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ARTICLE · 02 APRIL 2024

How Liquid Is Your Letter Of Credit?

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Other than cash, a standby letter of credit (LoC) is generally considered the most liquid form of performance security. While beneficiaries generally believe drawing on an LoC...

CanadaLitigation, Mediation & Arbitration
Brian P. Reid
Brian P. Reid
Geoffrey Stenger
Geoffrey Stenger
Marina Ferguson (Articling Student)
Marina Ferguson (Articling Student)
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Other than cash, a standby letter of credit (LoC) is generally considered the most liquid form of performance security. While beneficiaries generally believe drawing on an LoC should be a relatively simple process, many do not understand the extent to which the counterparty could try to stop you. This issue was addressed in Pacific Atlantic Pipeline Construction v. Coastal Gaslink Pipeline Ltd (2023) ABKB 736.

Pacific Atlantic Pipeline Construction Ltd v Coastal Gaslink Pipeline Ltd, 2023 ABKB 736

In this case, Coastal Gaslink Ltd. (CGL) contracted with Pacific Atlantic Pipeline Construction Ltd. (PAPC) to construct portions of the coastal gaslink pipeline project (Project). During the Project, disputes arose in connection with the performance of PAPC's work and CGL ultimately terminated the contract and arbitration proceedings were commenced.

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