Full opinion text
MUKASEY, District Judge. Plaintiffs, Rudy Oei and M.J.F.M. Kools, the sole proprietor of Kools de Visser, sue Citibank N.A. (“Citibank”) and Citibank International (“Citibank Int’l”), for fraud and aiding and abetting fraud, and Citibank for wrongful honor and conversion, arising out of payment on a letter of credit issued by Citibank at Oei’s direction as part of a transaction in which plaintiffs sought to purchase Levi jeans. Defendants move to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), or in the alternative, for a summary judgment, dismissing all claims, and striking plaintiffs’ demands for consequential and punitive damages and for a jury trial. Defendants move also to dismiss the fraud and aiding and abetting fraud claims pursuant to Fed. R.Civ.P. 9(b). Plaintiffs cross-move for summary judgment on the wrongful honor claim. For the reasons given below, defendants’ motion to dismiss, or in the alternative for summary judgment, is granted as to plaintiffs’ conversion claim and the fraud and aiding and abetting claims against Citibank, but denied as to the other claims. Defendants’ motion to strike plaintiffs’ demand for punitive damages on the fraud claim is denied, but their motions to strike plaintiffs’ demands for consequential and punitive damages on the wrongful honor claim and for a jury trial are granted. Defendants’ motion to dismiss pursuant to Rule 9(b) is denied. Plaintiffs’ cross-motion for summary judgment on the wrongful honor claim is granted. I. On January 5, 1995, I dismissed an action brought by M.J.F.M. Kools against Citibank, because Kdols, as an undisclosed principal, lacked standing to sue for wrongful honor of a letter of credit issued by Citibank at Oei’s application, allegedly as agent for Kools. Kools v. Citibank, 872 F.Supp. 67 (S.D.N.Y.1995), certifying question to New York Court of Appeals, 73 F.3d 5 (2d Cir.1995), opinion withdrawn, No. 95-7209, 1996 WL 450776 (2d Cir. Aug.5, 1996). Kools appealed, but then withdrew that appeal and filed this action together with Oei. Familiarity with my previous opinion is assumed. The following facts are drawn from the complaint, and the parties’ affidavits, exhibits and Rule 3(g) statements: Oei is a resident of Connecticut and a retired IBM product manager. (Compl. ¶ 1; Oei 9/9/96 Aff. ¶ 2) Kools de Visser (“Kools”) is a Netherlands sole proprietorship with its principal place of business in Bergen Op Zoom, the Netherlands, and is owned by M.J.F.M. Kools and managed by Wilhelmus Kools: (Compl. ¶ 2; M.J.F.M. Kools 9/9/96 Aff. ¶3) Kools sells clothing at wholesale and retail in the Netherlands. (Compl. ¶2) In 1992, Kools retained Oei as a broker to purchase on its behalf Levi jeans made in the United States. (Compl. ¶ 8; PI. 3(g) ¶ 1) Oei arranged a transaction with Jade-USA, Inc., which purported to be a supplier of such jeans and which agreed to supply 43,200 pairs of Levi jeans at $23.25 a pair, for a total cost of $1,004,400. (W. Kools 9/9/96 Aff. ¶ 12) To effect this transaction, Oei applied for a letter of credit from Citibank. (PI. 3(g) ¶ 2; Def. 3(g) ¶ 1) The Application and Agreement for Commercial Letter of Credit (“Application Agreement”), dated October 28, 1992, provided that Citibank would issue a letter of credit in the amount of $1,004,400, with Jade designated as beneficiary, for the purchase of “LEVI JEANS 501-0191, New, Originals, Made in USA.” (Compl. ¶ 9 & Ex. A; PI. 3(g) ¶2) The Application Agreement provided that it was to be governed by the Uniform Customs and Practice (“U.C.P.”) for Documentary Credits as most recently published by the International Chamber of Commerce, i.e., the 1983 version of the U.C.P. [hereinafter “U.C.P. 400”], and by the laws of the state of New York, except to the extent that such laws are inconsistent with the U.C.P. (Compl., Ex. A ¶ 17) On October 20, 1992, Kools transferred $1,080,000 into Oei’s and his wife’s joint checking account at Citibank. (Def. 3(g) ¶ 11) Then, on October 30, 1992, Oei deposited $1,004,400 (plus certain letter of credit fees for Citibank totalling approximately $8,000) from this account into a Citibank savings account in his name, in Totten trust for his wife, to secure Citibank’s payments under the letter of credit. (Def. 3(g) ¶ 12; Compl. ¶ 11) On October 30, 1992, Citibank actually issued the Letter of Credit, with Citibank International (“Citibank Int’l”), a Citibank affiliate located in Miami, acting as advising bank. (Compl. ¶ 4 & Ex. A) Citibank Int’l functioned as advising bank for the amendments to the letter of credit and also collected the documents from the beneficiary for shipment to the issuer, Citibank, although its other roles in the transaction are disputed. The letter of credit, as amended on November 2 and 4, 1992, required that to redeem the funds, Jade was to submit specified documents to Citibank conforming to certain requirements, including those set forth in the U.C.P. 400. (Compl., Ex. B) These documents included: 1) a sight draft bearing the identifying reference specified in the letter of credit; 2) an original and four copies of Jade-USA’s commercial invoice for merchandise described as “LEVI JEANS 501-0191, NEW, ORIGINALS, MADE IN USA LABELS”; 3) an insurance policy or certificate; 4) all originals of a “MARINE/ON BOARD OCEAN BILL OF LADING OR CONTAINER BILL OF LADING OR BILL OF LADING BEARING CONTAINER ENDORSEMENT” issued to Kools, to be marked “NOTIFY RUDY T. OEI” and “FREIGHT PAID”; 5) a packing list; and 6) a certificate of compliance of quality and inspection by Lloyds of London. (Compl., Ex. B) Defendants claim that plaintiffs were aware that Jade would submit false documents. Athough the letter of credit required “on board” bills of lading and the goods were to be described as “genuine” Levi jeans, defendants claim that plaintiffs were aware that the beneficiary, Jade, would be paid before the goods were loaded on board a ship (Sharrow 7/10/96 Deck, Exs. 17-18; Id., Ex. 5 at 85), and that the jeans that would be shipped would be counterfeit. Plaintiffs deny both allegations. On November 18, 1992, Jade presented Citibank Int’l with documents requesting payment under the letter of credit. (Def. 3(g) ¶ 21; PL 3(g) ¶ 5) These documents did not conform to the letter of credit requirements. They included a truck bill of lading, rather than a marine bill of lading, issued by Eagle Freight Services, purporting to show shipment by truck from Seattle, Washington, to Rotterdam, the Netherlands. (PI. 3(g) ¶ 5; Compl., Ex. C) In addition, the bill of lading contained several other discrepancies: it was dated five days later than the date on which Citibank Int’l received it; it failed to identify the goods; and it named Jade, rather than Kools, as consignor. (Compl. ¶¶ 16-17) As a result of these and other discrepancies (Compl., Ex. D), Citibank Int’l notified Jade that it would not accept the documents. (Def. 3(g) ¶ 23) The discrepancy report created by Citibank Int’l employee Luis Castella-nos states that Diann Hart, Jade’s president, told him to “hold on” to the documents, and that Jade would submit new ones. (Compl. ¶ 19, Ex. D; Def. 3(g) ¶ 24) Plaintiffs claim that Citibank Int’l should have known that the documents were fraudulent, rather than merely discrepant, both because of the above discrepancies and because Jade’s request that Citibank Int’l hold the documents was unusual as bills of lading are negotiable and a shipping company would not issue