A documentary credit or a letter of credit is usually used to finance international trade. Judges have referred to documentary credits as the “life blood” of international commerce.
It is the bank’s obligation to pay the seller of goods or services a certain amount of money in the timely submission of documents confirming shipment of goods or performance of contractual services.
The Documentary credit is considered a separate contract than the underlying sales contract under the principle of Autonomy.
It is the key principle controlling the documentary credits thereby promising business efficiency of documentary credits since centuries.
Documentary Letter Of Credit is one of the most important means of financing in the international trade, as the letter of credit is a tool that removes most of the risks as from the importer and from the exporter.
Documentary Letter Of Credit is very flexible and convenient tool for calculations, which have the widest recognition and acceptance in the world. Different kinds of Documentary Letter of Credit: –
The autonomy of the documentary credit can, therefore, be treated as a gain in international deals as it serves as a business security to parties in international trade based in different countries.
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