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L/C(Letter of Credit)	Home > Helper

{1} Letter of credit

[2] Special trait of letter of credit

- The essence of L/C is to simplify a bank's obligation and duty while conducting L/C transaction.
- When opening L/C, unless cancellation possibility is clearly stated in English, the cancellation is impossible and expendable.
- Once L/C is established, the effect continuous regardless of misprints such as a clerical error and an omitted words.
(1) Independency--Independent from a contract

- Once L/C is established, the parties involved for L/C are restricted to only with the contents of a letter (terms) not the contents of a sales contract.
- An opening bank may not delay or refuse payment for a difference excuse of the contents of a sales contract.
- Modifying L/C terms : Possible with the entire related parties (applicant, opening bank, beneficiary and confirming bank) consent.
- Although a sales contract is canceled, an opening bank is bind to make payment if a beneficiary performs to the terms of L/C.

(2) Abstractness-- It is a transaction of documents therefore, the performance duty for outsourcing or goods are the separate matters.

- Determine only with the documents performance
- Only if present the transportation documents that conforms the L/C terms, payment will be disbursed or will be Nego by inspecting documents only.
- A bank is not obligated to confirm the actual transaction details.
- L/C is a means to disburse payment by exchanging the documents equipped with prescribed terms with L/C.

(3) Boundaries--Independency and Abstractness

- If presented the transportation documents are different from the actual contract details : If the documents conforms to the L/C terms, the applicant is obligated to payment. (For the breach of a contract, institute a claim, arbitrations procedure or lawsuit
procedure separately)
- An opening bank holds no obligation or duty for damage prevention and the breach of a contract.