‘Parallel Forms, Divergent Foundations’: Unmasking The Mirrored Façade Between Letter Of Credit And Bank Guarantee In Modern Finance Law
- IJLLR Journal
- Jun 14
- 1 min read
Saharshrarchi Uma Pandey, NALSAR Hyderabad and National Law University (NLU), Nagpur.
Sahashricha Pandey, Delhi University and ASIAN International University.
ABSTRACT
‘What may be a mirage of resemblance in commerce might also fracture in law, such is the tale of letter of credit and bank guarantee’ The Concept of Letter of Credit and Bank Guarantee are considered to be Life Line in Business and Mercantile Transactions. They are a boon to the Commercial Smoothness in the sense that they aim to secure the Payment Consideration from the competing party and their vested interest so as to be effective and efficient in the world of Financial Propriety. They minimise the associated risk and the inherent jeopardy in securing the payment. Owing to diverse economic conditions and also the physical and geographical distance between the parties to a contract, the risk concerning the payment on the delivery of goods seem to increase. Hence, the instrumental force is the notion of Letter of Credit and Bank Guarantee. They aim to secure the payment and mitigate the afore-mentioned risk and thus, positively increase private financing and the market sentiment towards mercantile growth. In this research paper, the researcher aims to deliberate on the issue of Bank Guarantee and Letter of Credit in great details, identifying their advantages, dis-advantages while specifying their nuances, particulars and functioning. The present research is based on qualitative approach, and it will explore the afore-mentioned implications in business transactions analysed through a perspective of judicial precedents and legal developments.
Keywords: Letter of Credit, Bank Guarantee, Strict Compliance, Autonomy, Fraud Exception.
