The Sale of Goods
In banking there are several procedures which have to be followed or which have to comply with certain rules. The banking procedure is sometimes complicated and may involve several contracts between the parties. If one of the terms of the contract is breached this may have an effect on the performance of the rest of the contracts. Taking the example of the sale of goods, the Buyer and the Seller will engage their banks in relation to providing credits to one another. There are several contracts between the parties. Upon the presentation of the correct documents the bank will pay out, this is however not the case if the documents are faulty.
Documentary credits are arrangements whereby an issuing bank, upon the request of the customer, will make a payment to third party (which is called the beneficiary) or will accept and pay bills of exchange. Issuing bank may authorise another bank to make such payments or negotiate against documents. Such a definition is codified in the Uniform Customs and Practice for Documentary Credits (UCP). UCPs are a set of rules which give guidelines and rules on all aspects of documentary credits. They were issued by the international Chamber of Commerce (ICC). As in accordance with the UCP, branches of one bank which are situated in different countries are considered as different banks.
E.G. Contract of the sale of goods
The parties to such a contract are the Buyer and the Seller. There are however other contracts with the issuing and confirming bank. There is a contract between the Buyer and the issuing bank. The issuing bank will agree to issue a credit or through a confirming bank to make the necessary payment on the presentation of the relevant documentation. The buyer hereby agrees to reimburse the issuing bank for the credit which has been given to him.
For more information on:
- Discrepancy and Reimbursement
- Refund of Reimbursement