Settlement by letter of credit
When calculating a letter of credit, a bank acting on behalf of a payer to open a letter of credit and in accordance with its instruction (issuing bank), undertakes to make payments to the recipient of funds or pay, accept or take into account a bill of exchange or give authority to another bank (the performing bank) make payments to the recipient of funds or pay, accept or take into account a bill of exchange (para 1, item 1, Article 867 of the Civil Code).
To the issuing bank, making payments to the recipient of funds or paying, accepting or taking into account the bill of exchange, the rules on the performing bank are applied (paragraph 2 of item 1 of Article 867 of the Civil Code).
The peculiarity of the letter of credit form is that, when applied, the funds are not transferred to the beneficiary's account, but are allocated, "reserved" for the production of settlements with the recipient of funds in the future. To determine the conditions for obtaining these (letter of credit terms) , a contract is concluded between the payer and the recipient of the funds, and these conditions are duplicated in the order of the payer to the bank for opening the letter of credit. For the execution of a letter of credit, i. the recipient must submit to the bank that opened the letter of credit or other (executing) bank, documents confirming the fulfillment of all the terms and conditions of the letter of credit (for example, documents confirming the performance of work under a particular contract for which settlement is made in a letter of credit ).
The law provides for the possibility of opening the following types of letters of credit:
• Covered (deposited) and uncovered (guaranteed) letter of credit;
• revocable and irrevocable letter of credit;
• Confirmed letter of credit.
Calculations for collection
When calculating by encashment, the issuing bank undertakes, on behalf of the client, to take action at its expense to receive payment or acceptance of payment from the payer (clause 1, Article 874 of the Civil Code).
In accordance with paragraph 2 of Art. 874 CC to execute the client's order, the issuing bank has the right to attract another bank (the executing bank).
The execution of the collection order consists in the fact that the bank that executes it submits to the payer the documents of the recoverer in the form in which they were received, with the exception of the notes and inscriptions of the banks necessary for processing the collection transaction. Documents submitted by the collector for collection shall comply with the requirements for their content and form as prescribed by law or banking rules. Such documents are checks, bills of exchange, payment claims paid in the order of pre-acceptance, payment order-requests, etc.
Calculations by checks
A check is a security that contains an undelivered instruction of the drawee to the bank to make payment of the amount specified in it to the check holder (item 1 of Article 877 of the Civil Code).
The main participants in the relations for the calculation of checks are the drawer, check holder and payer. The checker is the person who wrote the check; check holder - the person who owns the check; the payer - the bank that makes the payment on the presented check. In addition, the endorser - check holder that transmits the check to another person by means of an endorsement (endorsement), and avalyst - the person who gave the guarantee for payment of the check, executed by the guarantee inscription on it (aval). Only banks or other credit organizations having license to engage in banking activities.
The deadlines for presenting checks for payment are determined by the intra-bank rules for conducting transactions with checks. Revocation of the check before the expiration of the period for its presentation is not allowed (paragraph 3 of Article 877 of the Civil Code).
A checker may issue a warrant, a nominal or bearer's check.
The person who has paid the check has the right to demand the transfer of a check to him with a receipt in receipt of payment.
Some features have transfer of rights by check. So, a nominal check can not be transferred to another person. In a transfer check, an endorsement for the payer has the power of a receipt for receiving a payment (Article 880 of the Civil Code).
The check is submitted to the payment by the check holder by presenting the check to the bank servicing the check holder, for collection (collection of the check). In this case, the check is paid in the general order provided for for execution of the collection order. In the event of a refusal by the payer to pay a check submitted for payment, this circumstance must be certified in one of the following ways:
- the protest of the notary or the drafting of an equivalent act;
- a note of the payer on the check about refusal in its payment with the date of submission of the check for payment;
- a note of the collecting bank with an indication of the date indicating that the check was timely placed and not paid for (paragraph 1 of Article 883 of the Civil Code).
The check holder must notify his endorser and drawer during the two working days, of the protest or equivalent act following the day of the protest.
If the payer refuses to pay the check, the check holder has the right to demand a check payment from all the persons liable for it: the drawee, the avalists, the endorsers, who bear joint responsibility before the check holder (clause 1, article 885 of the Civil Code). The claim of the check holder to the said persons can be brought within six months from the date of expiration of the period of presentation of the check for payment (clause 3 of Article 885 of the Civil Code).
In recent years, electronic payment forms have become increasingly widespread in banking practice, where non-cash settlements are carried out mainly through telecommunications communication systems, and paperwork is minimized .
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