absolute
payment. In Saffron v. Societe Miniere Cafrika (1958) 100 C.L.R. 231,
243, 244, the High Court said:
} " a provision for payment by irrevocable and confirmed letter of
credit . . . might perhaps not unreasonably be regarded as a stipulation
for the liability of the confirming bank in place of that of the buyer."
And in Soproma S.p.A. v. Marine & Animal By-Products Corporation
[1966] 1 Lloyd's Rep. 367, 385, McNair J. said:
"Under this form of contract, as it seems to me, the buyer performs
* his obligation as to payment if he provides for the sellers a reliable
and solvent paymaster. . . ."
McNair J. did not, however, have all the arguments before him.
2 Q.B. 1972—8 (1)
210
Lord Denning M.R. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
In my opinion a letter of credit is not to be regarded as absolute payment,
unless the seller stipulates, expressly or impliedly, that it should be so.
He may do it impliedly if he stipulates for the credit to be issued by a
particular banker in such circumstances that it is to be inferred that the
seller looks to that particular banker to the exclusion of the buyer. There
are some cases in the United States which are to be explained in this way,
such as Vivacqua Irmaos S.A. v. Hickerson (1939) 190 Southern Rep.
657 and Ornstein V. Hickerson (1941) 40 Fed.Supp. 305. And in the
Soproma case [1966] 1 Lloyd's Rep. 367 there was a stipulation for a
particular banker, which may account for McNair J.'s observation.

Conditional payment
If the letter of credit is conditional payment of the price, the con-
sequences are these: the seller looks in the first instance to the banker for ^
payment: but, if the banker does not meet his obligations when the time
comes for him to do so, the seller can have recourse to the buyer. The
seller must present the documents to the banker. One of two things may
then happen: (1) the banker may fail or refuse to pay or accept drafts in
exchange for the documents. The seller then, of course, does not hand
over the documents. He retains dominion over the goods. He can resell D
them and claim damages from the buyer. He can also sue the banker
for not honouring the credit: see Urquhart Lindsay & Co. Ltd. v. Eastern
Bank Ltd. [1922] 1 K.B. 318. But he cannot, of course, get damages twice
over. (2) The bank may accept time drafts in exchange for the documents,
but may fail to honour the drafts when the time comes. In that case the
banker will have the documents and will usually have passed them on
to the buyer, who will have paid the bank for them. The seller can then ^
sue the banker on the drafts: or if the banker fails or is insolvent, the
seller can sue the buyer. The banker's drafts are like any ordinary
payment for goods by a bill of exchange. They are conditional payment,
but not absolute payment. It may mean that the buyer (if he has already
paid the bank) will have to pay twice over. So be it. He ought to have
made sure that he employed a " reliable and solvent paymaster." F
There are several cases which show that in the ordinary way a letter
of credit is conditional and not absolute payment. But, as Mr. Tapp
properly observed, they are all concerned with time drafts. Thus in New
Zealand in Hindley & Co. v. Tothill; Watson & Co. (1894) 13 N.Z.L.R.
13, 23, the Court of Appeal said that the seller had the liability "of
the bank in the first instance and on the bank's default that of the
defendants (the buyers)." In the United States in Greenough V. Munroe ®
(1931) 53 Fed.Rep. 2d 262, 365, the United States Court of Appeals for the
second circuit (New York) said:
" the authorities favour the view that there is no presumption that
the seller takes a draft drawn under a letter of credit in absolute
payment of the buyer's obligation to pay for the merchandise; hence
upon default by the bank upon its draft the seller may look to the H
buyer."
Finally in England in Newman Industries Ltd. v. Indo-British Industries
 211
2 Q.B. W.J. Alan & Co. v. El Nasr Export (C.A.) Lord Denning M.R.
(Govindram Bros. Ltd., Third Parties) [1956] 2 Lloyd's Rep. 219, 236,
"• Sellers J. said in regard to a time draft:
" I do not think there is any evidence to establish, or any inference
to be drawn, that the draft under the letter of credit was to be taken
in absolute payment. I see no reason why the plaintiffs . . . should
not look to the defendants, as buyers, for payment."
B Many of the textbooks treat a letter of credit as conditional payment.
