The previous chapter addressed the relationship between the buyer and seller in a trade transaction. It explored the sales contract (or agreement), and concluded with a decision to effect settlement through a documentary credit.This chapter starts with an examination of the different types of documentary credit that are available to support such a trade transaction. It is important to note that, while documentary credits have been categorised into types for the purpose of this chapter, it is quite common to find that the terms and conditions of a documentary credit will include some from another ‘type’. Students must not make assumptions about the terms and conditions that a documentary credit will contain simply on the basis of its type.The chapter then explores the relationship between the applicant (buyer) and the issuing bank (buyer’s bank) when the applicant applies to open a documentary credit. It explains the responsibility of the applicant when submitting a documentary credit application. It also details the responsibility of an issuing bank to examine the application carefully before preparing and issuing the documentary credit.
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