Definition Letter Of Credit Agreement

For international trade, the seller may be required to deliver goods to a shipyard to meet the requirements of the flow-through. Once the goods are delivered, the seller receives documents proving that it has been delivered and the documents are transmitted to the bank. In some cases, simply placing the shipment on board a ship triggers the payment, and the bank has to pay – even if something happens with the shipment. If a crane falls on the goods or the ship sinks, this is not necessarily the seller`s problem. The first beneficiary may require the transferring bank to replace the applicant. However, if a document other than the invoice is to be issued in such a way as to indicate the name of the applicant, it must be indicated in this case that it is free of charge in the transferred credit. Appropriations carried over may not be transferred again to a third beneficiary at the request of the second beneficiary. However, while the details of accreditation can be understood with some flexibility, banks must adhere to the “principle of strict compliance” when ascernouncing whether the documents submitted are the documents indicated in the accreditation. This is to make the obligation for banks to make simple, efficient and fast payments against documents. It might also be possible to qualify the flowers as a guarantee contract for a third party, since three different companies are involved in the transaction: the seller, the buyer and the banker. Jean Domat proposes that, because the flow-throughs are motivated by the buyer`s necessity, the reason for an LC is to exempt the buyer from its obligation to pay directly to the seller. Therefore, an LC can theoretically be considered as a guarantee contract accepted by the conduct or, in other words, as an implied contract in which the buyer participates as a third party beneficiary, the bank acting as the stipulater and the seller as the promiser.

The term “beneficiary” is not used correctly in the system of an LC, since a beneficiary (including in fiduciary law cestui que use) is, in the broad sense, a natural or other legal person who receives money or other benefits from a benefactor. Note that, according to the accreditation system, banks are neither benefactors of sellers nor benefactors of buyers and that the seller does not receive money in tip mode. Thus, it is possible that an “accreditor” was one of those contracts that had to be masked to hide the “consideration or price condition”. For example, a city could ask a contractor to complete a construction project. If the project is not completed on time (and a standby credit is used), the city can prove to the bank that the contractor has not fulfilled its obligations. As a result, the bank has to pay the city. This payment compensates the City and facilitates the mandate of an alternative contractor to complete the work. The Swiss Civil Code of 1911 was not directly interested in credits that were still scarce in the country at the time. . . .


Important
This site makes use of cookies which may contain tracking information about visitors. By continuing to browse this site you agree to our use of cookies.