Agreement Letter Of Credit Definition

An Accreditation Agreement (LC), also known as Documentary Credit or Bank Credit (LoU), is a payment mechanism used in international trade to give a commodity exporter an economic guarantee from a creditworthy bank. Letters of credit are widely used to finance international trade, where the reliability of the parties cannot be easily and easily established. Its economic effect is to introduce a bank as an insurer when it assumes the counterparty risk that the buyer pays the seller for the goods. [1] The range of documents that can be requested by the applicant is broad and varies considerably from country to country. There are several methods of document verification, which present different risk differentials if the documents are legal. A documentary credit offers security for buyers and sellers. In UCP 600, on behalf of the purchaser (who is often the applicant), the bank is required (or undertakes) to pay the recipient the value of the goods shipped if acceptable documents are provided and the conditions are strictly met. The buyer can count on the fact that the goods he is waiting for will only be received because it will be proven in the form of certain documents that comply with the specified terms and conditions. The supplier is confident that, if such provisions are complied with, it receives payment from the issuing bank, independent of the contracting parties. In some cases, accreditation requires the documents to be taken. Subject to ICC URC 525, view and usance, for delivery of transit documents against payment or acceptance of the design, if delivery is made first, the title documents are sent to the buyer`s bank by the seller`s bank, for the delivery of documents against payment/acceptance recovery. Other forms of payment made are direct payment when the supplier ships the goods and waits for the buyer to transfer the invoice under the open account conditions.

This type of letter allows a client to make any number of prints in a given time frame. The authors of the law did not comply, on behalf of the applicant, with the bank`s obligation to pay with a scientific analysis under contract. In other words, they did not examine the legal effect of the bank obligation using a coherent theoretical lens. This has led to several conflicting theories about the contractual effect of a letter of credit. Some theorists suggest that the obligation to pay stems from implicit promise, attribution, innovation, trust, freedom of choice, trust and even trust and guarantees. [24] Although documentary credits are enforceable as soon as they have been disclosed to the recipient, it is difficult to assign consideration to the recipient prior to the award of the documents. In such transactions, the obligation for the beneficiary to deliver the goods to the applicant is not sufficiently taken into account for the bank`s commitment, since the sales contract is concluded before the issuance of the credit and, in these circumstances, the consideration is complete. However, the performance of an existing contractual obligation may be a valid consideration for a new bank commitment, provided that the bank has some practical advantage[25] A commitment to honour commitments to a third party may also constitute a valid consideration. [26] The Swiss Civil Code of 1911 did not deal directly with letters of credit, which were then rare in the country.

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