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VOL. 7, ISSUE 3 (2021)
Role of letters of credit in international trade
Authors
Monica Raje
Abstract
Financing of an international transaction is an important concern for all parties involved in such a transaction. The seller wishes to be paid as soon as he ships the goods and fulfills his contractual obligations. The buyer on the other hand wants to delay payment till the goods arrive in his jurisdiction and he has an opportunity to examine them and satisfy himself that the goods meet the contractual requirements. A letter of credit as a means of financing an international transaction mitigates the risks for both the buyer and the seller. Letters of credit are indispensable for international transactions since they ensure that payment will promptly be received by the seller Using letters of credit allows the seller to significantly reduce the risk of non-payment for delivered goods, by replacing the risk of the buyer with that of the banks. Letters of credit have become a crucial aspect of international trade, due to differing laws in each country and the difficulty of knowing each party personally. This paper seeks to understand the importance of letters of credit in international trade. It will also study how a letter of credit transaction operates and the two important principles of doctrine of autonomy and the doctrine of strict compliance governing letters of credit transaction. It will also study the fraud exception to the doctrine of autonomy as carved by Courts in the U.S., UK. and India
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Pages:75-79
How to cite this article:
Monica Raje "Role of letters of credit in international trade ". International Journal of Law, Vol 7, Issue 3, 2021, Pages 75-79
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