a corrected bill of lading without return of the original. (Compl. ¶ 20; Colleran 9/7/96 Aff. ¶ 33) On or about November 24, 1992, Jade presented new documents requesting payment under the letter of credit, including a marine bill of lading issued by Sea-Land Services, Inc. (Compl. ¶ 22; Def. 3(g) ¶ 25) Once again, these documents contained discrepancies, and once again, Citibank Int’l’s discrepancy report stated that Jade would “fix” the problem and that the bank would hold the documents. (Compl. ¶ 24, Ex. F; Def. 3(g) ¶ 28) Plaintiff alleges that Citibank Int’l should have been aware that these documents were fraudulent because it was now in possession of two different bills of lading for the same goods, which showed that two shippers had received the same goods for shipment. In addition, the method of shipment in each bill of lading was different, one by land and one by sea. (Compl. ¶ 25; PI. 3(g) ¶ 16) On November 30, 1992, Jade presented a third set of documents requesting payment under the letter of credit for the third time. (Compl. ¶ 27 & Ex. H) Plaintiff alleges that these documents were also discrepant and inconsistent in many ways and were fraudulent on their face. (Compl. ¶29) Citibank Int’l forwarded the documents to Citibank without paying Jade, mistakenly omitting the inspection document from the package of documents. (Def. 3(g) ¶¶ 30-31) Plaintiffs, in reliance on testimony given by Hart in a previous action (Compl. ¶ 36; Sharrow 7/10/96 Deck, Ex. 10), claim that Luis Castel-lanos, the Citibank Int’l employee who checked the documents submitted by Jade, altered them by typing “Levi JEANS 501 0191 NEW ORLEANS, MADE IN USA LABELS” onto the face of the inspection document. (Compl. ¶ 36) They allege further that some Citibank or Citibank Int’l employee altered the packing list and the original invoice by typing the word “JEANS” onto those documents. (Compl. ¶ 37) To support this allegation, plaintiffs assert that the packing list included in the documents Jade submitted did not include the word “JEANS”, but that the packing list honored by Citibank contained the word “JEANS.” (PI. 3(g) ¶¶ 50-51; W. Kools 9/9/96 Deck ¶ 34, Exs. F, G) Castellanos and Citibank deny these allegations and cite contrary evidence. (Castel-lanos 7/8/96 Aff. ¶ 3; Sharrow 7/10/96 Deck, Ex. 10 at 122-23; Sharrow 12/4/96 Aff., Ex. 17) When these documents arrived at Citibank, its Trade Service Representative Rose Williams found several discrepancies which she detailed in a discrepancy report, including that the bills of lading and insurance did not mention “JEANS,” the packing list did not name the beneficiary, and the inspection certificate was missing. (Compl., Ex. I; Def. 3(g) ¶ 32) As will be shown below, the documents also contained other discrepancies and inconsistencies that Citibank did not note. On December 2, 1992, despite these discrepancies, Citibank paid Jade $1,004,400 by crediting Citibank Int’l’s account. (Def. 3(g) ¶35) Defendants claim that they contacted Oei by telephone on December 2 and that he waived these discrepancies. (Def. 3(g) ¶¶ 33-34) The discrepancy report, compiled by Williams, does indicate that someone named “Carlos” approved payment on December 2, 1992 at approximately noon. (Compl., Ex. I) Iris Carlo, an Assistant Vice President at Citibank’s Tarrytown, N.Y. branch, states that she received a call from Williams on December 2, 1992, advising her of several discrepancies in the documents submitted by ' Jade. (Carlo 7/9/96 Aff. ¶¶ 1-2) Carlo claims she informed Wade Walker, a Citibank Vice President and the “Relationship Manager” assigned to Oei, of these discrepancies. (Carlo 7/9/96 Aff. ¶ 3) Walker states that he called Oei and told him that the bills of lading omitted the word “Jeans,” that the packing list left out the beneficiary’s name, and that the original inspection certificate was missing. Walker claims that Oei approved payment despite these deficiencies. (Walker 10/28/96 Aff. ¶22) Walker claims that he told Carlo that “payment approval had been received.” (Walker 7/3/96 Aff. ¶ 3) Carlo states that she then telephoned Williams stating “that approval to pay had been received.” (Carlo 7/9/96 Aff. ¶ 3) Williams confirms that she received this call at 12:10 p.m. on December 2 and then authorized payment to Jade. (Williams 7/2/96 Aff. ¶ 4) Plaintiffs claim that Walker did not inform Oei during their telephone conversation on December 2 of any discrepancies in the documents other than that the original inspection certificate was missing; Oei states that he approved payment based upon a copy of the inspection certificate. (PI. 3(g) ¶¶ 30 — 33; Def. Response to PI. 3(g) ¶ 15) Immediately after paying Jade, Citibank debited Oei’s account by $1,004,400. (Def. 3(g) ¶ 36; PI. 3(g) ¶ 28) The same day, Oei picked up the documents from Citibank’s office. (PI. 3(g) ¶ 35; Def. 3(g) ¶¶ 37-38) Citibank attached to the documents a “payment advice”, which stated that “[w]e believe the attached documents to be in due form and regular in every respect. However, we assume no responsibility for the genuineness of the documents or for the quality or quantity of the merchandise represented thereby.” (Compl., Ex. J) It is undisputed that Citibank never informed plaintiffs of the first two presentments, although it remains disputed whether Citibank Int’l ever informed Citibank of these presentments, or whether Citibank, even if it was not told of them, should be charged with such knowledge as a result of its relationship with Citibank Int’l. (Williams 1/4/96 Aff. ¶ 2 n. 3; Castellanos 10/21/96 Aff. ¶ 7) On December 2,1992, Oei recognized some discrepancies and inconsistencies in the documents, and on December 3 he informed Kools of these discrepancies. (Def. 3(g) ¶¶ 40-41; Sharrow 7/10/96 Deck, Exs. 19-21) Between December 3 and 10, plaintiffs tried to get Jade to explain some of these discrepancies. It is undisputed that by December 10,1992, Kools and Oei were aware that Jade had submitted documents that contained discrepancies and were fraudulent. (Def. 3(g) ¶ 42; Sharrow 7/10/96 Decl., Ex. 29; W. Kools 9/9/96 Aff. ¶29) Although W. Kools advised Jade on December 11, 1992, that Kools was terminating its attempted purchase from Jade, the documents reveal that Kools continued to try to obtain conforming jeans from Jade. The documents show also that Hart strung Kools along, giving explanations and excuses for delay. (Sharrow 7/10/96 Decl., Exs. 31-33, 35-45) On January 25, 1993, Kools notified Citibank Int’l that the documents Jade submitted were fraudulent. (Sharrow 7/10/96 Decl., Ex. 46) However, as late as January 28, 1993, plaintiffs were sending mixed signals to Jade as to whether they wanted the goods or a refund. (Sharrow 7/10/96 Decl., Ex. 47) Only on January 30, 1993 did Kools unequivocally state that it wanted a refund. (Sharrow 7/10/96 Aff., Ex. 48) The parties dispute the fate of the goods that were the subject of this transaction. Defendants claim that Jade eventually shipped two containers of jeans to Kools in December, 1992 and January, 1993. (Def. 3(g) ¶ 50) Defendants claim that these jeans arrived in the Netherlands on January 30, 1993, and on March 30, 1993, were seized by Dutch customs officials as counterfeit. (Def. 3(g) ¶ 51; Sharrow 12/4/96 Aff., Ex. 10) Plaintiffs claim that the confiscated goods were not intended for them and that no goods were shipped 'under the subject letter of credit. (PI. 3(g) ¶¶ 38, 45-46; M.J.F.M. Kools 