The evolution of the doctrine of strict compliance the case before the court dealt with the responsibility of a bank which, in a letter of credit transaction, paid the beneficiary upon presentation of documents that were not in conformity with the credit. Letters of credit (also known as documentary credits or commercial credits) are an extremely popular method of payment in international trade as to the doctrine of strict compliance, common law requires every single document tendered to tally precisely with the instructions in the letter of credit. Letters of credit are based on two principles: (i) autonomy (ii) doctrine of strict compliance the autonomy of the letter of credit according to this principle, the letter of credit is disassociated from the actual sales and other contracts and, thus, is not affected by any problems and disputes related to the. The doctrine of strict compliance protects the interests of the buyer and of the paying bank when submitting the required documents, the law expects  in terms of the doctrine, the beneficiary's performance has to comply precisely with the terms and conditions as contained in the letter of credit.
Doctrine of strict compliance - an exception to autonomy principles chapter 3 doctrine of strict compliance — an exception to how far such rights are dealt under international rules governing credit transactions also needs examination. Introduction the letter of credit is the most commonly used method of payment for goods in chapter three explores the autonomy of the letters of credit, the doctrine of strict compliance and the if the documents are in compliance, advising or confirming bank, in case of confirmed letter of credit, will. Despite the fact that letters of credit are an important vehicle for companies to expand and grow internationally in turnborder transactions where 6 the high rejection rates accompanied with numerous controversial court rulings concerning the doctrine of strict compliance indicate that the.
A letter of credit (lc), also known as a documentary credit, bankers commercial credit, is a payment mechanism used in international trade to perform the same economic function as a guarantee. The doctrine of strict compliance has governed the law of letters of credit since the beginning of the 20th century it is echoed in one of the classical although the doctrine of strict compliance applies even to such transactions it is, quite erroneously, believed that the simple nature of the documents to. Letters of credit are documentary credits they are the one of the most secure methods of payment available to international traders this is the doctrine of strict compliance a revocable credit brings insecurity to the transaction for cases the open account is executed, the stand-by credit is a. A letter of credit is a letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount the international chamber of commerce uniform customs and practice for documentary credits oversees letters of credit used in international transactions.
Doctrine of strict compliance equitable trusts co of new york v dawson hol's (viscount sumner): 'no room for docs almost the same, or which will do 2 the doctrine of strict compliance is necessary in letter of credit transactions and any deviations therefrom would only cause undue. This principle of strict compliance is one of the fundamental principles governing the lc operation j economics and business research, vol1 no2, 2009 p191 4 ibid p 193-194 5 d krazovska, « impact of the doctrine of strict compliance on a letter of credit transaction », master thesis. The high court holds that the doctrine of strict compliance does not automatically apply to demand guarantees (or performance bonds) in the way that it applies to letters of credit summary the high court recently granted an order to enforce a demand guarantee against a guarantor despite claims.
A standby letter of credit usually requires the presentation of documents that evidence a default in the underlying transaction between the letter of credit beneficiary and typically a third party that arranges for the one of the central tenets of letter of credit law is the doctrine of strict compliance. The doctrine of autonomy is a cardinal principle in letters of credit transaction wherein the bank's duty to pay is found exclusively in the terms of the letter of credit irrespective of performance by in the doctrine of strict compliance the tender of documents that are similar are also not acceptable. The doctrine of strict compliance has been relaxed by the provisions introduced by the ucp 600 the above provision expressly maintains the requirement of strict compliance in commercial  roberto, bergami, will the ucp 600 provide solutions to letter of credit transactions. In transactions involving a letter of credit, the bank is not party to the underlying contract when applying the principle of strict compliance in its strictest sense, even the most trivial discrepancy allows a bank to reject the documents for non-conformity with the letter of credit this was first.
According to the doctrine of strict compliance, banks are bound to pay autonomy of the letter of credit according to the principle of autonomy of credit, the letter of credit which is a contract entered into between the applicant and the issuing bank is a separate and independent transaction from the. Meaning of strict compliance:- in general, doctrine of strict compliance referred to as a legal principle which provides that the bank is entitled to reject documents which do not the doctrine of strict compliance has been justified in the context of commercial letters of credit on two grounds. The letter of credit transaction involves as many as seven stages each of which can pose significant problems if the parties to the underlying contract by virtue of the doctrine of strict compliance and autonomy principle, banks are merciless in rejecting the documents even at the slightest opportunity.
The doctrine of strict compliance protects the interests of the buyer and of the paying bank when submitting the required documents, the law expects the seller to comply strictly with the requirements stated in the letter of credit this assures the buyer that the bank will not pay the seller, unless. Bacic letter of credit transaction process is written in this article the letter of credit application must be in accordance with the terms of the sales agreement 3 if the importer and its bank reach an agreement together on the working conditions the importer's bank (issuing bank) issues its letter of. Doctrine of strict compliance- the documents tendered by the seller/beneficiary must strictly conform to the terms of the letter of credit the tender of documents must include all documents required by the letter thus, a correspondent bank which departs from what has been stipulated.