European Government and Politics Essay

The three forms of government that will be examined in this paper include broadly, the Parliamentary system and the Presidential systems existing in Britain, France and Germany. Any comparative study of governing institutions involves an understanding of the governing institutions prevailing in different countries. All governmental institutions comprise a Legislature, an Executive and a Judiciary. Differences between governmental institutions primarily lie in how these three organs of government are related to each other and the extent of their functions. Traditionally, Britain consists of a parliamentary form of government. A parliamentary government is one where the most important and powerful office belongs to the prime minister. In this form of government, the legislature and the executive arms of the government are closely related, with the executive being involved in the working of the legislature and the executive being formed out of the legislature. In Britain, the legislature comprises the two houses of government, that is, the House of Lords (the upper house) and the House of Commons (the lower house). The House of Lords is a non-elective body and consists of both hereditary and life members who are called ‘Peers’. The strength of the House of Lords is over 900 members and a quorum of 30 members is the minimum for conducting proceedings in the House. The House of Commons comprises the elected representatives of the country. Since Britain has a bi-party system, members of the legislature mainly come from the two major parties, namely, the Labour and the Conservative. Elections for forming the government are held every five years and the party that secures a majority of votes polled forms the government with the leader of the party assuming the post of prime minister. It falls upon the prime minister to form the executive and he appoints his ministers and Cabinet members with the approval of the British Monarch. While the monarch and the prime minister together form the executive in Britain, the monarch is the constitutional head of the government and his powers are mostly ceremonial. It is the prime minister who is the real head of the government. However, there is a close collaboration between the prime minister and the monarch with the prime minister having to meet with the monarch and discuss matters relating to the running of the government. The House of Commons is more powerful than the House of Lords and money bills can be initiated only in the House of Commons, thus the lower chamber of parliament controls the purse of the government. The judiciary is the third organ of government. In the United Kingdom, there is no single judicial system and the judiciary of Britain consists of the judiciary of England and Wales. The House of Lords is the highest court of appeals both in civil and criminal cases. Since Britain does not have a written constitution, there is an absence of the system of ‘judicial review’ which enables the judiciary to act as the interpreter and guardian of the constitution. The courts in England therefore cannot decide on the merit of any law passed by the parliament. An important feature of the judicial system in Britain is ‘rule of law’ which implies that every person is governed by the same law, punishment is meted out only if a breach of law has been committed and the law protects the freedom and rights of the person. The British courts use three types of laws – the Cannon law, the Statutory law and the law of Equity. The judiciary functions on the basis of a jury system and open trial. Germany : In Germany, which is a Federal Parliamentary Democratic Republic, the parliamentary system of government prevails. In contrast to the two forms of governmental systems discussed above, Germany has a multi-party system unlike Britain and similar to that existing in France. In other words, while the political system in Britain is dominated by two major parties, in Germany there are several parties that contest elections. Among these the two main parties are the Socialist Democratic Party and the Christian Democratic Union. The other parties such as the Alliance 90 or the Greens, the Free Democratic Party and Delinke support the SPD or the CDU. Another important characteristic is that in Germany, coalition politics has dominated and the SDP and CDU, despite being dominant, have failed to secure a complete majority in the elections. Therefore the other parties have systematically supported either the SDP or the CDU in forming the government. The constitutional framework adopted in 1949 known as the Grundgesetz, or the basic law, has been in effect even after 1990. The executive in Germany is comprised of the Chancellor who is equivalent to a prime minister and holds office for a period of four years and the President who holds office for a period of five years. The Chancellor is the head of the government while the President is the head of the state. Like a parliamentary system, the executive functions in close collaboration with the legislature. The legislature in germany consists of the Federal Diet or the Bundestag and the Federal Council or the Bundesrat. The Bundestag is a directly elected body through the system of proportional representation. The Bundesrat consists of the representatives of the 16 federal states who are also members of the state Cabinet. The Bundestag has the power to remove the Chancellor by passing a motion of no-confidence. The judiciary in Germany is independent of both the executive and the legislature and follows the concept of Judicial Review. Almost all state actions are therefore subject to interpretation by the courts. In Germany, a complex and hierarchical system of appeals exists with separate branches dealing with administrative, taxation, labour and security aspects. In addition, there exists a Constitutional Court which handles violation of constitutional rights after the regular appeals system has been exhausted. France : Arguably, France is the seat of modern democracy following the French Revolutions of 1789. Like Germany, politics in France in its present form is of recent origin from 1958 to the Fifth Republic. While the government in Britain and Germany is Prime Ministerial, the French government is semi-Presidential. In effect the executive arm of the government consists of two heads of government where the President is the head of state and the Prime Minister is head of government. On the other hand, unlike in Britain and very much similar to Germany, France has a pluralist and multi-party system of politics. The French Presidency is the oldest in Europe. France has had five Republics and the powers and functions of the President has varied in these five Republics. Parliamentary system of government was in order in the Third and Fourth Republics which made the presidential office a nominal one, where as in the Fifth Republic, the President has been vested with more powers. Thus, although there exist two heads of government, the President is more powerful in comparison to the prime minister unlike in a parliamentary system. In addition, where as previously the Presidential tenure was seven years,, it has been cut down to five years. The prime minister is the leader of the majority party or coalition and can be appointed by the president indefinitely. He has no fixed tenure. The prime minister forms and heads the Council of Ministers whose sessions, in turn are chaired by the president. The legislature consists of the National Assembly which is the lower house and represents single-member constituencies and the Senate which is the upper house and represents mainland France and its 13 overseas territories. The lower house is in charge of conducting the daily proceedings of the government while the Senate looks after constitutional and foreign matters. The judiciary in France is composed of a two-tier system, one relating to the judicial branch dealing with civil and criminal law and the other relating to the administrative branch. France has a written constitution and therefore laws can only be interpreted by the judiciary in accordance with the process of judicial review. The Cour de Cassation is the highest court of appeals which is headed by six chief judges appointed by the president. All judicial appointments to the Supreme Court are appointments for life and all former French presidents are de jure members of the Constitutional Court. In conclusion, it can be said that the merits of the presidential system involving a fixed tenure and separation of powers and more important than a parliamentary system. Similarly, a multi-party system offers more representation and accountability than a bi-party system. Refernces Curtis, Michael & Ammendola, Guiseppe. (2002) Western European Government and Politics. Longman.