9/9/96 Aff. ¶ 8) It is undisputed that Kools never received conforming goods. (M.J.F.M. Kools 9/9/96 Aff. ¶ 8) In 1993, Kools commenced an action against Jade in Florida, Kools de Visser v. Jade-USA Inc., No. 93-956 C116 (Fla.Cir. Ct.). According to the complaint, on February 6, 1993, Jade gave Kools a promissory note payable in 30 days, for $1,004,400, as a refund on the transaction. (Sharrow 7/10/96 Decl., Ex. 9) The settlement agreement between Kools and Jade, signed at the time Jade gave Kools the note, stated that, Jade-USA has advised Kools de Visser that the goods shipped in fulfillment of the contract between Kools de Visser and Jade-USA are nonconforming to the contract-[and] Kools de Visser has rejected the nonconforming goods and Kools de Visser’s rejection of the nonconforming goods has been accepted by Jade-USA. (Sharrow 7/10/96 Decl., Ex. 13) Kools alleged that Jade failed to pay the note and that Hart failed to honor a personal guarantee on the note. (Id.) Kools obtained a default judgment against Jade, which remains unsatisfied. (PL 3(g) ¶44) In March 1996, Hart pleaded guilty in United States District Court for the Middle District of Florida to supplying Citibank with fraudulent documents. (Def. 3(g) ¶ 54; PI. 3(g) ¶ 47) Here, plaintiffs assert four claims, including: fraud and aiding and abetting Jade’s fraud, against Citibank and Citibank Int’l; and wrongful honor of the letter of credit and conversion, against Citibank. Defendants move to dismiss pursuant to Rule 12(b)(6), or in the alternative for summary judgment, on all four claims. They move also to dismiss the fraud and aiding and abetting fraud claims under Rule 9(b). Plaintiffs oppose these motions and cross-move for summary judgment on the wrongful honor claim. Further, defendants claim that Kools lacks standing under the doctrine of res judicata. They move also to strike plaintiffs’ demand for consequential and punitive damages, and for a jury trial. II. A motion to dismiss pursuant to Rule 12(b)(6) may be granted only if “it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102, 2 L.Ed.2d 80 (1957). On such a motion, the court must take all facts alleged in the complaint as true and draw all reasonable inferences in plaintiffs favor. See Jackson Nat’l Life Ins. Co. v. Merrill Lynch & Co., 32 F.3d 697, 699-700 (2d Cir.1994). Both plaintiff and defendant have submitted material outside the pleadings and treated this motion as one for summary judgment. Accordingly, I have considered all the documents and affidavits submitted and apply the summary judgment standard in the alternative to the.motion to dismiss. See Fed.R.Civ.P. 12(b),(c); Kennedy v. Empire Blue Cross and Blue Shield, 989 F.2d 588, 592 (2d Cir.1993); Franklin H. Williams Ins. Trust v. Travelers Ins. Co., 847 F.Supp. 23, 24 (S.D.N.Y.1994), rev’d on other grounds, 50 F.3d 144 (2d Cir.1995). The standard for summary judgment is well-settled. On a motion for summary judgment, the moving party must prove the absence of material factual issues and that the law requires judgment in the moving party’s favor. Fed.R.Civ.P. 56(c). When evaluating cross-motions for summary judgment, the court considers each motion separately, and on each views the facts in the light most favorable to the nonmovant. Heublein, Inc. v. United States, 996 F.2d 1455, 1461 (2d Cir.1993). Actions on letters of credit are “well suited to determination by motion for summary judgment because they normally present solely legal issues relating to an exchange of documents.” Banque Worms v. Banque Commerciale Privee, 679 F.Supp. 1173, 1178 (S.D.N.Y.), aff'd, 849 F.2d 787 (2d Cir.1988). III. Again, Citibank moves to dismiss, or in the alternative, for summary judgment dismissing the wrongful honor claim. Plaintiffs cross-move for summary judgment granting this claim. Plaintiffs argue that before Citibank was permitted to honor the letter of credit, it was required to receive from Jade strictly conforming documents, that Jade presented Citibank with documents that did not strictly comply with the letter of credit’s requirements, that Citibank paid anyway and then reimbursed itself from Oei’s account, and that as a result of Citibank’s breach, plaintiffs suffered damages because they lost the money and never received the goods. In opposition, Citibank argues that issues of fact remain as to whether: 1) the documents complied with the letter of credit requirements; and 2) plaintiffs waived expressly any discrepancies on the face of the documents. In addition, in support of its own motion for summary judgment, Citibank argues that plaintiffs, by failing to promptly notify it of the facial discrepancies in Jade’s documents and return the documents to it, waived their objections to the discrepancies by operation of law and cannot sue for wrongful honor. The following principles govern letters of credit. In its classic form, the letter' of credit is only one of three distinct relationships between three different parties: (1) the underlying contract for the purchase and sale of goods between the buyer (“account party” [or applicant]) and the seller (“beneficiary”), with payment to be made through a letter of credit to be issued by the buyer’s bank in favor of the seller; (2) the application agreement between the bank and the buyer, describing the terms the issuer must incorporate into the credit and establishing how the bank is to be reimbursed when it pays the seller under the letter of credit; and (3) the actual letter of credit which is the bank’s irrevocable promise to pay the seller beneficiary when the latter presents certain documents ... that conform with the terms of the credit. Alaska Textile Co. v. Chase Manhattan Bank, N.A., 982 F.2d 813, 815 (2d Cir.1992). The relationship between the applicant and the issuer is a separate contract, independent of the letter of credit relationship between the beneficiary and the issuer. See N.Y.U.C.C. § 5-109, cmt. 1 (McKinney 1991) (“The extent of the issuer’s obligation to its customer is based upon the agreement between the two.”); John F. Dolan, The Law of Letters of Credit ¶ 2.08[1], at 2-33-2-34 (rev. ed.1996) [hereinafter “Dolan I”] (“This contractual or statutory relationship [between issuer and applicant] is not a letter of credit, and parties to it may have no rights under the credit engagement.”); see also Burton V. McCullough, Letters of Credit § 3.04[7], at 3-117 (1996). Unlike the issuer-beneficiary relationship, where special letter of credit rules apply, usual contractual principles govern the issuer-applicant relationship. See Dibrell Bros. Int’l S.A. v. Banca Nazionale Del Lavoro, 38 F.3d 1571, 1579 (11th Cir.1994) (“[T]he relationship between the issuer and customer is of a contractual nature governed by the reimbursement agreement rather than the letter of credit.”); see also Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 494-96 (2d Cir.1995); Dolan I, supra, ¶ 2.09[4], at 2-45. As one commentator has noted: When the applicant disputes the issuer’s conduct, that dispute generally involves the respective rights and duties of the two parties under the reimbursement agreement, an ordinary contract. In that context, the independence principle and Code rules fashioned for the letter of credit do not apply.... Those actions are normal contract actions governed by the law of contracts. Dolan I, supra, ¶2.09[7], at 2-60-2-61; see also Nutro Prods, Corp. v. NCNB Texas Nat’l Bank, 35 F.3d 