NATURE AND IMPORTANCE  

> A  letter  of  credit  is  a  financial  device  developed  by  merchants  as  a convenient and relatively safe mode of dealing with sales of goods to satisfy the seemingly irreconcilable interests of the seller, who refuses to  part  with  his  goods  before  he  is  paid,  and  a  buyer,  who  wants  to have control of the goods before paying
>  To break the impasse, the buyer may be required to contract a bank to issue  a  letter  of  credit,  the  issuing  bank  can  authorize  the  seller  to raw   drafts   and   engage   to   pay   them   upon   their   presentment simultaneously with the tender of documents required by the letter of credit.    The  buyer  and  seller  agree  on  what  documents  are  to  be presented  for  payment,  but  ordinarily  they  are  documents  of  title evidencing or attesting to the shipment of the goods to the buyer
>  Once  the  letter  of  credit  is  established,  the  seller  ships  the  goods  to the buyer and in the process secures the required shipping documents and  documents  of  title.    To  get  paid,  the  seller  executes a  draft  and presents it together with the required documents to the issuing bank
>  The  issuing  bank  redeems  the  draft  and  pays  cash  to  the  seller  if  it finds  that  the  documents  submitted  by  the  seller  conform  with  what the letter of credit requires.  The bank then obtains possession of the documents upon paying the seller.  The transaction is completed when the  buyer  reimburses  the  issuing  bank  and  acquires  the  documents entitling him to the goods.  The seller gets paid only if he delivers the documents  of  title  over  the  goods  while  the  buyer  acquires  the  said documents  and  control  over  the  goods  only  after  reimbursing  the bank.
 

INDEPENDENCE PRINCIPLE

> What  characterizes  letters  of  credit,  as  distinguished  from  other accessory  contract,  is  the  ENGAGEMENT  OF  THE  ISSUING  BANK  TO PAY  THE  SELLER  ONCE  THE  DRAFT  AND  THE  REQUIRED  SHIPPING DOCUMENTS  ARE  PRESENTED  TO  IT.    In  turn,  this  arrangement ASSURES  THE  SELLER  OF  PROMPT  PAYMENT,  INDEPENDENT  OF  ANY BREACH OF THE MAIN SALES CONTRACT.
 

LAWS GOVERNING A LETTER OF CREDIT TRANSACTION

> Uniform  Customs  and  Practice  for  Documentary  Credits  (UCP)  issued by the International Chamber of Commerce
 

PARTIES TO A LETTER OF CREDIT TRANSACTION

1.    Buyer—procures  the  letter  of  credit  and  obliges  himself  to reimburse the issuing bank upon receipt of the documents of title.  He is the one initiating the operation of the transaction as buyer of the  merchandise  and  also  of  the  credit  instrument.    His  contract with the bank which is to issue the instrument and is represented by  the  Commercial  Credit  Agreement  form  which  he  signs, supported  by  the  mutually  made  promises  contained  in  the agreement
2.    Opening bank—usually the buyer’s bank which issues the letter of credit  and  undertakes  to  pay  the  seller  upon  receipt  of  the  draft and proper documents of titles to surrender the documents to the buyer  upon  reimbursement.    As  it  is  the  one  issuing  the instrument,  it  should  be  a  strong  bank,  well  known  and  well regarded in international trading circles.
3.    Seller—in compliance with the contract of sale, ships the goods to the  buyer  and  delivers  the  documents  of  title  and  draft  to  the issuing bank to recover payment.  He is also the beneficiary of the credit instrument because the instrument is addressed to him and is  in  his  favor.    While  the  bank  cannot  compel  the  seller  to  ship the goods and avail of the benefits of the instruments,  however, the seller may recover from the bank the value of his shipment is made within the terms of the instrument, even though he hasn’t given  the  bank  any  direct  consideration  for  the  bank’s  promises contained in the instrument
4.    Correspondent  bank/advising  bank—to  convey  to  the  seller  the existence  of  the  credit  or  a  confirming  bank  which  will  lend credence to the letter of credit issued by the lesser known issuing bank or paying bank which undertakes to encash the drafts drawn by  the  exporter.    Furthermore,  another  bank  known  as  the negotiating  bank  may  be  approached  by  the  buyer  to  have  the draft discounted instead of going to the place of the issuing bank to claim payment
 

