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I. Similarities between guarantees and stand-by letters of credit (1) Definitions Basic guarantees and standby letters of credit that are identical to those of legal parties, although they differ in the specific expressions of the definitions, but in general, they are all It is a written document issued by a bank or other non-bank financial institution with strong capabilities to the party (applicant) under a certain transaction contract to the other party (beneficiary) of the transaction, promising to submit Appears to be in compliance with the provisions of its terms written claims or other documents to pay. The legal parties for the letter of guarantee and standby letter of credit are basically the same, and generally include the applicant, the guarantor or the issuing bank (both in the same position) and the beneficiary. The legal relationship between the three parties is that the applicant is in a contractual relationship with the underwriter or the issuing bank. The rights and obligations between the two are based on the application for a letter of guarantee or between the issuing bank and the beneficiary. The legal relationship is based on the terms of the guarantee or standby letter of credit.
(B) Application of the same place guarantee letter and standby letter of credit is an important form of international settlement and guarantee, in the international trade and economic exchanges can play the same role to achieve the same purpose.
In international economic and trade exchanges, parties to a transaction often require various guarantees to ensure the performance of debts, such as tender guarantees in tender transactions, performance guarantees, prepayments for equipment trades, guarantees for quality, or maintenance, and international technology trade. In the payment guarantee, etc., these guarantees can be achieved through the form of letter of guarantee or standby letter of credit. From the point of view of the standby letter of credit, it is generated as an alternative to the letter of guarantee. Therefore, the purpose it achieves is naturally consistent with the letter of guarantee. This is also the case with the development of practice.
(C) The same in nature The guarantees in international economic and trade practice are mostly met with guarantees, which absorb the characteristics of the letters of credit and are increasingly closer to the letter of credit, so that the guarantees and letters of credit in standby letters of credit are Nature is increasingly the same. The performance is as follows: First, the guarantor bank or issuing bankâ€™s guarantee or payment responsibilities are of a primary nature, although the letter of guarantee or standby letter of credit is used as a guarantee for the purpose of use, that is, when the applicant fails to perform the debt, The person can obtain compensation by letter of guarantee or standby letter of credit. When the applicant fulfills his/her debt, the beneficiary does not need to use it (the standby letter of credit is so named); Second, although they are based on the applicant and the beneficiary The basic contract is opened, but once opened, it is independent of the underlying contract. Third, they are purely document transactions. The guarantor or the issuing bankâ€™s claim against the beneficiary is based on the terms of the letter of guarantee or standby letter of credit. And the prescribed documents, that is, payment by vouchers only. Therefore, someone called the letter of guarantee a "guarantee letter of credit."
Second, the difference between the letter of guarantee and the standby letter of credit (a) the letter of guarantee has a subordinate letter of guarantee and independent letter of credit, the standby letter of credit does not distinguish between the letter of guarantee as a kind of human guarantee, and it with it to open Is the relationship between the underlying contracts either dependent or independent? According to this, the guarantee letter has the nature of the property guarantee letter and the independent guarantee letter. The traditional letter of guarantee is attributed, and the letter of guarantee is a subsidiary contract of the underlying contract. Its legal effect is related to the existence, change, loss of the basic contract, and the guarantor's responsibility is the second-class payment liability, only if the applicant of the guarantee is When breach of contract, and do not assume responsibility for breach of contract, ensure that the person bears the liability for breach of contract, ensure that the person under the warranty is responsible for compensation under the letter of guarantee. The applicant's breach of contract is based on the provisions of the basic contract and the actual performance of the situation to make a judgment, but this judgment is obviously not a simple matter, often through arbitration or litigation to resolve the merits. Therefore, when a claim arises from the property guarantee letter, the guarantor must determine whether to pay it according to the terms of the underlying contract and the actual performance. The guarantees used by domestic transactions in various countries are basically guarantees made from attribute quality.
Independent guarantees are different. Although they are opened on the basis of a basic contract, once opened, they have an independent effect. They are self-contained documents. Whether the guarantor pays claims for the beneficiary is only based on the terms of the letter of guarantee.
Independent guarantees generally require that the guarantor's responsibility is irrevocable, unconditional, and payable immediately. Once the letter of guarantee is issued, the obligation under the guarantee it undertakes cannot be modified or cancelled without the consent of the beneficiary; the payment under the letter of guarantee only depends on the letter of credit itself, and does not depend on transactions other than the letter of guarantee. The bank receives the benefit. The personâ€™s claim shall be immediately paid the prescribed amount. The sight-seeing guarantee is a typical representative of an independent guarantee.
Independent guarantees are needed to meet the needs of contemporary international trade development after World War II. They are gradually established by the development of banks and commercial practices, and have become the mainstream and trend of international guarantees. The main reasons are as follows: First, the claim for property guarantees occurs. At that time, the guarantee bank had to investigate the actual situation of the performance of the basic contract, which was beyond the capability of its personnel and expertise, and would therefore be involved in contract disputes or even lawsuits. Banks consider themselves for their own interests and are not willing to be involved in complicated contract disputes. The interests and reputation of banks are damaged, and they tend to use independent guarantees. In addition, banks are increasingly introducing the principle of handling the letter of credit business when dealing with the letter of guarantee business, and some even call the letter of guarantee a guarantee letter of credit. Second, the independent guarantee can make the beneficiary's rights more secure and easier to implement. It can avoid the request of the letter of guarantee from the guarantee applicant for various reasons such as force majeure, impossibility of contract fulfillment, etc. to fight against its claim, and to avoid prosecution of the defaulter. The large amount of money, energy and protracted litigation that are spent to ensure that their rights are not compromised due to contractual disputes.
As a form of letter of credit, a stand-by letter of credit has no distinction between attributes and independence. It has the characteristics of â€œdependency, self-sufficiency, and pure billing transactionsâ€ of a letter of credit. The beneficiary shall prevail in the letter of credit. The bank only decides whether to pay according to the terms and conditions of the letter of credit, and has nothing to do with the basic contract.
(b) The legal norms and international practices applicable to the letter of credit and standby letter of credit are different.
Due to the fact that countries have different legal regulations on guarantees, so far there has been no international practice of guarantees that can be widely recognized by the banking and trading communities in various countries. Although the independent letter of guarantee has a wide range of applications in international economic and trade practice, most countries do not clearly stipulate their nature in law, which to some extent hinders the development of the letter of guarantee.
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