Thus Professor Davis in 1954 said:
" such authority as there is tends to support the view that the letter
of credit constitutes conditional, and not absolute, payment. There-
fore, should the issuing banker fail to honour the seller's drafts,
drawn in conformity with the terms of the credit, the rights of the seller
C against the buyer will revive " :
see The Law Relating to Commercial Letters of Credit, 2nd ed. (1954),
p. 46; 3rd ed. (1963), p. 49, Megrah in H. C. Gutteridge's Law of Bankers'
Commercial Credits, 4th ed. (1968), pp. 29^33 and Paget on The Laws of
Banking, 7th ed. (1966), pp. 620-622 is to the same effect.

D No payment at all
If the letter of credit is no payment at all, but only a means by which
payment may be obtained, i.e., if it is only collateral security, the con-
sequences are these: the seller ought to present the documents to the
banker. If the seller does not do so, he will be guilty of laches in enforcing
his security and the buyer will be discharged: see Peacock v. Pursell
(1863) 14 C.B.N.S. 728. But if on the presentation the banker fails or
E refuses to take up the documents, then (if the letter of credit is only
collateral security) the seller will be entitled to take the documents round
to the buyer (or send them to him) and demand that he takes them up and
pay the price. This situation finds no place in any of the authorities.
There is a statement in an old case in Pennsylvania, Bell v. Moss (1839)
5 Whart. 189, 203, when it was said:
F " A credit with a banker is not payment, but a means of payment,
more or less secure according to the solidity of the depositary; and
the greater or less certainty of the security cannot affect the question
of its character: it is but a security still."
That statement was quoted with approval by Finkelstein in 1930, in
Commercial Letters of Credit, p. 156, who says that the seller "desires
3 additional security without the surrender of any rights that he may have
against the buyer." But the complete answer was given by McNair J. in
Soproma S.p.A. v. Marine & Animal By-Products Corporation [1966] 1
Lloyd's Rep. 367,386:
" It seems to me to be quite inconsistent with the express terms of
a contract such as this to hold that the sellers have an alternative
g right to obtain payment from the buyers by presenting the documents
direct to the buyers. Assuming that a letter of credit has been opened
by the buyer for the opening of which the buyer would normally
be required to provide the bank either with cash or some form of
2 Q.B. 1972—8 (2)
212
Lord Denning M.R. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
authority, could the seller at his option disregard the contractual
A
letter of credit and present the documents direct to the buyer? As
it seems to me, the answer be plainly in the negative."
Conclusion as to payment
As a result of this analysis, I am of the opinion that in the ordinary
way, when the contract of sale stipulates for payment to be made by
confirmed irrevocable letter of credit, then, when the letter of credit is B
issued and accepted by the seller, it operates as conditional payment of the
price. It does not operate as absolute payment.
It is analogous to the case where, under a contract of sale, the buyer
gives a bill of exchange or a cheque for the price. It is presumed to be
given, not as absolute payment, nor as collateral security, but as conditional
payment. If the letter of credit is honoured by the bank when the docu-
ments are presented to it, the debt is discharged. If it is not honoured, *~
the debt is not discharged: and the seller has a remedy in damages against
both banker and buyer.
Variation or waiver
All that I have said so far relates to a " conforming " letter of credit;
that is, one which is in accordance with the stipulations in the contract of D
sale. But in many cases—and our present case is one—the letter of credit
does not conform. Then negotiations may take place as a result of which
the letter of credit is modified so as to be satisfactory to the seller. Alter-
natively, the seller may be content to accept the letter of credit as satis-
factory as it is, without modification. Once this happens, then the letter
of credit is to be regarded as if it were a conforming letter of credit. It
will rank accordingly as conditional payment. "
There are two cases on this subject. One is Panoutsos v. Raymond
Hadley Corporation of New York [1917] 2 K.B, 473; but the facts are only
to be found fully set out in 22 Com.Cas. 207. The other is Enrico Furst &
Co. v. W. E. Fischer Ltd. [1960] 2 Lloyd's Rep. 340. In each of those cases
the letter of credit did not conform to the contract of sale. In each case the
non-conformity was in that it was not a confirmed credit. But the sellers p
took no objection to the letter of credit on that score. On the contrary,
they asked for the letter of credit to be extended: and it was extended.
In each case the sellers sought afterwards to cancel the contract on the
ground that the letter of credit was not in conformity with the contract.
In each case the court held that they could not do so.
What is the true basis of those decisions? is it a variation of the
original contract? or a waiver of the strict rights thereunder? or a pro- G
missory estoppel precluding the seller from insisting on his strict rights?
or what else?
In Enrico Furst, Diplock J. said it was a " classic case of waiver."
