Commercial law. Letter of credit (lecture notes)

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Commercial law. Letter of credit (lecture notes)

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LECTURE No. 60. Letter of credit

A letter of credit is a conditional monetary obligation accepted by the issuing bank on behalf of the payer, to make payments in favor of the recipient of funds upon presentation by the latter of documents that comply with the terms of the letter of credit, or to authorize another bank (executing bank) to make such payments (Article 867 of the Civil Code of the Russian Federation). With a letter of credit form of payment, the movement of money is carried out under certain conditions - the conditions of a letter of credit - by the main bank where the client is served (issuing bank), or by another bank on behalf of the main bank. Payment is made by non-cash payment, by transferring the amount of the letter of credit to the account of the recipient of funds.

A letter of credit is a fairly common form of payment, especially in international trade. The popularity of the letter of credit lies in the fact that with this form of payment, both parties to the contract have certain guarantees. The main legal acts of applying a letter of credit are:

1) GCRF;

2) Regulations on non-cash payments in the Russian Federation;

3) Uniform Rules for Documentary Credits published by the International Chamber of Commerce in 1993.

Letters of credit are of the following types:

1) covered (deposited);

2) uncovered (guaranteed);

3) revocable;

4) irrevocable.

A covered (deposited) letter of credit is a type of letter of credit when the issuing bank is obliged to transfer the amount of the letter of credit (coverage) at the expense of the payer or the loan granted to him at the disposal of the executing bank for the entire duration of the obligation of the issuing bank (clause 2, article 867 of the Civil Code of the Russian Federation).

An uncovered (guaranteed) letter of credit is a type of letter of credit when the executing bank is given the right to write off the entire amount of the letter of credit from the account of the issuing bank maintained by it (clause 2 of article 867 of the Civil Code of the Russian Federation).

A revocable letter of credit is a letter of credit that can be changed or canceled by the issuing bank on the basis of a written order of the payer without prior agreement with the recipient of funds and without any obligations of the issuing bank to the recipient of funds after the withdrawal of the letter of credit. The executing bank is obliged to make a payment or other operations under a revocable letter of credit, if by the time they are made it has not received notification of a change in the terms or cancellation of the letter of credit. A letter of credit is revocable, unless otherwise expressly stated in its text (Article 868 of the Civil Code of the Russian Federation).

Irrevocable is a letter of credit that cannot be canceled without the consent of the recipient of funds. At the request of the issuing bank, the executing bank participating in the letter of credit transaction may confirm an irrevocable letter of credit (confirmed letter of credit). Such confirmation means the acceptance by the executing bank of an additional obligation to the obligation of the issuing bank to make payment in accordance with the terms of the letter of credit. An irrevocable letter of credit confirmed by the nominated bank cannot be changed or canceled without the consent of the nominated bank (Article 869 of the Civil Code of the Russian Federation). The procedure for providing confirmation on an irrevocable confirmed letter of credit is determined by agreement between the banks.

When the parties reach an agreement on a letter of credit form of payment, they must provide for the following terms of the letter of credit:

1) the name of the issuing bank;

2) the name of the bank servicing the recipient of funds;

3) the name of the recipient of funds;

4) the amount of the letter of credit;

5) type of letter of credit;

6) method of notifying the recipient of funds about the opening of a letter of credit;

7) method of notifying the payer about the account number for depositing funds opened by the executing bank;

8) a complete list and precise description of the documents submitted by the recipient of funds;

9) the validity period of the letter of credit, the submission of documents confirming the delivery of goods, and the requirements for execution of these documents;

10) terms of payment;

11) liability for non-performance or improper performance of obligations.

The most common payment terms for a letter of credit form of payment:

1) shipment of goods to certain destinations;

2) submission of documents certifying the quality of products, or acts of acceptance of goods for sending them through the executing bank and the issuing bank to the payer;

3) prohibition of partial payments under a letter of credit;

4) compliance with certain requirements for the method of transportation;

5) other conditions stipulated by the main contract.

For the execution of the letter of credit, the recipient of funds submits to the executing bank documents confirming the fulfillment of all the conditions of the letter of credit. If at least one of these conditions is violated, the letter of credit will not be executed (clause 1, article 870 of the Civil Code of the Russian Federation).

The responsibility for violation of the terms of the letter of credit to the payer shall be borne by the issuing bank, and to the issuing bank - by the executing bank, except for the cases provided for by this article. In the event of an unreasonable refusal of the nominated bank to pay funds under a covered or confirmed letter of credit, liability to the recipient of funds may be assigned to the nominated bank. In case of incorrect payment by the executing bank of funds under a covered or confirmed letter of credit due to violation of the terms of the letter of credit, the responsibility to the payer may be assigned to the executing bank (clause 1 of article 872 of the Civil Code of the Russian Federation).

Closing of a letter of credit in the executing bank is carried out:

1) upon expiration of the term of the letter of credit;

2) at the request of the recipient of funds to refuse to use the letter of credit before its expiration, if the possibility of such refusal is provided for by the terms of the letter of credit;

3) at the request of the payer for full or partial withdrawal of the letter of credit, if such withdrawal is possible under the terms of the letter of credit. The executing bank must inform the issuing bank about the closing of the letter of credit (clause 1 of article 873 of the Civil Code of the Russian Federation).

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