RESPONSIBILITIES OF BANKS IN COMMERCIAL CREDIT TRANSACTIONS

> If  the  beneficiary  is  to  be  advised  by  the  issuing  bank  by  cable,  the services of an ADVISING OR NOTIFYING BANK must always be utilized

> The  responsibility  of  the  NOTIFYING  BANK  is  merely  to  convey  or transmit  to  the  seller  or  beneficiary  the  existence  of  the  credit.  However, if the beneficiary requires that the obligation of  the issuing bank shall also be made the obligation of the bank to himself, there is what  is  known  as  a  CONFIRMED  COMMERCIAL  CREDIT  and  the  bank notifying  the  beneficiary  of  the  credit  shall  become  a  CONFIRMING BANK.  In this case, the liability of the confirming bank is primary and it is as  if the credit were issued by the issuing and confirming banks jointly, thus giving the beneficiary or a holder for value of drafts drawn under the credit, the right to proceed against either or both banks, the moment the credit instrument has been breached.  

> The  paying  bank  on  which  the  drafts  are  to  be  drawn  it  may  be  the issuing  bank  or  the  advising  bank.    If  the beneficiary  is  to  draw  and receive  payment  in  his  own  currency,  the  advising  bank  may  be indicated as the paying bank also.  When the draft is to be paid in this manner,  the  paying  bank  assumes  no  responsibility  but  merely  pays the  beneficiary  and  debits  the  payment  immediately  to  the  account which  the  issuing  bank  has  with  it.    IF  THE  ISSUING  BANK  HAS  NO ACCOUNT WITH THE PAYING BANK, the paying bank reimburses itself by drawing a bill of exchange on the issuing bank, in dollars, for the equivalent of the local currency paid to the beneficiary, at the buyeing rate  for  dollar  exchange.    The  beneficiary  is  entirely  out  of  the transaction because his draft is completely discharged by the payment, and the credit arrangement between the paying bank and issuing bank
doesn’t concern him.
> If the draft contemplated by the credit instrument, is to be drawn on the  issuing  bank  or  on  other  designated  banks  not  in  the  city  of  the seller,  any  bank  in  the  city  of  the  seller  which  buys  or  discounts  the draft  of  the  beneficiary  becomes  a  negotiating  bank.    As  a  rule, whenever, the facilities of an advising or notifying bank are used, the beneficiary  is  apt  to  offer  his  drafts  to  the  advising  bank  for negotiation,   thus   giving   the   advising   bank   the   character   of   a negotiating  bank  becomes  an  endorser  and  bona  fide  holder  of  the drafts  and  within  the  protection  of  the  credit  instrument.    It  is  also protected  by  the  drawer’s  signature,  as  the  drawer’s  contingent
liability, as drawer, continues until discharged by the actual payment of the bills of exchange.  
 

LIABILITY IN COMMERCIAL CREDIT TRANSACTIONS

> A commercial bank which departs from what has been stipulated under the letter of credit, as when it accepts a faulty tender, acts on its own risk,  and  it  may  not  thereafter  be  able  to  recover  from  the  buyer  or issuing  bank,  as  the  case  may  be,  the  money  thus  paid  to  the beneficiary
> In the case of a discounting arrangement, wherein a negotiating bank pays the draft of a beneficiary of a letter of credit in order to save such beneficiary from the hardship of presenting the documents directly to the  issuing  bank,  the  negotiating  bank  can  seek  reimbursement  of what  has  been  paid  to  the  beneficiary  who  as  drawer  of  the  draft continues  to  assume  a  contingent  liability  thereon.    Thus,  the negotiating bank has the ordinary right of recourse against the seller or beneficiary in the event of dishonor by the issuing bank. 

PROTOTYPE EXPORT TRANSACTION

1.    PROFORMA   INVOICE—all   the   particulars   for   the   proposed shipment which are then known to the buyer

2.    PRICE QUOTATION FAS AND CIF—FAS stands for “free along side” which  means  that  the  seller  will  be  responsible  for  the  cost  and risks  of  the  goods  “along  side”  an  overseas  vessel  at  the  stated location: the buyer bears the costs and risks from that point.  CIF on  the  other  hand  means  “cost,  freight  and  insurance”,  that  in exchange  for  this  stated  price,  the  seller  undertakes  not  only  to supply  the  goods  but  also  to  obtain  and  pay  for  insurance  and bear the freight charges to the stated pointy.

