The Impact Of The Credit For The International Sale Of Goods

Being a great invention, Letter of Credit (abbreviated as L/C) is a fine and ingenious instrument of payment in international trade. L/C is substituted by the credits of bank for the purpose of promoting trading, which can obviously reduce the risk of the exporter and ease the trust crisis. How can L/C play so important function? The key lies in the Independence and Abstraction Principle, Issuing Bank's Primary and Prompt Payment Liability and Fraud Exception, among which the Independence and Abstraction Principle is the footstone and backbone of L/C. Such principles should be insisted on in both law and practice.While, L/C transaction in practice evokes lots of disputes, seriously blocking the smooth going of underlying transaction. People find those principles, especially the principle of Independence and Abstraction have far more abundant connotations than that they seemingly signify. Unfortunately, many problems arise in trading are not in line with the rule of L/C, but should be resorted to the contract law. People are easy to be puzzled by the application of laws, for different disputes should be solved by different laws. Therefore, it has great significance to study and make clear the relation between L/C and the underlying contract.By using international customs and practice and other legal documents for reference, and analyzing related cases at home and abroad, this paper elaborates where L/C operation impacts on the benefits of parties'. Once the rights and duties of parties' is ascertained, the parties may identify whom and how they should sue. The paper is composed with four chapters: the first chapter provides the definition of L/C; the second chapter explains the principle of Independence and Abstraction; the third chapter describes the connection of the three main parties to L/C transaction; the forth chapter puts emphasis on the impact which L/C affects the underlying contract.Believing that more legal study on L/C is needed. Hopefully, this paper may be helpful for people: to comprehend and grasp the principle of Independence and Abstraction; to operate when taking the specialty of L/C into account in Practice; to manage and exert the relation between L/C and the relevant underlying contract in order to avoid unnecessary conflicts.