I agree with him. It is an instance of the general principle which was
first enunciated by Lord Cairns L.C. in Hughes v. Metropolitan Railway
Co. (1877) 2 App.Cas. 439, and rescued from oblivion by Central London JJ
Property Trust Ltd. v. High Trees House Ltd. [1947] K.B. 130. The
principle is much wider than waiver itself: but waiver is a good instance
of its application.
 213
2 Q.B. W. J. Alan & Co. v. El Nasr Export (C.A.) Lord Denning M.R.
The principle of waiver is simply this: If one party, by his conduct,
leads another to believe that the strict rights arising under the contract will
not be insisted upon, intending that the other should act on that belief, and
he does act on it, then the first party will not afterwards be allowed to
insist on the strict legal rights when it would be inequitable for him to do
so: see Plasticmoda Societa per Azioni v. Davidsons (Manchester) Ltd.
[1952] 1 Lloyd's Rep. 527, 539. There may be no consideration moving
B from him who benefits by the waiver. There may be no detriment to him
by acting on it. There may be nothing in writing. Nevertheless, the one
who waives his strict rights cannot afterwards insist on them. His strict
rights are at any rate suspended so long as the waiver lasts. He may on
occasion be able to revert to his strict legal rights for the future by giving
reasonable notice in that behalf, or otherwise making it plain by his con-
duct that he will thereafter insist upon them: Tool Metal Manufacturing
- Co. Ltd. v. Tungsten Electric Co. Ltd. [1955] 1 W.L.R. 761. But there
are cases where no withdrawal is possible. It may be too late to withdraw:
or it cannot be done without injustice to the other party. In that event he
is bound by his waiver. He will not be allowed to revert to his strict legal
rights. He can only enforce them subject to the waiver he has made.
Instances of these principles are ready to hand in contracts for the sale
3 of goods. A seller may, by his conduct, lead the buyer to believe that he
is not insisting on the stipulated time for exercising an option: Bruner v.
Moore [1904] 1 Ch. 305. A buyer may, by requesting delivery, lead the
seller to believe that he is not insisting on the contractual time for delivery:
Charles Rickards Ltd. v. Oppenhaim [ 1950] 1 K.B. 616, 621. A seller may,
by his conduct, lead the buyer to believe that he will not insist on a con-
firmed letter of credit: Plasticmoda [1952] 1 Lloyd's Rep. 527, but will
^ accept an unconfirmed one instead: Panoustsos v. Raymond Hadley Cor-
poration of New York [1917] 2 K.B. 473; Enrico Furst & Co. v. W. E.
Fischer [1960] 2 Lloyd's Rep. 340. A seller may accept a less sum for
his goods than the contracted price, thus inducing him to believe that he
will not enforce payment of the balance: Central London Property Trust
Ltd. v. High Trees House Ltd. [1947] K.B. 130 and D. & C. Builders Ltd.
p v. Rees [1966] 2 Q.B. 617, 624. In none of these cases does the party who
acts on the belief suffer any detriment. It is not a detriment, but a benefit
to him, to have an extension of time or to pay less, or as the case may be.
Nevertheless, he has conducted his affairs on the basis that he has that
benefit and it would not be equitable now to deprive him of it.
The judge rejected this doctrine because, he said, " there is no evidence
^ of the buyers having acted to their detriment." I know that it has been
3
suggested in some quarters that there must be detriment. But I can
find no support for it in the authorities cited by the judge. The nearest
approach to it is the statement of Viscount Simonds in the Tool Metal
case [1955] 1 W.L.R. 761, 764, that the other must have been led " to alter
his position," which was adopted by Lord Hodson in Ajayi v. R. T. Briscoe
(Nigeria) Ltd. [1964] 1 W.L.R. 1326, 1330. But that only means that he
j must have been led to act differently from what he otherwise would have
done. And if you study the cases in which the doctrine has been applied,
you will see that all that is required is that the one should have " acted on
the belief induced by the other party." That is how Lord Cohen put it in
214
Lord Denning M.R. W. J. Alan & Co. v. El Nasr Export (C.A.) (1972]
the Tool Metal case [1955] 1 W.L.R. 761, 799, and that is how I would put
it myself. "
The judge also rejected the doctrine because of something which was
said in the recent case of Woodhouse A.C. Israel Cocoa Ltd. S.A. v.
Nigerian Produce Marketing Co. Ltd. [1971] 2 Q.B. 23 about estoppel:
but no question of waiver arose there: no question of letters of credit; or
anything of that kind. It has no application here and neither counsel relied
in any way upon it before us. B

Conclusion
Applying the principle here, it seems to me that the sellers, by their
conduct, waived the right to have payment by means of a letter of credit
in Kenyan currency and accepted instead a letter of credit in sterling.