3.    BUYER’S PURCHASE ORDER

4.    LETTER OF CREDIT
a.    One way for a seller to be assured of payment is to ship goods under a negotiable bill of lading and arrange for a bank  in  buyer’s  city  to  hold  the  bill  of  lading  until  the buyer  pays  the  draft  in  the  usual  foreign  sale  this arrangement  for  securing  payment  of  the  price  is  not adequate
b.    In  some  situations,  sellers  may  need  assurance  of payment even before the time of payment.  This problem arises  in  contracts  which  call  for  the  manufacture  of goods to the buyer’s specifications.
c.     Although the proforma invoice may not specify, the seller will  expect  the  letter  of  credit  to  be  confirmed  by  the local  bank  in  its  location.    But  why  does  a  local  bank confirm  rather  than  issue  a  letter  of  credit?    The  bank that issues the letter of credit needs assurance that it will be reimbursed by the buyer, on whose behalf it pays the seller.    The  buyer’s  bank  can  take  steps  to  minimize  or
remove the hazards.  It will receive the negotiable bill of lading  controlling  the  goods  which  will  provide  security for  the  customer’s  obligation  to  reimburse  the  bank;  in addition, the buyer’s own bank can  judge in the light of its  knowledge  of  his  financial  standing  whether  added security is needed and can insist on such security before it issues the letter of credit
d.    To  meet  the  seller’s  letter  of  credit  requirements,  the buyer will request its bank to arrange for the issuance of a letter of credit which will comply with the terms of the proforma  invoice.    The  buyer  will  then  sign  a  detailed application    and    agreement    for    commercial    credit prepared by the bank.  The issuing bank, after approving the buyer’s credit standing transmits a letter of credit by cable  to  the  confirming  bank.   This  confirming  bank  will then deliver to seller a document advising the latter that the issuing bank opened a letter of credit in its favor and adding  the  confirming  bank’s  confirmation.    In  this arrangement, the seller is assured of payment of its sight drafts drawn on the confirming bank in the amount of the total  amount  of  the  sale,  provided  it  presents  the documents   called   for   in   the   letter   of   credit.      An examination of the letter of credit will also reveal that the bill of lading is to be consigned to the order of the buyer’s bank,  thereby  giving  the  bank  control  over  the  goods, with  the  consequent  security  for  its  claim  against  the buyer.

5.    ACCEPTANE; SHIPMENT
a.    On the receipt of the confirmed letter of credit, the seller will send the order acknowledgment.  This document will repeat  the description  and  price  of  the  goods  which  has also  appeared  on  the  proforma  invoice  and  states  the number and expiration date of the letter of credit.  
b.    Further, the arrival of the letter of credit is the go-signal for the seller to send the goods.  The seller then prepares the  COMMERCIAL  INVOICE  which  provides  a  complete record  of  the  transaction  and  is  an  important  source  of information   to   such   interested   parties   as   a   bank discounting   a   draft   or   an   underwriting   extending issuance.
c.     As  the  time  of  shipment  approaches,  the  seller  will contact its forwarder and give its shipping instructions.  It will  inform  that  to  comply  with  the  requirements  of  the letter  of  credit,  the  bill  of  lading  must  be  made  to  the order of the issuing bank.  It will also send copies of the commercial invoice, a packing list, and a Shipper’s export declaration.      When   the   forwarder   receives   these documents,  he  takes  over  all  further  documentation  as the  agent  of  the  shipper,  the  latter  merely  has  to dispatch  the  goods  from  the  factory  in  accordance  with the forwarder’s instructions.
d.    The seller will then send the truck to the pier where they are  delivered  to  the  ocean  carrier’s  receiving  clerk  who signs  the  dock  receipt.    The  dock  receipt  is  a  form supplied by the ocean carrier which contains information relevant  to  the  shipping  of  the  bearings  such  as  the number of the pier, and the name of the ship. The dock  receipt  is  NON-NEGOTIABLE  and  serves  as  a  temporary receipt for the goods until they are loaded on board.
e.    The  ocean  carrier  is  soon  ready  to  receive  the  cargo.  When the goods are loaded on board, the steamship line issues a bill of lading which, to comply with the letter of credit, is CONSIGNED TO ORDER OF THE ISSUING BANK.  The bill of lading is initially prepared by the forwarder on a  form  supplied  by  the  ocean  carrier,  it  sets  forth  the markings  and  numbers  of  the  packages,  description  of the goods, and the number and weight of the packages.  On its dorsal side, it will state that the goods are received for  shipment,  but  a  statement  FREIGHT  PREPAID  ON BOARD  is  initiated  by  a  representative  of  the  steamship line after loading.  The forwarder then delivers the bill of lading and the commercial invoice to the seller.