Oration Piece Essay

When I am neither man nor child†¦my voice falls from high C to B flat minor and every pimple tries to find its resting place on my face. I am sensitive to criticism, fear often change my mood. My nights are spent thinking so many things, school works, unrequited love and how to pursue the pleasures of youth without reprimanded. Every time I imply â€Å"I WANT TO BE FREE TO DO WHAT I WISH† thing, a long sermon is being delivered to a statement that rings to my ears â€Å"FREE IS BEING RESPONSIBLE FOR ONESELF â€Å". All teens go to school and have normal teenager lives experiencing what I have also experienced which I have mentioned lately. Being a scout does not spoil the education and life of teenagers, instead it guides them to become a good citizen. Scouting emphasizes the value of learning and tries to instill in youth the thirst for knowledge. The goals are the same – to help us learn and grow so that we will become productive, engaged members of the community and provide opportunities to reach our full potential. Scouting Is a Partner in Education. Some say that men who were Scouts five or more years are more likely to graduate from high school and graduate from college. They are also more likely to assume leadership roles at school, think of others, make honest decisions, and appreciate the education they are getting and the environment in which they live. Scouting teaches citizenship, compassion, cooperation, courage, faith, honesty, perseverance, resourcefulness, respect, and responsibility. In addition, Scouting activities help boost a child’s self-esteem and self-image, and give them a generally more positive attitude about themselves and others. All of these traits make us more receptive to learning and enhance our academic performance. Scouting also prepares youth to work and care for the larger community through providing community service. Through these activities we learn that we are a contributing part of society and build a sense of pride in their community and themselves. We also learn that the community sees us as a valuable resource and that the community values us. Thus, scouting not only influences our academic performance but also our lives as citizen, as a part of the community. Being a scout makes us free and at the same time responsible after all.

