Under clauses 5.5 and 22.4 of AS3556-1988 (and equivalent provisions in related standard forms), a purchaser becomes 'entitled to exercise a right' in respect of security when it has a bona fide claim that moneys are due to it exceeding any moneys due from it; an authoritative determination by a court or arbitrator is not required. Where security takes the form of a standby letter of credit, the supplier bears the risk of being out of pocket pending resolution of the underlying dispute. On the supplier's construction, the security would become worthless before recourse became permissible, given that letters of credit invariably have expiry dates.
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