Banks Deal with Documents and Not with Goods or Services to Which the Documents May Relate - Coursework Example

Comments (0) Cite this document
Summary
This essay seeks to analyze the role of banks in issuing letters of credit when the beneficiary demands payment. The limitations of the bank’s role in dealing with documents without exceeding these limits in the light of judiciary’s view will be discussed…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.5% of users find it useful
Banks Deal with Documents and Not with Goods or Services to Which the Documents May Relate
Read TextPreview

Extract of sample "Banks Deal with Documents and Not with Goods or Services to Which the Documents May Relate"

Download file to see previous pages This paper is divided into three sections: the principle of independence in the bank’s role in complying with the documents, analyzing the doctrine of strict compliance and the position of the bank in interpreting the doctrine and the bank’s duty in relation to the exceptions to the above doctrines.

2. The Principle of Independence
2.1 General overview
As Goode highlights, the principle of independence, or the principle of autonomy, is the most essential principle of a document of credit (DC).5 It is not an exaggeration to say that the true benefits of the LC go hand-in-hand with this principle. It is the “cornerstone of the law relating to a letter of credit”. This means that an LC is separate and independent from underlying contracts between the credit’s parties. In Nareerux Import Co. vs. Canadian Imperial Bank of Commerce, the Court of Appeal stated:
“A letter of credit thus exists in the context of three separate and distinct agreements: (i) the underlying contract between the buyer and seller; (ii) the contract between the buyer and the bank and (iii) the contract between the bank and the beneficiary…these contracts are separate and independent from each other”. In fact, the main purpose of the credit document is to create an ‘abstract payment’ commitment. Therefore, the rights and obligations resulting from the DC do not depend on the relationship between the seller and the buyer, with the former fulfilling his contractual obligations towards the latter. Generally, not carrying out some or all of these obligations does not give the buyer the right to ask the bank to withhold payment to the seller as long as the documents presented by the beneficiary are compatible ‘on their face’ with the LC. This is true unless it does not fall into any of the exceptions that will be discussed in Section 3 of this essay. Therefore, the commitments of both the confirming bank and the issuing bank are considered in regards to the documents and not the goods. This has been confirmed in the Sztejn vs. Henry Schroeder Banking Corporation case, where the court stated that: “It is well-established that a letter of credit is independent of the primary contract of sale between the buyer and the seller. The issuing bank agrees to pay upon presentation of documents, and not the goods. This rule is necessary to preserve the efficiency of the letter of credit as an instrument for the financing of trade.” Moreover, Act 4(a) the UCP 600 states that a credit is a separate transaction from any other underlying contract, and banks are not bound to such contracts. Therefore, the role of the bank is to honor, negotiate or fulfill obligations under the credit. However, the bank, as a plaintiff or defendant, in the case regarding the LC, does not have the right to plead its relationship with the other bank or with the buyer. This is true even in the case when the buyer does not pay for the LC. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Banks Deal with Documents and Not with Goods, Services or Performance Essay - 1”, n.d.)
Retrieved from https://studentshare.org/law/1449738-banks-deal-with-documents-and-not-with-goods
(Banks Deal With Documents and Not With Goods, Services or Performance Essay - 1)
https://studentshare.org/law/1449738-banks-deal-with-documents-and-not-with-goods.
“Banks Deal With Documents and Not With Goods, Services or Performance Essay - 1”, n.d. https://studentshare.org/law/1449738-banks-deal-with-documents-and-not-with-goods.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Banks Deal with Documents and Not with Goods or Services to Which the Documents May Relate

Google Documents

... Google Documents Google Documents is the web based free to use word processor, presentation and spreadsheets application program from Google. Google Docs helps user to save, edit and at the same time share documents over the internet with the help of internet via web browser. Unlike MS Office suite which are mainly used offline on personal computers and laptops Google Documents are created online and gives the flexibility to share the documents with anyone using Google account and can be updated at the same time. It eliminates the need to e-mail documents to share with others and it can also be edited online by the shared users of the...
1 Pages(250 words)Essay

Banks Deal with Document not with Goods, Services or Performance to Which the Documents May Relate

...? Banks Deal With Document Not With Goods, Services or Performance to Which the Documents May Relate (UCP 600, Article 5) of Institution] 4100 Words [Date] Introduction Commercial laws also referred to as business or corporate laws have been in existent since time immemorial and are applied in the regulation of both private and public commercial transactions. Covered in commercial laws are subjects and concepts such as merchant shipping, bills of exchange and partnership, principal, agent and insurance. Commercial law thus regulates commercial contracts, sales of products and hiring practices among other...
16 Pages(4000 words)Essay

