refusal of Letter of Credit
Querist :
Anonymous
(Querist) 06 April 2011
This query is : Resolved
Our client had refused to accept the L/C wherein the purchaser extended its validity without specific authorisation or permission from the beneficiary.
Whether the beneficiary can refuse to accept the L/C.
Will it amount to termination of contract automatically.
What is the consequences.
PL. answer
malipeddi jaggarao
(Expert) 07 April 2011
Mechanism of Letter of Credit is independent to the commercial contracts entered between the buyer and seller. Before extending the validity the opener should obtain the prior consent from the beneficiary. If your client has not given his consent, he has every right to refuse the extended validity of the Letter of Credit, as any terms of LC should be on mutual consent of both beneficiary and opener. However, this will not amount of termination of commercial contract entered into between the buyer and seller prior to opening of LC, as LC is independent of such contracts.
