Doctrine of Strict Compliance

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Commercial credit or Documentary credit known as letter of credit is considered to be the most common method used in the international trade for the payments of the goods .This method of letter of credit considered to be a prime instrument for international commerce financing and its operation has been highly harmonized by the Uniform Customs and Practice for Documentary Credits (“UCP”). The letter of credit is considered to be the unique form of contract which gives rise to relationship between the various parties: the contract between buyer and banker, the contract between banker and seller and between issuing and correspondent banks.
One of the main principle of letter of credit or documentary credit on which credit transaction is based is Doctrine of strict compliance which provides that in order to obtain the payment from the bank, the documents presented to the bank by the seller-beneficiary on their face strictly confirm with the terms of the credit.
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 strictly conform to the terms of the credit.
The doctrine provides that in order to receive the payment from the bank the seller/beneficiary is required to tender documents which are in conformity with the terms of the letter of credit. And under this principle of strict compliance the bank is at liberty to reject the documents which do not strictly complied with the terms of the credit.
The principle of doctrine of strict compliance was first formulated in 1927 by an English court in Equitable Trust Company of New York v Dawson Partners Ltd as; "There is no room for documents which are almost the same, or which will do just as well... if the bank does as it is told, it is safe; if it declines to do anything else,…...

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