It was, when given, conditional payment, with the result that, on being duly
honoured (as it was), the payment was no longer conditional. It became
absolute, and dated back to the time when the letter of credit was given
and acted upon. The sellers have, therefore, received payment of the
price and cannot recover more.
I would pay tribute to the judgment of the judge—with which in great
part I entirely agree. I only differ from him on the ground of variation
or waiver, which does not appear to have been argued before him as D
fully as before us.
I would, therefore, allow this appeal and enter judgment for the
buyers.

MEGAW LJ. The sellers, W. J. Alan & Co. Ltd., are merchants in
Nairobi, and the buyers, El Nasr Export & Import Co., are an Egyptian
state trading company. The sellers and the buyers, the latter through "
their Dar es Salaam branch, made two contracts, on July 12 and 13,
1967, for the sale of coffee, f.o.b. Mombasa. The first contract was for
250 tons, with shipment date September/October 1967. The second con-
tract, out of which the present dispute arises, was for a further 250 tons,
with shipment date October/November 1967. Apart from the different
shipment dates, the two contracts were in identical terms. F
The price clause in each contract was: " Price: shs.262/- (two hundred
and sixty-two) per cwt. of 112 lb. nett f.o.b. Mombasa." The payment
clause read: " Payment: By confirmed, irrevocable letter of credit to be
opened at sight one month prior to shipment as stipulated in this contract."
It was provided in each contract that it was made under the terms and
conditions of the London Coffee Trade Federation. There is no doubt but
that the proper law of the contracts was English law. The Federation's *•*
conditions expressly provided that English law should govern.
At the time when the contracts were made there was parity between
sterling and Kenyan currency. 20 Kenya shillings were of identical
value with one pound sterling. The dispute in this case has arisen
because, while shipment of part of the coffee under the second contract
was actually in process of being made, but before payment for that ship- JJ
ment had been made or was due, sterling was devalued, whereas Kenya
shillings were not devalued. Thereafter one pound sterling was not worth
20 Kenya shillings, but was worth only 85.7 per cent, of 20 Kenya
 215
2 Q.B. W. J. Alan & Co. v. El Nasr Export (C.A.) Megaw LJ.
shillings. It therefore becomes necessary to decide whether the money of
^ account—that is, the currency by reference to which the amount of the
contractual payment is to be calculated—is Kenya shillings or sterling.
Meanwhile, before the devaluation of sterling, various relevant events
had happened. The buyers, it would appear, had resold the coffee to sub-
buyers in Spain. Those sub-buyers had established an irrevocable trans-
ferable letter of credit in favour of the buyers in a Spanish bank in Madrid.
Q It would seem that the credit had been established in sterling. The buyers,
in purported performance of their obligations to the sellers under the con-
tracts of July 12 and 13, had arranged for the transfer of a part of that
Madrid credit to the National Bank of Commerce, Tanzania, in Dar es
Salaam. That bank, by letter of September 20, 1967, notified the sellers
of the availability to them of that transferred letter of credit, and the bank
itself confirmed the credit. In so doing, the bank, of course, was acting on
^ the buyers' instructions.
Apart from any question as to the currency in which the credit was
expressed, the credit fell short in various respects of compliance with the
buyers' obligations under the contracts of sale. It was established late.
Each contract called for a separate letter of credit, not, as was offered, one
single credit for the two contracts. The credit did not extend over the
3 whole of the shipment periods. It stipulated for at least one certificate
of quality which the contracts did not require. It might be construed as
calling for the whole of the shipments under both contracts to be made by
one named vessel. It is not necessary to consider these discrepancies further,
because the sellers took no objection to them; though they did thereafter
ask for and receive amendments, including an extension of date.
So far as concerns the currency involved, there can be no doubt what-
E ever that the confirmed letter of credit was expressed to be in sterling and
that the only obligation which it imposed upon the bank was an obligation
to make payment in, and measured by, sterling. The confirming bank's
letter expressly stated that the credit was "up to an amount of £131,000
(sterling one hundred thirty-one thousand pounds)," Clause 7 of the letter
may not be of much significance in other respects, since it relates merely
p to a cable to be sent to the buyers " for insurance purposes." It is, how-
ever, of some significance, in respect of the currency question, that there is
a reference in that clause, in the Spanish language, to " the price of stg.