Critical Reasoning

Critical Reasoning Assignment I (Exercise 2) 1. Sappho- The type or style of writing that Sappho used in â€Å"To Absent Lovers’† was poetry. This literary work was very familiar to me and was fairly easy to comprehend. The basic subject matter of this story was about two people that seemed to be in love with one another that eventually had to separate in the end. Ban Zhao- In the passage â€Å"Admonitions For Women,† it basically tells us about the way of the woman in ancient medieval China. This was a very informative outlook on the way the women were viewed and treated in China. It is a very recognizable literary work, but it is different from anything I have read. The way the modern woman is viewed today in the U. S. is very different than the way they were viewed in China. They were pretty much expected to do their part and do whatever the men needed done. If a woman was to mess up, they were expected to confess and admit it. If they did something good, they were expected not to mention it. Lady Murasaki- The type or style of â€Å"The Tale of Genji† was mainly romance. I have never seen a literary work that was quite like this. To me, it was hard to understand and comprehend. It did, however, give a good deal of information about the outlook on romance in Japanese cultures. Anna Comnena- The style of writing in the passage â€Å"The Alexiad† was basically just describing different people. It went in to great detail of describing every little thing about each person. Marie de France- I honestly did not understand this passage very well. For some reason it was harder to understand than the others. It obviously was a romantic story but I didn’t get it. 2. After reading the five passages, I found some similarities and some differences in the writers and their work. I found that three of the five passages were about romance. This tells me that these passages were obviously written in a romantic time in history. I think Ban Zhao tended to be more different from any of the other writers. In the passage she wrote, â€Å"Admonitions For Women,† she basically described the role of the woman in the ancient medieval China rather than romance. 3. In my opinion, I think there certainly is a uniquely feminine perspective. The reason for this is most of the time women have a different point of view or mind-set than men. Women tend to view things differently than men and that is just a natural trait. For example, something that means nothing to a man could mean the world to a woman. After reading â€Å"A Night’s Tale,† I think the tone is slightly different. I don’t think anyone could draw a conclusion to this simply because there are so many opinions and you couldn’t base your opinions on one passage. . The passage I enjoyed the most was â€Å"Admonitions For Women† by Ban Zhao. Something that really appealed to me in this passage was the way she elaborated on how the women of China used to be treated. It gave me a great sense of visualization and allowed me to really see what women had to go through. It also showed me how much different the role of the woman in China was rather than in the U. S. The reason I preferred reading this passage rather than the others was it was easier for me to read and it was very interesting in every aspect.

Minerals Essay Example | Topics and Well Written Essays - 500 words

Minerals - Essay Example Crespo et al., (2004) reported that disseminated graphite only occurred in metamorphic rocks of the La Umbria series and Fuente del Oro in the â€Å"Aracena Metamorphic Belt†. The deposits of graphite are weathered at 50 to 65 feet in depth. Coherence between graphite and other minerals is lessened due to weathering. Subsurface mining needs the cutting of multiple shafts to access the graphite deposits. Sometimes, tunneling equipments are used to remove the rock. Both, crystalline, and flake Graphite are graded as per carbon contents, and size of particles. Graphite with a high purity is only achieved through heating in the electric furnaces. Ash chemistry and likely applications are applied to grade the Flake carbon (80-99%), crystalline graphite (90-99%) and amorphous carbon (70-85%). Graphite’s purity is determined on the basis of Carbon contents and size of particles while amorphous Graphite is classified only on the basis of the carbon contents. Both, synthetic and natural graphite are heated up to 2500 °C that produces the graphite of a high purity 99.9%. Silicon and Boron are used as promoter elements for the graphite structure. Introduction of these elements enhances the consistency, conductivity and lubricant properties of the graphite (Crossely, 2000). Usually two techniques named as open pit mining and underground mining are used for graphite mining. Open pit mining is the method for the extraction of rocks from the open pits. This technique is useful when graphite ore lies close to the surface of the earth. On the other hand, underground mining involves the mining of graphite placed at the depth under the surface of the earth. Drift mining, slope mining, shaft mining and hard rock mining are the important methods for the underground mining (Crusher in China, 2012). Mining process of Graphite requires the power operations at the mining locations. The construction, decommissioning and operations