6.    INSURANCE

7.    PAYMENT; THE DRAFT.
a.    The  confirming  bank  stated  in  their  letter  that  the estimated CIF price would be “available by your drafts on us at sight” when accompanied by the listed documents

b.    Seller  accordingly  draws  a  sight  draft  on  the  confirming bank.    The  sight  draft  together  with  the  commercial invoice,  insurance  certificate,  full  set  of  bills  of  lading, and  the  packing  list  are  presented  to  the  confirming bank.    When  the  bank  receives  these  documents,  it issues  its  bank  draft  to  seller’s  order  and  transmits  the documents  by  air  mail  to  issuing  bank,  which  will
reimburse the confirming bank.
c.     The  documents,  sent  by  airmail,  will  reach  the  buyer’s bank  well  ahead  of  the  ocean  shipment.    The  time  for release of the documents to buyer and reimbursement to the  bank  will  depend  upon  the  arrangement  which  was made  between  the  bank  and  buyer  when  the  letter  of
credit was initially established.
d.    If the buyer plans to resell the goods, he may not be able to  reimburse  the  bank  until  the  goods  arrive  and  he resells  the  goods.    In  this  event,  the  issuing  bank  may need to take further steps to secure its claim against the buyer.  

STANDBY LETTERS OF CREDIT OR GUARANTEES

HISTORY AND PURPOSE

> Sometime  ago,  it  is  common  in  international  dealings  to  require  the furnishing  of  a  cash  deposit  as  security,  but  with  the  expansion  of international   trade   this   became   prohibitively   expensive   for   the counterparty  and  in  due  course  gave  way  to  a  more  convenient safeguard, the provision of a written undertaking by a bank in favor of the buyer or employer payable on demand
> Demand guarantees as substitute for cash are designed to provide the beneficiary  with  a  speedy  monetary  remedy  against  the  counterparty to  the  underlying  contract  and  to  that  end  are  primary  in  form  and documentary in character.
> The   demand   guarantee   is   expressed   to   be   payable   solely   on presentation of a written demand and any other specified documents.  Accordingly, any demand within the maximum amount stated must in principle be paid by the guarantor, regardless whether the underlying contract  has  in  fact  been  broken  and  regardless  of  the  loss  actually suffered by the beneficiary
 

A CONCISE DEFINITION: DEMAND GUARANTEES

> Undertaking given for payment of a stated or maximum sum of money on  presentation  to  the  party  giving  the  undertaking  of  a  demand  or payment  and  such  other  documents  as  may  be  specified  in  the guarantee   within   the   period   and   in   conformity   with   the   other conditions of the guarantee
> Procured by the seller in favor of the buyer for the latter to be paid in case the seller doesn’t comply with contract provisions.  The economic burder is upon the party who breaches the contract
 

> Employed   typically   in   construction   contracts   and   contracts   for international sale of goods

> Demand guarantees are intended to safeguard the other party against non-performance  or  late  or  defective  performance  by  the  supplier  or contractor
 

GUARANTEE   STRUCTURES   AND   TERMINOLOGY:   DIRECT   (3RD   PARTY) GUARANTEES

> Involves a minimum of three parties
1.    Account  party/principal—party  to  the  underlying  contract whose   performance   is   required   to   be   covered   by   the guarantee and who gives instruction for its
2.    Issuer/guarantor—the   bank   or   other   party   issuing   the guarantee on behalf of the customer the principal
3.    The beneficiary—the other party to the underlying contract, in whose favor the guarantee is issued
> Usually  the  guarantee  in  the  3-party  structure  is  the  principal’s  bank and carries on business in the same country as the principal, whilst the beneficiary carries on business in a foreign country
> Known as direct guarantees because the guarantee is issued to directly by  the  principal’s  bank,  not  by  the  local  bank  in  the  beneficiary’s country 