1021, 1023 (5th Cir.1994). Here, plaintiffs’ action is an applicant-issuer suit based on the Application Agreement. A. Strict vs. Substantial Compliance To determine whether Citibank breached its contract and is liable for wrongful honor, we must look to the contract. The Application Agreement provides that “The Applicant will pay you [Citibank] on demand ... the amount of each draft or other request for payment ... drawn under the Credit.” (Compl., Ex. A ¶ 1) However, it provides also that: Any action, inaction or omission taken or suffered by you or by any of your correspondents under or in connection with the Credit or any relative drafts, documents or property, if in good faith and in conformity with foreign or U.S. laws, regulations or customs applicable thereto, shall be binding upon the Applicant and shall not place you or any of your correspondents under any resulting liability to the Applicant. (Compl., Ex. A ¶ 4) Under the Application Agreement, therefore, Citibank is in breach if it does not properly carry out its responsibilities as a letter of credit issuer in conformity with laws, regulations, or customs applicable to the transaction. Under the U.C.P. and New York law, the issuer must ensure before paying that the documents submitted by the beneficiary strictly comply with the letter of credit. See United Bank Ltd. v. Cambridqe Sporting Goods Corp., 41 N.Y.2d 254, 258-59, 392 N.Y.S.2d 265, 270, 360 N.E.2d 943, 948 (1976) (“[T]he beneficiary must meet the terms of the credit — and precisely — if it is to exact performance of the issuer.... There is no room for documents which are almost the same, or which will do just as well.”); see also Alaska Textile Co. v. Chase Manhattan Bank, 982 F.2d 813, 816 (2d Cir.1992). This rule ensures that an issuer — a third party ignorant as to the specifics of the transaction — can decide quickly and reliably whether to pay by simply looking at the documents and determining whether they comply with the letter of credit’s requirements, without the need to judge the significance of any discrepancies. See John F. Dolan, Letter of Credit Disputes Between the Issuer and Its Customer: The Issuer’s Rights Under the Misnamed “Bifurcated Standard”, 105 Banking L.J. 380, 386 (1988); see also Todi Exports v. Amrav Sportswear Inc., No. 95 Civ. 6701, 1997 WL 61063, *4 (S.D.N.Y. Feb.13, 1997). This standard applies to the issuer-beneficiary relationship, at least under New York law. See United Bank, 41 N.Y.2d at 258-59, 392 N.Y.S.2d at 270, 360 N.E.2d 943. However, there is disagreement as to the standard applicable when an applicant sues an issuer for wrongful honor. Some courts hold that an applicant need demonstrate only that the documents did not strictly comply to recover against the issuer for wrongful honor. See, e.g., Bank of Cochin Ltd. v. Manufacturers Hanover Trust Co., 612 F.Supp. 1533, 1539 & n. 8 (S.D.N.Y.1985) (dictum), aff'd, 808 F.2d 209 (2d Cir.1986). Other courts and commentators, however, have held that an applicant must show that the documents did not substantially comply with the letter of credit requirements in order to recover. See Transamerica Delaval Inc., v. Citibank, N.A., 545 F.Supp. 200, 203-04 (S.D.N.Y.1982); Data General Corp. v. Citizens Nat’l Bank, 502 F.Supp. 776, 781 n. 5 (D.Conn.1980); McCullough, § 3.04[d][7], at 3-121-22. They reason that because the applicant’s action against the issuer is based on a contract, general contract principles apply, including that a party may avoid performance, here reimbursement by the applicant, only if the breach is material — i.e., if the issuer honors documents that do not substantially comply with the letter of credit’s requirements. See, e.g., Ocean Bank v. La Esquina Presidencial, Inc., 623 So.2d 520, 520 (Fla.Dist.Ct.App.1993) (dissenting opinion); Dolan I, supra, ¶ 7.05[3], at 7-108. Moreover, some courts have required — as in all breach of contract cases — that the issuer’s payment despite substantial noncompliance prejudice the applicant or result in loss. See, e.g., National Bank of North America v. Alizio, 103 A.D.2d 690, 691, 477 N.Y.S.2d 356, 357-58 (1st Dep’t 1984), aff'd, 65 N.Y.2d 788, 790, 493 N.Y.S.2d. 111, 112, 482 N.E.2d 907, 908 (1985); Chairmasters, Inc. v. Public Nat’l Bank & Trust Co., 283 A.D. 704, 127 N.Y.S.2d 806, 807 (1st Dep’t 1954); Bank of New York & Trust Co. v. Atterbury Bros., Inc., 226 A.D. 117, 234 N.Y.S. 442, 449 (1st Dep’t 1929); see also Dolan, supra, 105 Banking L.J. at 400-04. Even if the substantial compliance standard — the less demanding standard from the bank’s point of view — applies, and even if plaintiffs must show that Citibank’s payment despite substantial noncompliance prejudiced them, Citibank is Hable for breach of the AppKcation Agreement here because the documents Jade submitted in its final presentment did not substantially comply and Citibank’s payment prejudiced plaintiffs. In general, article 15 of U.C.P. 400 provides: Banks must examine all documents with reasonable care to ascertain that they appear, on their face, to be in accordance with the terms and conditions of the credit. Documents that appear, on their face, to be inconsistent with one another will be considered as not appearing, on their face, to be in accordance with the terms and conditions of the credit. U.C.P. 400, art. 15. Therefore, documents inconsistent on their face are not in accordance with the letter of credit requirements. In addition, although banks are not responsible if documents that are facially compHant are fraudulent, they must know and observe banking industry practice, and act in good faith. See U.C.P. 400 art. 17; 29 N.Y.Jur.2d, Credit Cards, § 35 (1983); see also Resolution Trust Corp. v. Kimball, 963 F.2d 820, 826-27 (5th Cir.1992) (noting importance of accepted banking industry standard in determining document eomphance with letter of credit requirements); S.B. Int’l. Inc. v. Union Bank of India, 783 S.W.2d 225, 227 (Tex.App.1989) (“In making this document consistency determination, the issuer is charged with knowledge of banking industry practices_ ”). Here, the letter of credit required six documents, with certain specific requirements for each, including: a draft, a commercial invoice, bills of lading, an inspection document, an insurance document, and a packing Hst. Plaintiffs claim that each of these documents contained facial discrepancies and inconsistencies. 1. The Draft The letter of credit required that Jade submit a sight draft marked, “drawn under irrevocable letter of credit no. CCD6-1150-90019085 of Citibank N.A., New York, New York.” (Compl., Ex. B) Plaintiffs argue that the draft Jade submitted contained several facial discrepancies, including: 1) it was not marked as drawn under this letter of credit (Colleran 9/7/96 Aff. ¶ 26); 2) it did not indicate that it was drawn at sight (Id. ¶ 27); and 3) it was not signed by the drawer, dated, and drawn payable to the order of a named party, as is required of all drafts (Id. ¶28). Defendant’s expert, Alan L. Blood-good, contends that these defects were not significant because the purpose of referring to the particular letter of credit — identifying it so that the bank can examine the documents against its requirements — was obviously fulfilled. (Bloodgood Aff. ¶ 56) Although Bloodgood may be correct that these discrepancies by themselves were not significant, he does not deny that these were facial discrepancies, and that they may demonstrate, when combined with other discrepancies, that the documents did not substantially comply. 