Public Relations Issue Tracking on Current Event Topic Essay

Public Relations Issue Tracking on Current Event Topic - Essay Example The first nominee of President Bush for this post was Harriet Myers, White House counsel and this led to charges of cronyism. Her confirmation process in the Senate ran into rough weather with some of the supporters of President Bush backing off. In this scenario Harriet Myers was forced to withdraw and despite the claims from the White House it was a clear sign of retreat. (Miers withdraws Supreme Court nomination). President Bush has now nominated Samuel Alito, a conservative jurist functioning at the Philadelphia based Third U.S. Circuit Court of Appeals, for the post of Supreme Court Justice. (Alex, L. (2005). Nominee). This nomination is going to face a tough time too at the confirmation process in the Senate, as the Democrats having tasted blood once are going to try again. (Zuckman, J. (2005). Democrats signal Alito faces rockier confirmation process). The Role of Public Relations: The focus of the attack from the Democrats will be on the Samuel Alito’s views on religion and more so on abortion. (Alex, L. (2005). Alito battle will focus on abortion and religion). The other area of likely attack is in civil rights. (Kirkpatrick, D.D. (2005). White House Says Alito Was Assuring on Districting). Religion, abortion and civil rights are three important areas of public opinion and it is clear that the opposition intends using public relations to raise public opinion to defeat the nomination process of Samuel Alito in the Senate. In addition the opposition is also likely to turn public opinion against this nomination.

History and Evolution of the Women's Army Auxiliary Corp Research Paper

History and Evolution of the Women's Army Auxiliary Corp - Research Paper Example Nevertheless, they worked so hard that they were seen to be more hardworking and determined than men and had proved to be more organized than them as well. Following is the account of how their journey began and came to an end. History and Evolution of the Women's Army Auxiliary Corp In the year 1942, around 800 females had joined the WAAC ad began their elementary training in Iowa where they were properly equipped with arms and ammunition, given uniforms to wear and were assigned proper duties to be performed during the war. For the purpose of defining their goals and objectives, a manual was established which identified what they were supposed to achieve in clear words (Permeswaran & Yashila, 2008). The manual said that they had to replace men and be with them on equal terms. In those times however, it was a very critical move because women were not encouraged to come to terms with men on an equality basis, and men felt devalued seeing females standing with them involved in a furio us physical activity like war. Moreover, women had not participated in war previously on ground level. The only females to participate in war before this were nurses. Even though there was a lot of criticism on the women for being part of WAAC, there was a necessity arising in this regard due to the number of men decreasing because of the War. There were around 150,000 women who took part in the world war. They were also believed to be better than men in terms of being more organized, well-disciplined and hardworking. Even in an appalling situation where women were not given overseas pay or any other benefits like life insurance or medical coverage, their passion was enough of an evidence to prove their worth which they successfully did even after facing difficulties of initially getting the bill passed for females to participate in the World War as part of WAAC. It had become very difficult for people to accept women in this new role because most people believed that it was not the kind of job women were supposed to do. Opposing parties questioned that if women started to serve in the army then who would be responsible for the house work and that females were not smart enough to be part of the army, they were likely to make mistakes and have the tendency to act carelessly. The day the bill was passed officially, Oveta Culp Hobby was chosen as the Director of WAAC.She proved to be a very determined and hardworking lady and had proved all assumptions about WAAC wrong. According to her, women were there in the army to assist them in winning war and their roles would not exactly switch or become different from what they are in civilian life. She just believed it would help men in achieving success. In the year 1917, it was decided that women will play a role in the British Army as for being sent to France and Haig who was the then commander in chief wrote to the war office that women will be permitted to fight in the war in France and their services will be utili zed wherever appropriate. However, the kind of work they were supposed to do at that time was much more related to household than to anything else because physical labor was not what they ought to do after all. Selection in WAAC required two references and interview