£262 per long ton." So the contractual 262 shillings per cwt. had become,
at least for purposes of the confirmed credit, £262 per ton. So far as
that transaction was concerned, sterling was the money of account. Sterling
had been made the money of account in the bank's offer of payment.
3 That offer was made by the bank on the instructions of the buyers. It was
an offer for the purpose of providing the payment, and the only payment,
stipulated by the contracts of sale.
The sellers did not raise any complaint as to the confirmation of the
letter of credit in those terms. They did not complain about the currency.
Instead, they at once took advantage of the confirmed credit by operating
fj on it. By September 20, 1967, 88 tons of coffee, under the first contract,
had been shipped in the Vinlartd Saga at Mombasa. The sellers presented
documents and obtained payment from the bank. The documents included
an invoice, no 17, dated September 20. It expressly referred to the credit.
216
Megaw L.J. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
It used the words " @ £262 per long ton." While the resulting sum was
A
initially shown in shillings, the total was expressed as " £23,064 3s. 9d."
In other words, it was a sterling invoice. We have not seen the documents
relating to payment, but it is safe to assume that the draft corresponded
with the invoice total, showing pounds, shillings and pence: so that pay-
ment was by sterling draft. A further 191 tons were shipped on September
20, further bills of lading for that quantity being issued on that date. This
shipment completed the 250 tons of the first contract and also comprised B
29 tons towards the fulfilment of the second contract. The invoice, no, 18,
was unambiguously a sterling invoice, expressed in pounds, shillings and
pence. Again, no doubt, the draft was in sterling to correspond with the
invoice and the terms of the credit.
Two hundred and twenty-one tons still remained to be shipped under
the second contract. That quantity was loaded in the Maria Teresa and
bills of lading were issued on November 16, 1967. An invoice for 221 C
tons (invoice no. 28) had been prepared by the sellers with the date
November 18. Once again, it was a sterling invoice: the computation was
expressed as "£262 per long ton": it was all in sterling: the total was
£57,877 15s. 9d. Before the documents were presented for payment came
the news of the devaluation of sterling. It was still not known if Kenya
shillings would follow sterling. The sellers, leaving the invoice in other Q
respects as originally prepared, added the words: " Part payment of
balance due. . . ." As is clear from the terms of a letter dated November
22 from the sellers' bank in Nairobi, the Ottoman Bank, to the
confirming bank in Dar es Salaam, the sight draft which accompanied in-
voice no. 28 was expressed as £57,877 15s. 9d. Payment in accordance with
the draft was ultimately made to the sellers by the confirming bank. How-
ever, when it became known on November 21 that the Kenyan currency ^
was not going to be devalued, the sellers prepared a further invoice no.
28B, in the sum of shs.165,530.45. This sum is the difference between
the amount of Kenya shillings referable to 221 tons at shs.262/- per
cwt. and the amount of Kenya shillings which would have been realised
in exchange for £57,877 15s. 9d. after devaluation. Invoice no. 28B was
accompanied by a sight draft, drawn, not on the confirming bank (who p
clearly could not be made liable to pay anything more) but on the buyers,
for shs.165,530.45. The buyers refused to accept or pay the draft on
the ground that they did not owe the sellers anything. The sellers protested
that refusal. Battle was joined.
The first issue is whether in the original contract, the contract of July
13, 1967, the money of account was initially Kenyan currency or sterling.
To my mind, Orr J. was right, for the reasons given by him, in holding G
that when that contract was made the money of account was Kenyan. The
fact that it was expressed in a form which was appropriate for Kenyan
currency and was not appropriate for sterling must outweigh, and far
outweigh, the various indications relied upon by the buyers as pointing
to sterling.
However, in my judgment the currency of account was subsequently JJ
varied from Kenyan currency to sterling. That being so, the sellers have
been paid the full amount to which they are entitled and they have no valid
claim against the buyers.
 217
2 Q.B. W.J. Alan & Co. v. El Nasr Export (C.A.) Megaw LJ.
The contract of sale contained its own express provision for payment,
^ which I have already quoted in full. I repeat the essential words: " Pay-
ment: By confirmed, irrevocable letter of credit . . ." There is nothing
else in the contract, at least in its express terms, which adds to, subtracts
from or qualifies that contractual provision as to payment of the price.
It was the buyers' obligation to procure that a bank should offer to the
sellers its confirmation of an irrevocable credit which would provide for
3 payment of the contract price as specified in the contract of sale, against
delivery to the bank of the proper documents.
The offer made by the confirming bank, as I have already said, did not
comply, in several respects, with what the sellers were entitled to require.
