In practice, smaller transactions are made by proformed invoices, while medium and higher volume transactions are covered by sales contracts. This lesson also illustrates how an exporter can use a standby letter of credit instead of an offer obligation and, in the same way, instead of a performance obligation. Most countries understand the use of standby letters of credit and generally accept them in cases such as this. This lesson highlights the autonomy of a letter of accreditation under Section 4 bis of the Uniform Practice of Customs and Documentary Credits (UCP). “A credit is, by its very nature, a transaction separate from the sale or another contract on which it may be based. Banks are not affected or linked to such a contract, even if any indication of that contract is included in the credit. A sales contract can cover any type of sale action, such as the sale of intellectual property rights. B, the sale of real estate, etc. On this side, we focus only on international sales contracts. Another point in the decision to use a proform invoice or sales contract is the duration of the transaction. Definition: The sales contract is defined as a “formal contract by which a seller agrees to sell and a buyer agrees to buy under certain conditions stipulated in writing in the document signed by both parties.
In other words, a credit institution is an irrevocable obligation for a bank to make payments to a designated beneficiary (seller) within a specified period of time upon presentation of certain documents strictly in accordance with the terms of that credit. In essence, the use of a term loan allows a seller to replace the creditworthiness of his purchaser with that of a solvent bank, provided the appropriate documents can be provided. A credit of accredited is considered in UCP 6001 as “… any agreement, whatever it is named or described, that is irrevocable and therefore constitutes a firm obligation for the issuing bank to comply with a presentation in accordance with the prescribed documents, provided that they meet on its face the credit conditions that must be determined according to standard international banking practices, as expressed in the UCP issued by the International Chamber of Commerce.