In the past decade, the credit card industry has seen its fair share of reform. In particular, notable changes have occurred regarding credit card transactions. Credit card transactions, both domestic and abroad, require payment. What few people know are the procedures behind them. Letters of credit transactions are made directly by the bank. In return, the seller offers their goods and services.
Principle of Autonomy
Those who govern letter of credits are expected to follow adequate procedures. One procedure they are expected to follow include the principle of autonomy. Essentially, the principle of autonomy is intended for banks to have zero involvement in the goods and services of a contract. Another procedure is the principle of strict compliance.
Principle of Strict Compliance
The principle of strict compliance suggests that the documents go hand in hand with a letter of credit. In other words, the documents have to comply with the letter of credit. In regards to this principle, banks are responsible for understanding all boundaries and possess the right to reject subsequent documentation.
Revocable and Irrevocable Letters of Credit
The type of letters of credit are similar to any typical letter of credit. However, there are letters tailor-made for the world of business and it is up to the parties to decide whether they will utilize revocable or irrevocable letters of credit.
Revocable letters and irrevocable letters of credit are simple to figure out. Revocable letters of credit lack the reliability of irrevocable letters of credit. At any moment, a revocable letter can be terminated. In a nut shell, revocable letters of credit benefit the buyer far more than they benefit the beneficiary.
On another note, irrevocable letters of credit are non-negotiable. They cannot be terminated on demand. Therefore, these letters put beneficiaries at an advantage. Contact our Palm Springs banking law firm for help with your banking case.