8.2 Basic Features and Fundamental Principles of Letter of Credit

The instrument: the letter of credit (LC) = the buyer's bank's (issuing bank's) undertaking to pay the SELLER (beneficiary) against the DOCUMENTS' presentation (the shipment's papers: the bill of lading, the invoice, the inspection certificates) — the international sale's payment mechanism (the distance-and-distrust problem's solution: the bank's credit substituted for the buyer's). The parties: the applicant (the buyer), the issuing bank, the beneficiary (the seller), the advising bank, the confirming bank (the added undertaking), the nominated/collecting banks — the chain's craft. The fundamental principles (the exam's trio): The autonomy/independence principle — the LC independent of the underlying sale contract (the documents' world only: "deal in documents, not in goods" — the UCP-type uniform rules' first principle (the ICC's UCP the practice's code)); The strict compliance principle — the documents must COMPLY strictly with the LC's terms (the bank's examination (the documents' face — the five-working-days-type discipline; the UCP's craft); the non-compliant presentation's refusal (the notice's discipline)); The documentary payment duty — the payment only against the compliant documents (the bank never touches the goods (the fraud exception the narrow escape)). The features' catalogue: the irrevocable character (the modern LC's default — the cannot-be-amended- without-consent); the confirmed-and-unconfirmed faces (the confirming bank's independent promise — the double security); the sight-vs-usance (the immediate vs the deferred payment); the types (the commercial LC, the…