PRINCIPAL TYPES OF DEMAND GUARANTEES

1.    Tender or bid guarantee
a.    Where  tenders  are  invited  it  is  often  a  condition  of consideration of the tender that the tenderer undertakes to sign the contract if its awarded to him, to procure the issue of any performance or other guarantee required by the guarantee and not to modify or withdraw his tender in the meantime
b.    Purpose—safeguard  the  beneficiary  against  breach  of such an undertaking
c.     If the tenderer is successful and fails to sign the contract and   to   furnish   the   requisite   performance   or   other guarantee, or withdraws his tender before its expiry, the beneficiary can call upon the guarantor to pay a specified sum  designed  to  compensate  him  for  the  trouble  and
expense  he  suffered  in  reawarding  the  contract,  as  well as any additional cost of the contract

2.    Performance guarantee
a.    Guarantee  of  the  central  performance  of  the  contract from commencement to completion
b.    Given for a specified percentage of the contract sum
c.     But  there  are  stages  in  the  relationship  between  the parties    which    precede    and    follow    the    central performance,  and  there  may  be  distinct  segments  of liability to be covered within that performance

3.    Advance payment or repayment guarantee
a.    Underlying contract may entitle the principal to payment of stated sums in advance of performance
b.    The  advance  payment  guarantee  is  designed  to  secure the beneficiary’s right to repayment of the advance if the performance to which it relates is not furnished
4.    Retention guarantee
a.    Construction    contracts    usually    provide    for    stage payments against architect’s or engineer’s certificate and for a specified percentage of the amount certified in each certificate to be retained by the employer for a specified period of time as safeguard against defects
b.    The  employer  may  be  willing  to  release  such  retention moneys    against    a    retention    guarantee    securing repayment  of  the  released  retention  moneys  if  defects are later found or  if the contractor fails to complete the contract
5.    Maintenance or warranty guarantee
a.    Construction contracts usually provide that on completion part  of  the  retention  moneys  are  to  be  retained  for  a  specified  period  to  cover  the  cost  of  any  defects  or malfunction which become manifest during that period 
 

GUARANTEES NOT GUARANTEED BY UNDERLYING CONTRACT

> Not all guarantees are meant to be in favor of a party in the underlying contract
> For example are customs guarantees which are issued to the customs to  cover  any  duty  that  may  become  payable  when  imported  goods which would be exempt from duty if reexported within a specified time are not in fact reexported within that time
 

THE LEGAL NATURE OF A DEMAND GUARANTEE

> A  demand  guarantee  is  an  abstract  payment  undertaking  that  is,  a promise   of   payment   which,   though   intended   to   preserve   the beneficiary  from  loss  in  connection  with  the  underlying  transaction  is detached   from   the   underlying   contract   between   principal   and beneficiary  and  is  in  form  a  primary  undertaking  between  the guarantor and beneficiary which becomes binding solely by virtue of its issue
> A  secondary  guarantee  is  both  secondary  in  form  and  intent.    The intention of the parties is that the guarantor will be called upon to pay only  if  the  principal  defaults  in  performance,  and  then  only  to  the extent of the principal’s liability and subject to any defenses available to the principal
> A documentary credit is both primary in intent and form.  The parties to the underlying contract intend that the bank issuing the credit is a to  be  the  first  port  of  call  for  payment,  and  this  is  the  effect  of  the agreement  between  them.    Whereas  in  the  case  of  a  suretyship guarantee,  the  beneficiary  cannot  look  to  the  guarantor  without establishing  default  by  the  principal,  the  reverse  is  true  of  the documentary  credit.    The  parties  have  designated  payment  by  the bank as the primary payment method and only if it fails without fault on the part of the beneficiary is entitled to > DEMAND    GUARANTEE    STANDS    BETWEEN    THE    SURETYSHIP GUARANTEE   AND   THE   DOCUMENTARY   CREDIT—SECONDARY   IN INTENT  AND  PRIMARY  IN  FORM.    Performance  is  due  in  the  first instance  from  the  principal,  and  the  guarantee  is  intended  to  be resorted to only if the principal has failed to perform.  But though this is the intent of the parties, the guarantee isn’t in form linked to default under   the   underlying   contract,   nor   there   is   any   question   of performance  to  hold  the  beneficiary  harmless  up  to  the  agreed maximum; and the sole condition of the guarantors payment liability is the  presentation  of  a  demand  and  other  documents  specified  in  the guarantee in the manner of and within the period of the guarantee