However, the only non-conforming aspect of the offer which I regard as
relevant for the purposes of this appeal is the term of the offer in respect
of currency. That, in my view, is not only relevant: it is vital.
The confirming bank's offer, made to the sellers with the knowledge of,
and on the instructions of, the buyers, was an offer which involved sterling,
not merely as the currency of payment, but as the currency of account, in
respect of that transaction. The sellers accepted the confirming bank's
offer, including its terms as to currency, by submitting invoices and drafts
with the form and contents which I have already described.
) As I see it, the necessary consequence of that offer and acceptance of
a sterling credit is that the original term of the contract of sale as to the
money of account was varied from Kenyan currency to sterling. The pay-
ment, and the sole payment, stipulated by the contract of sale was by the
letter of credit. The buyers, through the confirming bank, had opened
a letter of credit which did not conform because it provided sterling as
the money of account. The sellers accepted that offer by making use of
- the credit to receive payment for a part of the contractual goods. By that
acceptance, as the sellers must be deemed to have known, not only did
the confirming bank become irrevocably bound by the terms of the offer
(and by no other terms), but so also did the buyers become bound. Not
only did they incur legal obligations as a result of the sellers' acceptance—
for example, an obligation to indemnify the bank—but also the buyers could
j not thereafter have turned round and said to the sellers (for example, if
Kenyan currency had been devalued against sterling) that the bank would
thereafter pay less for the contractual goods than the promised sterling
payment of £262 per ton. If the buyers could not revert unilaterally to
the original currency of account, once they had offered a variation which
had been accepted by conduct, neither could the sellers so revert. The
contract had been varied in that respect.
1
The sellers, however, contend that they were, indeed, entitled to make
use of the non-conforming letter of credit offered to them, without im-
pairing their rights for the future under the original terms of the contract,
if and when they chose to revert. They seek to rely on the analogy of a
sale of goods contract where the goods are deliverable by instalments, and
one instalment falls short of the prescribed quality. The buyer is not
j obliged, even if in law he could do so, to treat the contract as repudiated.
He is not, it is said, even obliged to complain. But he is in no way pre-
cluded from insisting that for future instalments of the goods the seller
shall conform with the precise terms of the contract as to quality. That
218
Megaw L J. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
is not, in my opinion, a true analogy. The relevant transaction here is not
one of instalments. It is a once-for-all transaction. It is the establishment
of a credit which is to cover the whole of the payment for the whole of the
contract. Once it has been accepted by the sellers, the bank is committed,
and is committed in accordance with its accepted terms, and no other terms.
Once the credit is established and accepted it is unalterable, except with the
consent of all the parties concerned, all of whose legal rights and liabilities
have necessarily been affected by the establishment of the credit. Hence B
the sellers cannot escape from the consequences of the acceptance of the
offered credit by any argument that their apparent acceptance involved
merely a temporary acquiescence which they could revoke or abandon at
will, or on giving notice. It was an acceptance which, once made, related
to the totality of the letter of credit transaction; and the letter of credit
transaction was, by the contract of sale, the one and only contractual pro-
vision for payment. When the letter of credit was accepted as a transaction ^
in sterling as the currency of account, the price under the sale contract
could not remain as Kenyan currency.
For the buyers it was submitted further that, if there were not here a
variation of the contract, there was at least a waiver which the sellers could
not, or did not, properly revoke. I do not propose to go into that sub-
mission at any length. On analysis, it covers much the same field as the D
question of variation. In my view, if there were no variation, the buyers
would still be entitled to succeed on the ground of waiver. The relevant
principle is, in my opinion, that which was stated by Lord Cairns L.C., in
Hughes v. Metropolitan Railway Co. (1877) 2 App.Cas. 439, 448. The
acceptance by the sellers of the sterling credit was, as I have said, a once-
for-all acceptance. It was not a concession for a specified period of time
or one which the sellers could operate as long as they chose and thereafter "
unilaterally abrogate; any more than the buyers would have been entitled
to alter the terms of the credit or to have demanded a refund from the
sellers if, after this credit had been partly used, the relative values of the
currencies had changed in the opposite way.
