The Letter of Credit Contract is a fundamental instrument in international trade finance, particularly relevant under Swiss law given Switzerland's prominence as a global financial and trading hub. This document is essential when parties seek a secure payment mechanism in cross-border transactions, providing assurance to sellers of receiving payment and to buyers of receiving goods as specified. The contract type is specifically designed to mitigate risks in international trade by having a bank act as an intermediary, guaranteeing payment upon presentation of compliant documents. A Letter of Credit Contract typically includes detailed terms about the credit facility, document requirements, payment conditions, and bank obligations, all structured within the framework of Swiss banking laws and international practices such as UCP 600. It's particularly valuable in situations where parties may not have established trading relationships or when dealing with high-value transactions requiring additional security.
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1. Parties: Identification of all parties involved: Applicant (Buyer), Issuing Bank, Beneficiary (Seller), and any Advising/Confirming Banks
2. Background: Context of the underlying transaction and purpose of the Letter of Credit
3. Definitions: Key terms used throughout the contract, including banking and trade terminology
4. Credit Amount and Currency: Specification of the Letter of Credit amount and currency of payment
5. Type of Credit: Whether irrevocable, confirmed, transferable, revolving, etc.
6. Availability and Expiry: Terms of when and where the credit is available, and its expiry date
7. Required Documents: Detailed list of documents required for presentation
8. Presentation Terms: Conditions and timeframes for document presentation
9. Payment Terms: Specifics of payment execution, including timing and method
10. Bank Charges: Allocation of banking fees and charges between parties
11. Governing Law and Jurisdiction: Specification of Swiss law as governing law and jurisdiction details
12. Notices: Communication procedures between parties
1. Confirmation Instructions: Required when a confirming bank is involved in the transaction
2. Transfer Provisions: Included when the Letter of Credit is transferable
3. Special Conditions: Any particular requirements specific to the transaction or parties
4. Insurance Requirements: Detailed insurance terms when required for specific types of shipments
5. Force Majeure: Provisions for unforeseen circumstances, particularly relevant for international trade
6. Assignment of Proceeds: Included when assignment of proceeds is permitted
7. Back-to-Back Credits: Required when back-to-back credit arrangements are involved
1. Form of Documentary Requirements: Template formats for required shipping documents, invoices, and certificates
2. Fee Schedule: Detailed breakdown of all applicable bank charges and fees
3. Specimen Signatures: Authorized signatures for relevant parties
4. Form of Amendment Request: Standard format for requesting amendments to the Letter of Credit
5. Commercial Invoice Requirements: Specific requirements and format for commercial invoices
6. Transport Document Requirements: Detailed specifications for bills of lading or other transport documents
7. Insurance Document Requirements: Specifications for insurance certificates or policies when required
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