Comments on the Autonomy Principle of letters of credit
Letters of credit
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It appears that when a seller and a buyer are finding too many hurdles in reaching an understanding, such actors have found suitable to ask bankers to take liability for solving their issue. The attractiveness of the letter of credit as a device for payment in international transactions lies in the substitution of the sometimes unreliable promise of payment of an unknown buyer with the very certain promise of a bank or banks. The complexity of a letter of credit is explained in that it has a documentary nature that not only protects the issuing bank and the applicant under the strict complianc...
It appears that when a seller and a buyer are finding too many hurdles in reaching an understanding, such actors have found suitable to ask bankers to take liability for solving their issue. The attractiveness of the letter of credit as a device for payment in international transactions lies in the substitution of the sometimes unreliable promise of payment of an unknown buyer with the very certain promise of a bank or banks. The complexity of a letter of credit is explained in that it has a documentary nature that not only protects the issuing bank and the applicant under the strict compliance doctrine but also protects the beneficiary of the same under the autonomy principle. By concentrating on the payment, commercial and financing functions of the L/C, and outlining the most recent cases whereby courts had asserted other possible scenarios where the autonomy principle would be superseded, this article suggests that fraud is not the only exception to the autonomy principle of the L/C, rather there are other exceptions that could endanger its autonomy, and which should be addressed more carefully by academics.
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