We were invited to consider a large number of authorities cited from
the courts of Australia, New Zealand and the United States as well as of F
this country; and on the basis of those authorities to formulate propositions
of general principle as to the effect upon a buyer's liability of the establish-
ment of a confirmed letter of credit. Does the mere establishment of the
credit, completed by confirmation, discharge the buyer's liability com-
pletely? Or does it discharge it provisionally, and, if so, subject to precisely
what provision? With all respect, I do not think it is necessary, nor would
it be helpful, to seek to formulate general principles on these fascinating **
topics. As became apparent from the numerous cases cited, the relevant
factors, particularly as to the relevant terms of the individual sale contracts,
vary so widely that it would be dangerous to state general principles, unless
the statement were to be so hedged about with reservations and qualifica-
tions as to render the principles useless. However, without seeking to
formulate general principles, I am satisfied that the discussion which we JJ
have heard on this topic, when it is related to the particular facts of this
particular case, indicates another ground for deciding this appeal in favour
of the buyers.
 219
2 Q.B. W. J. Alan & Co. v. El Nasr Export (C.A.) Megaw L J.
On the simple form of contractual provision for payment in this sale
contract with which we are concerned, the sellers, in my view, have no
right of requiring payment (I am not, of course, speaking of damages for
breach) otherwise than in accordance with, and by means of, a confirmed
irrevocable letter of credit: so long, at any rate, as no default is made by
the bank in its performance of the letter of credit obligations. There are
cases in which a contract on its true construction imposes on the buyer a
B potential liability to make payment direct to the seller in certain circum-
stances, outside or in addition to payment by the bank under a duly
established letter of credit. An example is to be found in the facts of
Urquhart Lindsay & Co. Ltd. V. Eastern Bank Ltd. [1922] 1 K.B. 318.
But there is no scope for such an implication in the present contract of
sale. Here the contractual obligation is " payment by confirmed, irrevo-
cable letter of credit . . ." If such a credit is duly established, and if
C payment is duly made in accordance with its terms, I see no scope for any
liability on the part of the buyers to make, or on the part of the sellers to
require, any other or additional payment. Here the credit was, it is true,
not duly established. But the non-compliance of the credit with the con-
tract of sale was, in my opinion, unquestionably waived, and irrevocably
waived, by the sellers. On the facts of this case, the credit which was
£j established has to be treated as a conforming credit. On the terms of this
contract of sale, there remains no obligation on the buyers to make any
payment to the sellers, because they have discharged the whole of their
contractual obligation as to payment when a conforming credit has been
established and payment has actually been made under that credit, in
accordance with its terms, to the full extent that the sellers have properly
sought to draw upon it. It follows that, even if there were no variation
E or relevant waiver in respect of the terms of the contract of sale, I should
hold that the sellers' claim fails on that quite separate and independent
ground.
It is apparent, and indeed we have been told, that some of the arguments
before Orr J. followed a very different line in certain respects from the
arguments which have been presented to us. The judge, in a very lucid
p and careful judgment, disposed of a difficult and complex question which
has not been further argued on this appeal, the parties having accepted the
judge's decision. He also dealt with the question of the original currency
of account in a manner to which I should wish, respectfully, to pay tribute.
Certainly no blame can attach to him because he did not, on some of the
issues which have been put forward as being important in this court, have
the opportunity of considering the merits of the arguments now presented.
G For the reasons which I have given, I am of opinion that the buyers
have made all the payment which was due from them. I would allow the
appeal.

STEPHENSON L.J. I agree that this appeal succeeds on the second point
of variation or waiver for reasons which I shall state in my own words,
| j although they add little or nothing to what my Lords have already said.
The currency of account fixed by the contract of sale was clearly
Kenya shillings and not sterling. I agree with the judge in attaching
importance to the use of the abbreviation " shs." recognised as denoting
220
Stephenson LJ. W. J. Alan & Co. v. El Nasr Export (C.A.) [1972]
Kenya shillings by the Schedule to the Central Bank of Kenya Act 1966.
It stamps Kenya on the contract as the money of account almost as
" schillings" would stamp Austria on it. Unlike the judge, I also attach
importance to the presumption created by section 21 of the same Act,
which does not seem to me to have been displaced by the agreement
between buyers and sellers.
The letter of credit varied the currency of account in the events that
happened from Kenya shillings to pounds sterling. B
The contract of sale provided for payment by " confirmed, irrevocable
letter of credit to be opened at sight one month prior to shipment as
stipulated in this contract." There was no other provision for payment
in the contract. If the sellers had rejected the letter of credit it may be
that the buyers would have been under an implied contractual obligation
to pay the agreed price themselves and the sellers to present to the buyers
the agreed documents so as to obtain payment. The bare provision of a ^
letter of credit in conformity with the contract might not have discharged
that primary liability under this contract. But the payment by the bank
of the agreed price under a conforming letter of credit would have dis-
charged the buyers' liability to pay, because there was no other obligation
to pay provided by this contract.