Grief Assignment Example | Topics and Well Written Essays - 500 words

Grief - Assignment Example The struggles to search for him were characterized by sleepless nights and huge expenditures as we all offered ourselves to ensure his survival. K.L was the most supportive member of the family who all of us admired. He was humble, honest, and charming; this made us love him the most. When he went missing and finally died in unknown circumstances, we were hurt more than if it was someone else. The saying by Lewis revived my pain and grief. I now feel as if the sorrowful events that I experienced during the period of lose have just recurred. After reading the saying, I tried to compare what I feel when people in the neighborhood die and what I felt for K.L.; there is a big difference between in the pain and grief I experience when a distant person dies or encounters worst situations. Lewis’s saying reflected on my experiences by reminding me the intense pain and grief I experienced after the disappearance and burial of K.L. According to Winokuer and Harris (2012), reading statements of grief and pain resets the painful and grievous memories of the past found in the sub-conscious mind. This is true because as human beings forget the past, anything related to their life events makes them recall past occurrences. I belief that there is a way we would be honest with ourselves and have it in a different way. Pain and grief are natural elements that all human beings must experience as long as they love. However, we should not anguish forever and destroy our lives. Winokuer and Harris (2012 assert that people experiencing grief should seek the services of a counselor to enable them appreciate situations and take care of their lives. Grief manifests itself through several ways, and it occurs in stages with each stage bringing different emotions (Holleran, 2006). Grief manifests itself through shock; shock constitutes a natural form of adaptation that prevents the victims from the impact of death

W11DBBCCDiscDQ1 and DQ2 Essay Example | Topics and Well Written Essays - 250 words

W11DBBCCDiscDQ1 and DQ2 - Essay Example The CAPM can be calculated using the following formula: Risk and return have a positive relationship. Securities that have higher risks will generate higher profits. Risk adverse investors prefer investment options with low or cero risk such as Treasury bills. The rate of return of common stocks is higher than Treasury bills due to the higher risks associated with common stocks. The value of a firm can be estimated using financial models such as the dividend discount model (Nyu). There are various factors that determine the risks of a project. Three of those factors are location of the project, timeline requirements, and quality of the labor provided by the project manager and team members. The funding available for a project is another variable that influences the success of a project. Projects that have unlimited funding have a greater chance of success than under funded projects. A major financial decision companies make is deciding the composition of the capital structure of the firm. Accountingformanagement.com (2011). The Use of Net Present Value (NPV) Method in Capital Budgeting Decisions – Discounted Cash Flows. Retrieved September 3, 2011 from

Meaning of life 3 Essay Example | Topics and Well Written Essays - 1000 words

Meaning of life 3 - Essay Example Contrarily, the incapability to acquire meaning in life causes distress, addiction, boredom, aggression and even depression. Now this is what brings us to what Frankl describes as the state of meaninglessness. Psychological responses to the worst experiences are never predetermined by any given circumstance, no-matter how strong or weak it is. Meaning of life comes from within an individual in spite of the existing despair. Personal responsibility is always the best way for an individual to gain meaning. And this is considered likely if the person does not surrender to negative mind-set of others and be true to him or herself. Frankl states that it is possible to be frequently exposed to death and misery of Auschwitz, yet still get a way of discovering meaning in this grief. Even while death seems to be unavoidable, Frankl thinks that individuals have the central capacity to reflect positively on the all the good things they have achieved in their entire lifetime and to put in perception the current meaning of their grief (Frankl, Viktor 87). When a fella apprehends that it is his destiny to suffer, he will have to consider his grief as his task; his only exceptional mission. And normally this is what is considered to be the state of meaninglessness. A person will have to live with the fact that even during suffering he is alone and experiences a unique situation in the universe. And that no other person is capable of relieving him or suffering for his or her sake. His or her unique opportunity depends on how he or she carries the burden. Frankl describes the diverse phases of psychological response that were common to all the prisoners. These stages are alleged to have ensued in a sequential way, from shock to apathy then to freedom readjustments. He states that he was able to witness the grace even in the worst case scenarios. Frankl quotes â€Å"we who stayed in the concentration camps can never

