Abstract

The object of the banker's irrevocable documentary credit is to ensure that the seller-beneficiary of the credit gets paid for the goods he sells and the buyer gets, in the shape of the relative documents of title, the goods which the seller has contracted to deliver to him. This purpose is massively achieved by the issue on behalf of the buyer by his banker of a credit containing the banker's promise to make payment on conditions laid down in the credit. The conditions almost always include the tender of the documents which give title to the goods. Yet documents valid under a credit may not necessarily represent the contract goods. Virtually all credits are made subject to the Uniform Customs and Practice for Documentary Credits (U.C.P.), which introduces a set of rules or practices applicable in cases where the credit is lacking in some essential particular or in which some fact needs construction as to its meaning. Insofar as it is applicable, therefore, the U.C.P. forms part of the credit contract between the banker issuing the credit and the beneficiary who is usually the seller.

Seemingly, it takes little to breach this contract; all conditions must be fulfilled or the seller cannot demand payment. The condition which gives trouble (and would give more if it were not for the integrity of most parties—banker, buyer and seller) is that documents tendered by the seller should be precisely what the credit demands. Herein lies one of the problems facing the banks—the question of strict compliance.

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