POL- Founding Documents

...Submision: The Declaration of Independence and the U.S. Constitution The pronouncement of Independenceand the Constitution of the United States are the two most significant, and enduring credentials in our America’s record. It has been supposed that the pronouncement of Independence was the pledge; the Constitution was the accomplishment. This paper discusses the actions of King George III that Thomas Jefferson recognized as justification for American independence from English rule. It also analyzes how the U.S Constitution was crafted to avert comparable abuses from occurring in the new republic, and assesses the likely role ethics played in the advancement of these founding documents. The actions of King George III...
4 Pages(1000 words)Research Paper

A Critical Analysis of Article 5 of UCP 600

...attempt” on the part of the applicant to include the main contract as a significant “part of credit”, as well as copies of the contract, “proforma invoice and the like”.16 Thus UCP 600 makes a determined effort to establish and strengthen the autonomous role of the letter of credit and distancing it from the underlying contract to which it applies. Article 5 further buttresses the autonomy principle by providing that: Banks deal with documents and not with goods, services or performance to which the documents may relate.17 Article 14 is therefore prefaced by Articles 4 and 5 of UCP 600. Article 14...
13 Pages(3250 words)Essay

Banks Deal with Documents and Not with Goods, Services or Performance to Which the Documents May Relate' (UCP 600, Article 5)

...?‘Banks deal with documents and not with goods, services or performance to which the documents may relate’ (UCP 600, Article 5). Critically Discuss in the Light of Relevant Case Law Introduction It is clear that international trade organizations have attempted to further develop the international trade system since the Bretton Woods Conference was convened in 1944.1 The reason for this is that international trade law regulates and covers a wide area of commercial transactions; for instance, commercial contracts, the sale of products, transportation of goods, insurance, finance and...
17 Pages(4250 words)Essay

Booker T. Washington Self-Made Man

6 Pages(1500 words)Essay

Personal Presentation documents

...1) Strength Weakness Opportunities and Threat (SWOT) analysis. Strengths (current) I have good communication skills I am good in public communicationI plan my time well I am a people person I am very creative I am very bright, which can be proved by the grades I obtained while in school Weaknesses (current) I am poor at concentrating I am poor in solving mathematical problems I am hot tempered I am told I am over social Opportunities (future) I am young hence can further my education My education back ground is wide hence I can work in almost any sector in the business industry I have many relatives and friends who are conversant with the marketing industry hence more advice and guidance about the industry I believe my weaknesses... ...
4 Pages(1000 words)Essay

Business Documents

...Business Documents: Email Correspondences September 7, To Mr. Jonathan Smith, Chairman of the Board CC The Board of Directors, Edible Delights Pty Ltd. From : , Public Relations Manager Subject: Crisis Management and Communication Plan ================================================================ Dear Mr. Smith: In view of the recent reports published in various news media regarding the vulnerabilities faced by major food manufacturers, like us; one is seriously concerned based on the fact that our organization has no crisis management or communication plan which could significantly address impending threats and mitigate potential risks from food contamination incidents. Therefore, based on one’s research, I am hereby... , as emphasized by...
2 Pages(500 words)Essay

Discussion Documents

...Nita Henry: Executive Director Office of Human Resources, of Denver Nita Henry is a national figure in Colorado having worked for the last 25 years in the healthcare and service delivery organizations in the country. Her overwhelming experience in the field of human resource management is not questionable, as she has been working within this career field for all that period. Without any doubt, her experience and commitment to work are the highest rating reasons why she recently won her appointment as the Executive Director of Human Resources in the City of Denver. Nita is a scholar. She attended various institutions of higher learning including: University of Phoenix where she earned her doctorate degree in...
1 Pages(250 words)Assignment

Historical Documents

...in the United States as the trigger for the great depression. 4Trade and incomes experienced a dramatic drop. This led to a dip in tax collection for the treasury. At the peak of the great depression, unemployment rates stood at 25% in the United States. Other developed nations had unemployment rates of over 30% of the working age population. Many historians and economists believe that there are two theories that best describe the cause of the Great Depression. 5 The Demand theory argues that service and products were being over produced while the demand was not keeping up with the supply. Companies were over investing in products that had no matching demand meaning the companies were spending more than they were...
3 Pages(750 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Coursework on topic Banks Deal with Documents and Not with Goods or Services to Which the Documents May Relate for FREE!

Contact Us