Governance Research and Analysis Paper Example | Topics and Well Written Essays - 3750 words

Governance and Analysis - Research Paper Example The overall increase in the cost can be attributed to the steady rise in the tuition fees, reduction in the buying capacity of the allowance aids sanctioned for the students, shrinking financial plans for higher education of the states, augmenting liability loads for the students and increasing requirements for institutional responsibilities (Meek, Teichler & Kearney, 2009). It is in this context that the augmenting tuition expenses are turning out to be a grave concern, especially for the families with comparatively lesser earning which makes it impossible for them to meet up to the increasing costs. However, in some instances the considerable boosts in the monetary helps provided by the institutions as well as the governments have assisted in alleviating the price rises for few students. This problem needs immediate attention as it might involve grave effects by restricting the right of entry for would-be college scholars focusing on the students with little earnings (Meek, Teichle r & Kearney, 2009). It is worth mentioning in this context that University of Central Florida is one of the well-renowned American Universities that aim to render its students with quality education. Hereby, the main objective of the paper will be to identify the governance policies as well as programs of the University of Central Florida and hence recognize how the governance of this university can assist in resolving the issues faced by it. The impact created by the external environment on the governance procedures and policy measures will also be identified in the discussion further. Governance Policies and Strategies in University of Central Florida The administration, the faculty as well as the staffs of the University of Central Florida (UCF) work in a collaborate manner so that it can offer its staffs with high quality programs, courses, teaching facilities as well as other developmental services to the community. The university’s governance procedures tend to clarify the duties as well as responsibilities of numerous parties such as the administration division, the staffs and the faculties. It is to be mentioned that the Nominating and Governance Committee is employed by the University Of Central Florida Board Of Trustees with the objective to suggest potential candidates suitable for designation as Trustee Emeritus and Honorary Doctor for deliberation by the full board. It further aims at persuading the members of the corporate governance â€Å"best practices† and thus makes suggestions to the Board and its committee members. The governance procedure further creates and suggests the Board with the number as well as structure of the committees. The chairperson of the board is responsible to elect and appoint the members of the committee. The committee is responsible to assess its performance on a continuous basis. The committee also intends to analyze the committee charter yearly and thus contemplate any needed changes with the board in o rder to ensure if the panel has approved or re-approved the charter or not (Board of Trustees, 2012). Furthermore, the university also intends to render the facilities of cost sharing in the context of higher education which means a transfer in the burden related to higher education costs from being borne by the governments i.e. taxpayers to being shared exclusively by parent and students. A shift in the burden of

Social Work with the Elderly Essay Example | Topics and Well Written Essays - 1500 words

Social Work with the Elderly - Essay Example A challenge is a fact that it is common for the social workers’ clients to be afflicted with different kinds of diseases and disabilities: physically, mentally, or emotionally. This paper aims to give an in-depth discussion of the challenges involved in working with the elderly, and how the clients’ identity issues affect their relationship dynamics with the worker. First, let us explore the clients’ perspectives and situations from the beginning of things – as they enter the residential home for the elderly. Some have existing and financially capable relatives by they themselves choose to stay in a residential facility so as not to burden their family members with their needs. It could due to reasons of pride, or perhaps a deeply ingrained sense of independence that spurs them to instead opt for professional and paid help. It could be a defense against possible future rejection and the hurt that would succumb from it. Others would have preferred to stay with their children and/or grandchildren, as is in most cases in Asian countries for example, but the family members are either too poor, too disgusted at the prospect of being solely responsible of taking care of an elderly person, or too concerned with having their own lifestyles cramped. Many times the older persons in these cases are admitted to residential homes despite wanting to stay with their families or remain in their own homes. They perhaps just weren’t given a choice. The majority of the elderly have been placed in residential homes because of a physical or mental disability and/or because they do not have anyone around to take care of them anymore. These factors, one way or another, have a crucial impact on the clients’ psychological state and invariably affect their responsiveness and cooperation during the course of case management. As each and every human being has unique identities and personalities, the dynamics of an elderly person and his or her identity is profoundly affected.

