Letter of Credit

GENERAL PROVISIONS AND DEFINITIONS

These provisions and definitions and the following articles apply to all documentary credits and are binding upon all parties thereto unless otherwise expressly agreed.
For the purpose of such provisions, definitions and articles the expressions "documentary credit(s)" and "credit(s)" used therein mean any arrangement, however named or described, whereby a bank (the issuing bank), acting at the request and in accordance with the instructions of a customer (the applicant for the credit),
1. Is to make payment to or to the order of a third party (the beneficiary), or is to pay, accept or negotiate bills of exchange (drafts) drawn by the beneficiary; or
2. Authorizes such payments to be made or such drafts to be paid, accepted or negotiated by another bank, against stipulated documents, provided that the terms and conditions of the credit complied with.
Credits, by their nature, are separate transactions from the sales or other contracts on which they may be based and banks are in no way concerned with or bound by such contracts.
Credit instructions and the credits themselves must be complete and precise. In order to guard against contusion and misunderstanding, issuing banks should discourage any attempt by the applicant for the credit to include excessive detail.
The bank first entitled to exercise the option available under Article 32 b shall be the bank authorized to pay, accept or negotiate under a credit. The decision of such bank shall bind all parties concerned. A bank is authorized to pay or accept under a credit by being specifically nominated in the credit.

A bank is authorized to negotiate under a credit either:
1. By being specifically nominated in the credit, or
2. By the credit being freely negotiable by any bank.
A beneficiary can in no case avail himself of the contractual relationship existing between banks or between the applicant for the credit and the issuing bank.