Where, as here, the letter of credit by which the buyers' liability to pay j)
was to be discharged did not conform to the contract, it only became bind-
ing on the sellers if they accepted or agreed to it. That they could do
unequivocally and in full satisfaction of the buyers' liability or pro tanto
and in part satisfaction if it did not conform in respect of the price includ-
ing (as here) the currency of account. Alternatively, they could reject the
letter of credit or insist on its amendment to conform with the sale contract.
But if the sellers wanted to accept the letter of credit and payment under it E
without prejudice to their right to the full price (in the currency of account)
from the buyers, they must say so and not allow buyers and sub-buyers,
issuing and confirming banks to act upon it. Otherwise they must be
taken to have accepted the letter of credit and its terms of payment in
pounds sterling as the currency of account as well as the currency of pay-
ment, and to have accepted them beyond the possibility of unilateral p
revocation.
If the confirming bank had defaulted, the sellers might not have been
prevented by having agreed to the letter of credit and to payment of the
price by the bank from looking to the buyers either for the price agreed
in the contract of sale or for damages for breach of their contractual
promise to pay by letter of credit. For the buyers promised to pay by
letter of credit, not to provide by a letter of credit a source of payment G
which did not pay. As the sellers would have agreed to payment in sterling
by the bank, not by the buyers, they would perhaps have been entitled to
be paid by the buyers in Kenya shillings. But that question does not arise
in this case and I agree that Kenyan currency went out of this contract in
the events that happened, whatever might have been the effect on it of an
event which did not happen. JJ
By not objecting to the non-conforming letter of credit, by obtaining
payment on it in sterling from the bank and by extending it the sellers
clearly accepted and agreed to it and were treated as having done so not
 221
2 Q.B. W. J. Alan & Co. v. EI Nasr Export (CA.) Stephenson LJ.
only by the bank but by the buyers, who may be presumed (although
there was no evidence about it) to have paid charges and incurred liabilities
such as a liability to indemnify the bank. The sellers never indicated any
reservations about the change from Kenya shillings to pounds sterling or
asked for any adjustment, probably for the simple reason that they con-
sidered sterling as good as Kenya shillings if not better. When after
devaluation of sterling they invoiced the balance of the goods against part
payment of the balance of the price and claimed the difference created by
devaluation from the buyers, they were attempting to assert a liability
which, whether by variation or waiver, they had allowed the buyers to alter.
On this point I disagree with diffidence from the judge and would allow
the appeal. I find it easier to differ from the judge when I am told that it
was never argued before him that the buyers' procurement of the letter of
credit was a discharge of their liability to pay conditional upon payment
being made to the sellers by the bank and that he therefore considered the
questions of variation and waiver on a different basis from that on which
this court has answered them.
I agree that there may be contracts of sale which provide for letters of
credit but by their express or necessarily implied terms would leave the
buyers with a residual liability to pay a difference such as this, or would
absolve them from any such liability for different reasons from those on
which this decision in favour of these buyers is founded. It all, or mostly,
depends on the terms of the contract of sale and the facts of the case.
But a promise of payment like this is, in my judgment, plain; and, in
the unusual course of events which has happened in this case, has been
carried out, leaving the buyers with no further obligations and the sellers
with no further rights.
I agree also with the views expressed by Lord Denning M.R. on the
first point that this confirmed irrevocable letter of credit operated
as a conditional payment of the price which, when honoured, discharged
the buyers' debt to the sellers. And I agree further that this would in the
ordinary way be the effect of such a letter of credit being issued and
accepted by the seller in performance of a contract of sale which does
not stipulate expressly or impliedly that its issue and acceptance should
have a different effect. But on the second point I would leave open the
question whether the action of the other party induced by the party who
" waives " his contractual rights can be any alteration of his position, as
Lord Denning M.R. has said, or must, as the judge thought, be an alteration
to his detriment, or for the worse, in some sense. In this case the buyers did,
I think, contrary to the judge's view, act to their detriment on the sellers'
waiver, if that is what it was, and the contract was varied for good con-
sideration, which may be another way of saying the same thing; so that I
need not, and do not, express a concluded opinion on that controversial
' Appeal in action allowed with costs.
Appeal on motion dismissed with
costs.
Leave to appeal.
Solicitors: Attwater & Liell, Harlow; Gordon, Dadds & Co.
M. M. H.
2 Q.B. 1972—9