Documentary credit has historical importance. It has a popular and universal acceptable method of payment in international trading transactions. Numerous uniform international practices have been established and codified for their use. Such uniform international practices are the Uniform Customs and Practices for Documentary Credits. With the advent of technology, “documentary nature of these credits may require certain reversion.
In a nutshell, documentary credit plays a pivotal role in financing international trade and as a result have been described as “the life blood of international commerce”, referred to as the quintessential international instruments”.
This paper examines the historically notion of documentary credit, sources of laws and its application. It also entails rights and obligations of parties dealing with documentary credit in transnational commerce, key principles of credit as well as types of credits which can be used during transactional commerce.
Finally, it examines ‘the fraud exception’ rule and how different countries treat this rule according to their different legal systems.
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