2. The Invoice Plaintiffs argue that there were important facial discrepancies in the commercial invoice. The merchandise description set forth in the letter of credit as amended, and required in the invoice, was “LEVI JEANS 501-0191, NEW, ORIGINALS, MADE IN USA LABELS.” (Compl., Ex. A, 11/2/92 amendment) The letter of credit required also one original invoice and four copies. “It is a well-established principle of letter of credit law that the description of the goods in the commercial invoice must mirror the description in the credit itself.” Dolan I, supra, ¶ 1.07[l][b], at 1-38; see U.C.P. 400, art. 41(c). Jade submitted an original invoice that included “LEVI 501-0191, NEW, ORIGINALS, MADE IN USA LABELS” on one line, with the word “JEANS” typed right above the word “LEVI.” (Compl., Ex. H) However, the copies of the invoice did not include the word “JEANS” at all. Apparently, someone had added the word “JEANS” to the original after the copies were made and neglected to include it in the copies. Thus, the invoice copies were not only facially discrepant, in that they did not contain the proper description of the goods, they also were not even true copies. Bloodgood dismisses these discrepancies, stating that “[blanks do not typically examine each apparent copy of a document with the same degree of care as the original”; rather, they “eyeball” them and count the copies to make sure that there are the correct number. (Bloodgood Aff. ¶ 61) Once again, Bloodgood does not contest the existence of a discrepancy. Nor does he contest its materiality. Indeed, this discrepancy was significant because a letter of credit transaction is intended to ensure receipt of the correct goods and therefore an exact description of the goods in the invoice is required. A misdescription of those goods — especially when a word as important as “JEANS” is left out — may signal a shipment of incorrect goods. Rather, Bloodgood argues that this discrepancy would not have been discovered with the exercise of reasonable care. However, even a quick glance at the copies should have disclosed this discrepancy, given that the word “JEANS” in the original was added awkwardly above the word “LEVI” and therefore was out of place, and given that the description of the goods is the most important entry on the invoice. Moreover, in a letter of credit transaction, where the appliqant places such reliance on the bank’s inspection of the documents, banks cannot fulfill their responsibility merely by “eyeballing” documents. In fact, the “Group of Experts,” a subcommittee of the International Chamber of Commerce Banking Commission, the committee that created the U.C.P., has stated that “if a commercial invoice is required in quintuplícate, the original and all copies are to be identical in every respect. It is a discrepancy if they are not.” (Coller-an 1/20/97 Aff. ¶ 18, quoting International Chamber of Commerce, More Case Studies on Documentary Credits, ICC Publication No. 489 (Jan Dekker ed.1991) (emphasis in original)) Therefore, Citibank’s attempt to dismiss this discrepancy is unavailing. 3. The Bills of Lading The letter of credit required that Jade submit a “marine/on board original ocean bill of lading or container bill of lading or bill of lading bearing container endorsement (if more than one original has been issued, all, originals are required).” It required also that the bills of lading be issued to the order of Kools de Visser, and marked “notify Rudy T. Oei, 25 Wascussue Court, New Canaan, CT 06840,” and “freight paid.” Plaintiffs point out several facial discrepancies in the bills of lading, as well as defects that they claim should have alerted Citibank that the bills were fraudulent, including: 1) the purported original bills of lading contained crossed-off or blocked-out areas which typically show that they are actually carbon copies (Colleran 9/7/96 Aff. ¶ 8); 2) they contained an unusual stamp, “clean on board” (Id. ¶ 9); 3) the purported multiple originals, which should have contained identical information, differed from each other in several ways, including: a) on two out of the three, the box marked “To be prepaid” is checked, but on the third it is empty; and b) the export reference number and zip code for the forwarding agent differ (Id. ¶ 10); 4) that two of the documents included “x” marks in the “To be prepaid” box demonstrates a substantive discrepancy as well because it conflicts with the letter of credit requirement that the bills of lading be marked as prepaid (Id. ¶ 11); and 5) one of the bills of lading, under the heading “Marks and Numbers,” notes “CLEAN BOXES,” while the other two note “PLAIN BOXES” (Id. ¶ 12). Under U.C.P. 400, art. 26, an issuer must accept a marine bill of lading if, inter alia, it appears on its face to have been issued by a named carrier, consists of a full set of originals, and meets all the stipulations of the credit. Citibank’s expert Bloodgood argues first, that the crossed-out spaces on the purported originals “is not a proper basis for rejecting an otherwise complying presentation.” (Bloodgood Aff. ¶ 65) However, he does not state that plaintiffs are incorrect in noting that usually only copies have such blocked-out areas and that a bank document examiner should have been aware of that. (see also Castellanos 10/21/96 Aff. ¶ 10) Because the crossed-out spaces showed that these were copies, not originals as required by the letter of credit and the U.C.P., this was a discrepancy. Second, Bloodgood notes that bills of lading sometimes contain a stamp “Clean on Board.” (Bloodgood Aff. ¶ 68) Therefore, that does not seem to be a clear undisputed discrepancy. Third, Bloodgood claims that, for the same reasons noted above in relation to the copies of the invoice- — i.e., that examiners only “eyeball” copies — Citibank’s failure to detect differences between the original bills of lading — -including the differences in the export reference number, the zip code of the forwarding agent and the “To be prepaid” box — did not constitute a lack of reasonable care. However, such an argument disregards that all three of the bills of lading were to be originals, not copies. Even if Bloodgood is correct that banks need only “eyeball” copies, this cannot excuse inspection of originals. Therefore, these were discrepancies. The fourth problem with the bills of lading — i.e., that two of the originals showed that total charges were “To be prepaid” — also was a facial discrepancy. Article 31 of U.C.P. 400 provides, b. If a credit stipulates that a transport document has to indicate that freight has been paid or prepaid, banks will accept a transport document on which words clearly indicating payment or prepayment of freight appear by stamp or otherwise ... c. The words “freight repayable,” “freight to be prepaid,” or words of similar effect if appearing on transport documents, will not be accepted as constituting evidence of the payment of freight. Thus, two of the purported originals were facially discrepant because they indicated that the goods were “to be prepaid.” That discrepancy is significant because the party picking up the goods may have to pay the freight. Finally, Bloodgood dismisses the differences in the designation of the markings on the boxes — “clean boxes” vs. “plain boxes” — by stating that these terms mean only that the boxes were unmarked. (Blood-good Aff. ¶ 70) This discrepancy, although it does demonstrate a failure to ensure that the multiple originals were identical, is not otherwise significant. 