Relationship between a Banker and His Customer under a Letter of Credit: A Legal Reflection
- May 2, 2019
- Posted by: RSIS
- Category: Social Science
International Journal of Research and Innovation in Social Science (IJRISS) | Volume III, Issue IV, April 2019 | ISSN 2454–6186
Relationship between a Banker and His Customer under a Letter of Credit: A Legal Reflection
Mantinkang Formbasso Lawrence
University of Ngaoundere, Cameroon
Abstract:-The banker/customer relationship is a relation based largely on contract with well-defined terms. The contract conferred reciprocal rights and duties upon the parties. This is to say that the bank under normal banking operation is supposed to respect only the written terms of the contract between it and the customer. However, banks often intermittently of course perform some other duties which are not spelled out in the contract. The bank at times act as an agent of the customer towards other persons with whom the customer has a transaction. A documentary credit transaction stands out as a clear example of a situation where a bank act as an agent for the customer. The base contract giving birth to the opening of a documentary credit for the customer by the bank is a sale contract between the customer (buyer) and a seller in which they agree payment be made by a documentary credit. The conclusion of payment of goods supply to be made by documentary credit often give rise to three other independent but inter-related legal transactions among which is the transaction between the customer (buyer) and the issuing bank. This article focuses on this relationship between the customer and the bank which lead to the opening of a documentary credit. The credit is opened on the request of the customer for the benefit of the seller. The objective of this article is therefore to examine the content of the relationship between a customer and the issuing bank under a documentary credit transaction.
I. INTRODUCTION
The financing of trade by means of banker’s commercial credit is a device which in its modern form has become an integral part of all banking systems worldwide. This is to say that this instrument is a well-known banking instrument. Its main purpose is to finance the sale of goods across international borders. As an aspect of the banking system, banker’s commercial credit otherwise referred to as letter of credit is just one of the various means used by bank to enhance or facilitate payment between businessmen in different countries. The use of letter of credit has become necessary in the interdependent trade world where international commerce has greatly narrow the world into a commercially managed size. The used of this instrument by bank has made international trade sometimes easier than domestic trading.
