Should Deferred Payment Letters of Credit Be Specifically Treated in a Revision of Article 5
![handle is hein.journals/brklr56 and id is 159 raw text is: SHOULD DEFERRED PAYMENT LETTERS OF
CREDIT BE SPECIFICALLY TREATED IN A
REVISION OF ARTICLE 5?
Gerald T. McLauglin*
The 1983 Revision of the Uniform Customs and Practice for
Documentary Credits (the U.C.P.) recognizes the deferred pay-
ment letter of credit as one of four authorized forms of letters of
credit.1 Despite their recognition in the U.C.P., however, de-
ferred payment letters of credit are not common in the United
States.2
To demystify this form of letter of credit, Part I of this
Article will describe what a deferred payment credit is and the
reasons for its development. Part II will then explain why, de-
spite their recognition in the U.C.P., deferred payment credits
have not been popular with U.S. bank issuers. Although there
are several explanations for this, the most important reason
seems to be the large bankers' acceptance market in the United
States. Part III will suggest that, despite their present unpopu-
larity with U.S. bank issuers, it would be shortsighted not to
deal with deferred payment credits in any future revision of Ar-
ticle 5 of the U.C.C.3
* Associate Dean and Professor, Brooklyn Law School Research for this Article vms
made possible by a grant from Brooklyn Law School
I U.C.P. article 11(a) states [a]ll credits must clearly indicate whether they are
available by sight payment, by deferred payment, by acceptance or by negotiation.
U.C.P. article 10(a) provides in relevant part that:
An irrevocable credit constitutes a definite undertaking of the suing bank,
provided that the stipulated documents are presented and that the terms and
conditions of the credit are complied with.... (ii)... if the credit provides
for deferred payment - to pay, or that payment will be made, on the date(s)
determinable in accordance with the stipulations of the credit ....
See U.C.P. articles 10(b)(ii) and 16(a) with respect to the confirmation of deferred pay-
ment credits. See also OPINIO S OF THE ICC BANKING COCULssION ON QUERiEs RELATING
TO THE UNIFoRM CusToMs AND PRAcICE FOR DocubErNTR CREmr, 1984-1926, at 10
(confusion with respect to the language of U.C.P. article 16(a)).
2 See Eberth & Ellinger, Deferred Payment Credits: A Comparative Analysis of
Their Special Problems, 14 J. OF MAR. L & Com. 387, 390 n.10 (1983).
3 Although they are not specifically mentioned, the present text of article 5 would
seem to cover deferred payment credits - as long as these credits are conspicuously](ViewImageLocal?handle=hein.journals/brklr56&div=18&collection=&method=preview&ext=.png&size=3)
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Should Deferred Payment Letters of Credit Be Specifically Treated in a Revision of Article 5
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