4. The Inspection Document The original letter of credit required that Jade submit a “Certificate of Compliance of quality and inspection by Buyer/Agent AND unbiased professional firm such as Lloyds of London, SGS or other acceptable to both Buyer and Seller.” (Compl., Ex. A) However, an amendment to the letter of credit stated specifically: “Certificate of Inspection by Lloyd [sic] of London is required.” (Compl., Ex. B) Plaintiffs claim that the inspection document was discrepant in several ways, including: 1) it purported to be issued by an agent for Lloyds of London, not by Lloyds of London itself as the letter of credit required, and was a report, not a “certificate” (Colleran 9/7/96 Aff. ¶ 17; Colleran 1/20/97 Aff. ¶ 34); 2) it was inconsistent with the bills of lading because it showed a total of 900 boxes, not 1800 boxes as the bills of lading noted (Id. ¶ 18); and 3) it described the merchandise as “Levi JEANS 501 0191 NEW ORLEANS, MADE IN USA LABELS” (Id. ¶ 19) (emphasis added), and this was inconsistent with the invoice description as “new, original” jeans. Citibank’s sole defense is that plaintiffs waived these discrepancies. That issue will be addressed below, where I find that there is no evidence that any of these discrepancies were waived. However, Citibank does not contest that these discrepancies existed. Further, they were material and substantial. The requirement that a beneficiary submit an inspection report is the only way to ensure that the beneficiary has provided conforming goods before it receives payment. 5. The Insurance Document The letter of credit required that Jade submit an “insurance policy and/or certificate”, with “insurance to include war risk.” (Compl., Ex. B) Plaintiffs identify several discrepancies in the insurance document Jade submitted including: 1) it purported to be a “marine open cargo policy,” which is a general policy that would not cover individual shipments (Colleran 9/7/96 Aff. ¶ 13); 2) it did not identify itself as a “certificate” or a “policy”, as required by the U.C.P. (Id. ¶ 14); 3) it did not identify the particular shipment that it covered (Id. ¶ 15), which would have made it difficult for plaintiffs to enforce any claim (Colleran 1/20/97 Aff. ¶ 8), see, e.g., Sunlight Distrib., Inc. v. Bank of Communications, No. 94 Civ. 1210, 1995 WL 46636, at *4 (S.D.N.Y. Feb. 7, 1995); and 4) it did not, as required by U.C.P. 400, art. 37(b), cover 110% of the value of the shipment, but was $800 short (Id. ¶ 16). Citibank does not attempt to refute these discrepancies. (Bloodgood Aff. ¶ 74) It argues merely that these discrepancies in the insurance document could not have caused plaintiffs any losses if no goods were shipped or if nonconforming goods arrived safely, the two possible factual scenarios in this case. Once again, however, Citibank does not contest that such discrepancies, when taken together with others, may demonstrate substantial noncompliance. 6. The Packing List Plaintiffs claim that the packing list was discrepant and reflected fraud in several ways: 1) it gave the “DATE SHIPPED” as a week later than when the packing list was purportedly created (Colleran 9/7/96 Aff. ¶21); 2) in one space, it stated that the shipment contained 900 cartons, and in another, 1800 boxes (Id. ¶ 22); 3) it was inconsistent with the bills of lading as to the weight of the shipment and the shipment date (Id. ¶¶ 23-24); and 4) it did not show the specific batch of merchandise it covered (Id. ¶ 25). Citibank counters first that the shipment date may have been an anticipated shipment date. (Bloodgood Aff. ¶ 79) However, immediately preceding the shipment date entry is a line for “APP. SHIP WEEK” and “11 23 92” is filled in. Citibank’s expert does not explain why, if the shipment date was intended to be an anticipated date, the word “APP.” was not included before “DATE SHIPPED.” In addition, the packing list used the term “DATE SHIPPED”, in the past tense, implying that the goods had already been shipped. Therefore, when the packing list, dated November 17, 1992, showed a shipment date of November 24, it reflected an internal inconsistency and should have raised suspicion in the mind of the document checker. Defendant argues second that there is no necessary inconsistency in the number of cartons or boxes because the jeans could have been packed with two boxes in each carton. (Bloodgood Aff. ¶ 81) However, the bills of lading stated that there were 1800 boxes in the shipment. Bills of lading would show only the number of visible boxes because that is all the shipper is concerned about. If two boxes were packed in one carton, the bills of lading would show 900 boxes or cartons. Therefore, if Citibank is correct and the packing list should have been read by the document examiner as showing that two boxes were packed in each carton, the packing list would be inconsistent with the bills of lading. Citibank does not contest the inconsistency in the weight of the goods between the packing list and the bills of lading — the packing list stated that the goods weighed 64,800 lbs. and the bills of lading stated that they weighed 38,000 lbs. Nor does the bank contest that the bills of lading showed the shipment date as November 23 and the packing list showed it as November 24. Finally, Citibank notes correctly that because the packing list need refer only generally to the goods and the packing list does so, its failure to refer to the specific batch of merchandise is not a discrepancy. 7. Application of the Substantial Compliance Test When evaluating whether documents substantially comply with letter of credit requirements, it is important to keep in mind that a bank deals only in documents and that errors that may seem inconsequential in other settings may be significant in documents associated with a letter of credit. The documents Jade submitted contained 17 discrepancies or inconsistencies which Citibank should have discovered in the exercise of reasonable care. Moreover, many of the defects in the documents were significant in that they were directly related to the existence, quality and quantity of the goods, including: 1) the absence of the word “JEANS” in the invoice copies; 2) the crossed-out areas of the bills of lading purporting to be originals and the differences in information between bills of lading; 3) the identity of the inspecting party as an entity other than Lloyds of London; 4) the inconsistency between the number of boxes in the shipment listed on the inspection document and on the bills of lading (900 vs. 1800); 5) the description of the goods in the inspection document as “New Orleans” rather than “New, Original”; 6) the inconsistency in the number of boxes in the shipment both within the packing list and in relation to the bills of lading; 7) the packing list’s specification of a shipment date seven days after the list was purportedly created; and 8) the inconsistency between the weight of the goods listed in the packing list, 38,000 lbs., and the weight listed in the bills of lading, 64,800 lbs. Courts have found substantial compliance lacking in situations where the beneficiary’s documents contained much less significant and extensive discrepancies than are present here. See, e.g., Brul v. MidAmerican Bank & Trust Co., 820 F.Supp. 1311, 