LETTERS OF CREDIT: TEACHING AN INTEGRAL PART OF THE INTERNATIONAL COMPONENT

• Author: MARK S. BLODGETT
• Date: 01 March 1991
• DOI: http://doi.org/10.1111/j.1744-1722.1991.tb00028.x
• Published date: 01 March 1991

LETTERS

OF

CREDIT:

TEACHING AN INTEGRAL PART

OF

THE

INTERNATIONAL COMPONENT

*MARK

S.

BLODGETT

As

instruments of international trade, letters of credit are an integral

part of the international component; however, they are

a

complex area

of the law that students may find elusive and to which textbook authors

may not devote much if any, space.‘ Thus, the purpose of this article

is

to present

a

simple and effective method

of

teaching letters of credit,

a method that makes them an informative and interesting topic of discus-

sion and that recognizes their strategic position within the international

legal and business environment?

This method uses a model letter of

red it.^

Diagram

1

presents the com-

ponents of the model and Diagram

2

presents the fundamental principles

governing

it.

The model

is

then applied to the international legal and

business environment in a series of significant case examples that track

substantive concepts, reveal jurisdictional variety, and confront students

*

Assistant Professor

of

Legal Studies, Georgia Southern University.

A

recent survey reveals

a

paucity of textbook coverage. Whitman,

International

Law

Coverage

in

Business Law

Texts:

Survey

and

Analysis.

6

J.

LEGAL

STUD.

EDUC.

41,

51 (1987).

Perhaps

it

is not hyperbole to state that until very recently business students have

generally had little

or

no exposure

to

letters of credit; however, “to keep the wheels of

commerce rolling, letters

of

credit are absolutely indispensable. Students need to know

how such businesses are assured they will be paid for goods they ship and how buyers

can be sure they will receive the goods for which they paid.”

Id.

The Third Circuit summarizes the purpose and

role

of letters of credit by stating

that they “provide an effective, efficient, and economic means

of

guaranteeing payment

to a seller of goods

or

services.

For

a fee, the issuer, usually a bank, commits itself to pay

a certain sum when the seller, the beneficiary, satisfies the terms and conditions

set

out

in the letter of credit.” Roman Ceramics Gorp.

v.

Peoples National Bank,

517

F.

Supp. 526

(M.D.

Pa. 1981),

aff’d,

714 F.2d 1207, 1216-17 (3d Cir. 1983).