>  THE   GUARANTOR   HAS   NO   CONCERN   WITH   THE   UNDERLYING CONTRACT AND IF DEMAND IS DULY PRESENTED, PAYMENT MUST BE MADE   DESPITE   ALLEGATIONS   BY   THE   PRINCIPAL   HAS   FULLY PERFORMED  THE  CONTRACT—IN  THE  ABSENCE  OF  ESTABLISHED FRAUD   OR   OTHER   EVENT   CONSTITUTING   GROUND   FOR   NON-PAYMENT
 

STANDBY LETTERS OF CREDIT

> Undertaking primary in form but intended to be used only as a fallback in the event of default by the principal under the underlying contract

> Standby credit in legal perspective is simply another term for demand guarantees
> The standby credit has developed into an all-purpose financial support instrument  embracing  a  much  wider  range  of  uses  than  the  normal demand  guarantee.    Thus,  standby  credits  are  used  to  support financial  and  non-financial  obligations  of  the  principal  and  to  provide credit enhancement for the primary financial undertaking
 

KEY ELEMENTS IN A DEMAND GUARANTEE

1.    The parties
2.    A reference to the underlying contract
3.    The  amount  or  maximum  amount  of  the  guarantee  and  any agreement for reduction or increase
4.    The currency of payment
5.    The  documents,  if  any,  to  be  presented  for  the  purpose  of  a demand or of reduction or expiry
6.    The  expiry  date  or  other  expiry  provisions  as  well  as  any agreement for extension
> Where  it  is  intended  that  the  guarantee  shall  not  commence  until presentation of a particular document, this fact should be specified
> Direct  guarantee:  principal,  guarantor,  and  beneficiary  should  be identified
> Indirect   guarantee:   principal,   instructing   party,   beneficiary,   and counter-guarantee
> Central  to  the  demand  guarantee  is  its  documentary  character:  the rights and obligations it creates are to be determined solely from the terms   of   the   guarantee   and   from   any   document   presented   in accordance with the guarantee, without the need to ascertain external facts
 

DISTINCT NATURE OF CONTRACTUAL RELATIONSHIPS

> Guarantor’s  commitment  to  the  beneficiary  arises  solely  by  virtue  of the issue of the guarantee and his duty to pay is conditioned only on presentation  of  demand  and  other  specified  documents  in  conformity with the terms and within the duration of the guarantee
> Principal is not concerned with the contract between the guarantor and beneficiary
> Beneficiary has no concern with the contract between the principal and guarantor
> The relationship of principal and guarantor has an internal mandate—the  guarantor  is  obliged  to  act  in  accordance  with  the  terms  of  the contract,  failing  which  he  may  forfeit  his  right  to  reimbursement  but those  terms  are  of  no  concern  to  the  beneficiary,  whose  right  to payment depends solely on his acting on conformity with the terms of the guarantee
> In  indirect  contracts,  there  is  an  additional  mandate  which  has  2 facets—the mandate from the instructing party to the guarantor as to the  issue  of  the  guarantee,  which  the  guarantor  as  mandatory  must comply  with  if  he  accepts  the  instruction;  and  two,  the  counter-guarantee which the guarantor exacts from the instructing party as a precondition of issuing the guarantee and which is  separate from the mandate
1.    Abstract   character   of   the   payment   undertaking—binding solely  by  virtue  of  issue  of  the  guarantee,  subject  to  the beneficiary not rejecting it
2.    Independence   of   the   guarantee   from   the   underlying transaction
> Guarantee  is  separate  from  that  contract  and  the rights  and  obligations  created  by  the  guarantee  are independent  of  those  arising  under  the  underlying contract
> In   the   absence   of   established   fraud   by   the beneficiary,  the  guarantor  is  not  entitled  to  refuse payment  and  the  principal  is  not  entitled  to  have payment  restrained  merely  because  of  a  dispute between the principal and beneficiary
3.    Independence  of  the  guarantee  from  the  principal-guarantor relationship—the  guarantee  is  separate  from  the  contract between  the  principal  and  the  guarantor  is  not  entitled  to invoke a breach of that contract
4.    Documentary character of guarantee—amount and duration of the duty to pay, the conditions of payment and termination of payment  obligation  depend  solely  on  the  terms  of  the guarantee itself and presentation of required documents
5.    Requirement of compliance of the demand with the terms  of the guarantee
6.    Guarantor’s  duty  of  examination  limited  to  apparent  good order of the document
7.    Guarantor’s  duty  limited  the  exercise  of  good  faith  and reasonable care
8.    Independence of counter-guarantee from guarantee
9.    Independence  of  counter-guarantee  from  mandate  received from instructing party