1313-14 (D.Kan.1993) (holding that documents did not substantially comply where copies of letter of credit and promissory note were submitted, and letter of credit required originals); Rhode Island Hosp. Trust Nat’l Bank v. Eastern General Contractors, Inc., 674 A.2d 1227, 1230-31 (R.I.1996) (trial court directed verdict finding no substantial compliance because beneficiary failed to submit sight draft with presentment; Supreme Court reversed on other grounds). Moreover, plaintiffs were prejudiced by Citibank’s payment despite these discrepancies because the discrepancies related directly to the existence and quality of the goods and plaintiffs never received conforming goods. Taking all these discrepancies and inconsistencies together, no reasonable jury, properly instructed on the nature of the letter of credit transactions and the exacting obligations of the beneficiary and the issuer thereunder, could find that the documents submitted by Jade substantially complied with the letter of credit requirements. Citibank argues that plaintiffs’ losses were caused by Jade’s fraud, not by Citibank’s failure to comply with its obligations under the Application Agreement. However, as in any breach of contract case, Citibank’s breach need be only the “but for” cause of the loss. See Brown v. Lockwood, 76 A.D.2d 721, 742-43, 432 N.Y.S.2d 186, 201 (2d Dep’t 1980); Krofft Entertainment, Inc. v. CBS Songs, 653 F.Supp. 1530, 1534 (S.D.N.Y.1987). Here, by honoring the documents, Citibank breached the Application Agreement. No one disputes that Kools never received conforming, or even nearly conforming goods; however, Citibank reimbursed itself from Oei’s account. Citibank’s breach caused the loss because if Citibank had not honored Jade’s substantially nonconforming documents, plaintiffs would have sustained no direct losses — they would not have paid for the goods they never received. If Citibank had not honored the noncomplying documents, Jade’s fraud would not have succeeded. Further, Jade’s fraud was not an intervening cause. An intervening cause is one which “comes between the initial force or occurrence and the ultimate effect.” Black’s Law Dictionary 201 (5th ed.1979). Jade’s fraud was ongoing and did not break the chain of causation; that fraud could not have succeeded had Citibank not breached its duty. Citibank’s argument would essentially permit a bank to avoid liability whenever it honored noncomplying documents so long as the beneficiary also committed fraud. In addition, under New York law, where “the intervening, intentional act of another is itself the foreseeable harm that shapes the duty imposed, the defendant who fails to guard against such conduct will not be relieved of liability when that act occurs.” Kush v. City of Buffalo, 59 N.Y.2d 26, 33, 462 N.Y.S.2d 831, 835, 449 N.E.2d 725, 729 (1983). Among the purposes of requiring conforming documents is to ensure that the goods delivered by the beneficiary conform to the underlying contract between the applicant and the beneficiary and to guard against the beneficiary’s fraud. Citibank cannot claim that Jade’s fraud or failure to supply the goods was an intervening cause because that was one of the evils Citibank was supposed to guard against by closely examining the documents; the harm was foreseeable, and its avoidance was one of the principal reasons for using a letter of credit to make payment. B. Waiver or Estoppel 1. Express Waiver Citibank argues that an issue of fact exists as to whether plaintiffs waived expressly the facial discrepancies in the documents before Citibank paid Jade. The bank claims that one of its employees contacted Oei after Citibank had received the documents from Citibank Int’l and obtained his express waiver of all discrepancies. However, because the evidence shows definitively that Oei, and even the bank, were unaware of most of the discrepancies when Oei is alleged to have waived them, Citibank has failed to present evidence sufficient to create a genuine issue of fact as to whether Oei waived the substantial compliance.requirement. Where documents do not strictly comply with letter of credit requirements, an issuer may request an express waiver from the applicant. See Alaska Textile Co., 982 F.2d at 824; Western Int’l Forest Prods., Inc. v. Shinhan Bank, 860 F.Supp. 151, 155 (S.D.N.Y.1994); see also Dolan I, supra, ¶ 6.06[l][b], at 6-68 (“Most of the time ... the issuer obtains a waiver of the defects from the applicant and pays the beneficiary with notice that it is making payment despite nonconformities.”). A waiver is the “intentional relinquishment of a known right with both knowledge of its existence and an intention to relinquish it.” United Commodities-Greece v. Fidelity Int’l Bank, 64 N.Y.2d 449, 457, 489 N.Y.S.2d 31, 34, 478 N.E.2d 172,175 (1985) (quotations and citations omitted); see also Voest-Alpine Int’l Corp. v. Chase Manhattan Bank, N.A., 707 F.2d 680, 685 (2d Cir.1983); Dolan I, supra, ¶ 6.06[2], at 6-74 (“Waiver, unlike estoppel, requires a showing that the party making the waiver does so knowingly.”). Therefore, a party cannot waive discrepancies in a letter of credit unless it is aware of them at the time of the waiver. See United Commodities-Greece v. Fidelity International Bank, 99 A.D.2d 974, 975, 473 N.Y.S.2d 10, 12 (1st Dep’t 1984), aff'd, 64 N.Y.2d 449, 456-57, 489 N.Y.S.2d 31, 34, 478 N.E.2d 172, 175 (1985) (“[T]here can be no waiver until the facts which are being waived are known to the person to be charged with the waiver.” (quotations and citation omitted)); see also Transamerica Delaval Inc., 545 F.Supp. at 202 n. 3; Instituto Nacional de Comercializacion Agricola (Indeca) v. Continental Ill. Nat’l Bank & Trust Co., 530 F.Supp. 279, 285 (N.D.Ill.1982); Overseas Trading Corp. v. Irving Trust Co., 82 N.Y.S.2d 72, 75 (Sup.Ct. New York County 1948). Here, Citibank failed to present evidence that Oei was aware of most of the facial discrepancies at the only time he is alleged to have waived them expressly. Plaintiffs claim that Citibank told Oei on December 2, 1992, that Citibank Int’l had not forwarded the original inspection document with the rest of the documents, but that he could get a copy of it when he picked them up. They claim that Oei approved payment despite the ab-senee of an original inspection document (PI. 3(g) ¶¶ 31-32; Sharrow 1/10/96 Decl., Ex. 5 at 82-83; Oei 1/21/97 Aff. ¶ 4), but that he was never advised of any facial discrepancies in Jade’s documents and did not affirmatively waive such discrepancies, including those within the inspection document. (PI. 3(g) ¶¶ 30, 33-34; Oei 1/21/97 Aff. ¶ 7) Citibank claims it told Oei that it had not received the original inspection report and that Citibank Int’l was faxing it that day. It claims also that Oei “did not object to payment.” (See Def. 3(g) ¶¶ 33-34) In addition, Wade Walker, the Citibank employee who was in contact with Oei, states, When I told [Oei] about the alleged discrepancies and received his approval to pay, Mr. Oei was quite cavalier. He said that he simply wanted to get the deal done, that discrepancies were no big deal, and that he was not interested in the details of any discrepancies. I advised Mr. Oei that the bill of lading omitted the words “Jeans,” that the original of the inspection certificate was missing, and that the packing list left out the beneficiary’s name. Nevertheless, Mr. Oei expressed no concern at all. Instead, he just wanted N.A. to make payment and get the deal done. (Walker 10/28/96 Aff. ¶ 22) It is evident from this statement that Walker did not notify Oei of most of the particular discrepancies in the documents. Although Walker refers generally to “the alleged discrepancies,” he then specifies only three: the omission of the word “JEANS” from the bills of lading, the absence of an original inspection certificate, and the exclusion from the packing list of the beneficiary’s name. Walker was the only Citibank representative who claims to have spoken to Oei and even he does not claim that he told Oei of other discrepancies, or even that he told Oei that Citibank did not have a photocopy of the inspection report and could not check it for compliance. There are reasons to believe that the bank itself was unaware of the other discrepancies at the time Walker spoke to Oei, and therefore that Walker could not have informed Oei of those discrepancies. First, the discrepancy report compiled by Citibank employee Rose Williams contains only one of the 17 discrepancies noted above. (Compl, Ex. I) Walker did not see the documents and Williams was his only source as to the discrepancies; therefore, there is no reason to believe that Walker was even aware of the other discrepancies, much less that he informed Oei of them. Second, Williams admits that she did not even receive the fax copy of the inspection report from Citibank Int’l until 12:17 p.m. on December 2, 1992, seven minutes after she received approval from Carlo to pay Jade. (Williams 7/2/96 Aff. ¶ 5) It was impossible for Walker to have notified Oei of the discrepancies in the inspection report when Citibank had not yet received this report from Citibank Int’l at the time Walker spoke to Oei. Third, Castel-lanos, the document checker at Citibank Int’l, testified in a previous action that, in a chronology prepared in January, 1993, he recorded that Williams called him on December 2, 1992 about three discrepancies: the missing inspection certificate, the omission of the word “jeans” in the bills of lading, and the packing list’s omission of the beneficiary’s name. (Regal 1/22/97 Decl. ¶ 7 & Ex. C) Castellanos then recorded in his chronology that he informed her that the second two were not discrepancies; the only discrepancy remaining was the missing original inspection certificate. (Id.) Significantly, this is the only discrepancy that Oei concedes he heard about. Fourth, plaintiffs’ expert notes that waived discrepancies are usually noted on the payment advice given to the applicant with the documents. (Colleran 9/7/96 Aff. ¶ 40) No such waivers were noted on the payment advice Citibank gave Oei. (Compl., Ex. J) Walker claims that after he informed Oei of the discrepancies — i.e., the three that he lists — Oei was cavalier and stated that he just wanted to get the deal done and that discrepancies were no big deal. However, a cavalier attitude and a statement about wanting to get the deal done after being told of three discrepancies — technical discrepancies which do not rise to the level of substantial noncompliance — does not create an issue of fact as to the waiver of 17 other discrepancies, some significant and together rising to the level of substantial noncompliance, when both Oei and Walker were unaware of those discrepancies. Without knowledge of the particular discrepancies, or at least that discrepancies of such a magnitude existed, Oei could not waive them. See, e.g., United Commodities-Greece, 64 N.Y.2d at 457, 489 N.Y.S.2d at 34, 478 N.E.2d at 175. Citibank points out that the Application Agreement contains a clause that provides that the bank “may act in reliance on any oral, telephonic, telegraphic, electronic or written request or notice believed in good faith to have been authorized by the Applicant, whether or not given or signed by an authorized person.” (Compl., Ex. A) However, this clause merely permits the bank to proceed on its good faith belief that it was the applicant that authorized a certain action rather than someone other than the applicant; it does not permit a finding of waiver where there could be none. Nor could the bank believe in good faith that Oei had waived all discrepancies because the bank itself was unaware of them at that time. Citibank has not raised an issue of fact as to Oei’s express waiver of the facial discrepancies. 2. Waiver by Operation of Law Citibank argues next that plaintiffs, by failing to object promptly to the facial discrepancies in Jade’s documents and to return those documents to Citibank, waived their right to sue for breach of the Application Agreement. They claim that an applicant has a duty to notify the issuer within a reasonable time after receiving the documents that they do not comply with the letter of credit requirements, and to return those documents to the issuer. A failure to do so, according to Citibank, results in a waiver of discrepancies that “operates as a matter of law.” (Def. 12/4/96 Mem. at 13) If an applicant has no duty to inspect the documents promptly, report discrepancies and return the documents, no waiver can result from its failure to do so. There is no well-developed and authoritative body of law governing an applicant’s duty to inspect and return documents. However because such a duty has no basis in the law governing this transaction and makes little sense in the scheme of letter of credit transactions, I find that no such duty exists and that an applicant does not, by operation of law, waive its right to sue for breach of the application or reimbursement agreement by failing to object promptly and to return the documents to the issuer. First, the Application Agreement does not require that plaintiffs notify Citibank of any facial discrepancies in Jade’s documents or return those documents. In fact, plaintiffs have submitted examples of other application agreements which provide explicitly that an applicant that fails to notify the issuer within a specified period of time of facial discrepancies in the documents waives its objections. (Colleran 9/7/96 Aff., Ex. I) As plaintiffs’ expert Colleran noted, “Banks that do require such notification insert that requirement in their application agreements.” (Col-leran Aff. ¶ 42) Here, the parties did not contract for such an obligation. Second, there is no support in the U.C.P. 400 for an automatic waiver or preclusion arising from the applicant’s failure to object promptly to discrepancies. Article 16 of U.C.P. 400 requires that the issuing bank notify the beneficiary of acceptance or rejection of documents within a reasonable time and, in Article 16(e) states that if it fails to do so, “the issuing bank shall be precluded from claiming that the documents are not in accordance with the terms and conditions of the credit.” However, this section imposes no obligation on the applicant and concerns only the issuer’s obligations to the beneficiary. Linkers (Far East) Pte., Ltd. v. International Polymers, Inc., No. 94 Civ. 9226, 1996 WL 412854 (S.D.N.Y. July 23, 1996), is not to the contrary. There, the Court barred a claim by the applicant against the confirming bánk because the issuer failed to object promptly to the confirming bank. Linkers, 1996 WL 412854, at *1; see also Linkers, Amended Verified Complaint ¶¶ 18-29 (filed Jan. 18, 1995). The Court said nothing of an applicant’s duty to an issuer. The Linkers Court based its ruling on U.C.P. 500, art. 14(e), the successor to U.C.P. 400, art. 16(e)