Social Policy Essay Example for Free

Social Policy Essay This essay will use the McPhail family case study. The essay will look at the Functionalism and Feminism theory in relation to the case study family and show the effects of two sociological perspectives and there importance in assisting the social care worker to understand the family. The essay will also look at social policy on how it is developed and he issues of private and public issues. This will include how four sectors of social care will aid the case study family and how these organisations are funded. In today’s society, there are many different family structures and these structures are interpreted differently depending on the individual. There are five main ‘types’ of family structures and these can change throughout the life span of the family. In the case of the McPhail family, their family structure can be ‘labelled’ differently depending on when the family is viewed. The McPhail family consists of a grandparent John (68), parents John (42) and Betty (42) and their children Billy (25), Michael (23), Sandy (20), Lisa (15) and Charlene (12). This according to the family structure types this family would fall under the heading of ‘Extended’ family due to grandparent John being cared for by the family. But this can change or take on multiple family types. For example, Parent John’s work pattern, who works away from home with his two eldest sons. So using structure types John would become a ‘Lone Parent’ of his sons that are with him and this could also be applied to Betty with the remaining children in her care. There is also when grandparent John goes into respite, the family structure becomes a ‘Nuclear’ family. This shows that in today’s society there is no longer a normal family structure and with changes within the family is no longer stable. Their roles in their society are deemed different from normal society. As the John (42) and his two eldest sons are the workers of the family, they are known as the providers, like a lot of families the males of the family will go out to work. This leaves Betty (42) as the carer of the family that brings up the children and nurturing their traditional norms and values on the children. But there is a difference which in todays society is deemed different and that is that Betty although labelled the Homemaker has no say on the financial decisions of the family, which is the responsibility of John (42). In society today this is not so common within families, as typically both parents have the financial obligations to the family unit. And within the travelling community money is not spoken about to others and  with the women of the family. The use of sociological perspectives can also explain the workings of this family within society. In the case of the McPhail family there are two of the sociological theories that fit this family. The first being Functionalism Theory, which this theory sees society as a system with a set of interconnected parts that together work to provide for the family needs. According to Functionalists, the family is an important positive role in developing the next generation. The McPhail family parents nurture the children by entrusting their norms and values, which according to Functionalists is how the family should work but only if the gypsy society was the dominant society. As they are not and our society is seen as the ‘correct’ society then this family is now deemed as ‘Dysfunctional’ which the gypsies/ travellers community are seen as different and do not follow the norms, values and roles of our society but for this family their norms and values have been passed down through generation to generation and are seen as ‘normal’ within the gypsie society. The McPhails have strict cultural values that of the gypsy community are very strong and not always seen as acceptable in todays society. This sociological perspective shows how their behaviour, experiences and life chances are affected. The travelling community are strict on family unit and moving around the country has an effect on the life chances, through disrupted education, socialisation out with the family unit and behaviours expected by the non-travelling community. For example the males of the family are taught trades by their fathers and male relatives, and sent out to gain employment to provide for their family but without the academic certification this proves to hinder their life chances. The other of the sociological perspectives is Feminist Theory. For example the females of a traditional gypsy family are educated to be homemakers and thus academic education is not an essential requirement and usually females leave school at fifteen/sixteen, marry young. This highlights that the women of the travelling communities have less standing than men in their community as they are seen as only homemakers. This does not allow women to travel and experience other cultures and life situations such as living alone or sharing with non family. Lack of education also causes limitations on working careers though this is not deemed acceptable but maybe essential for the family to survive. This also has a substantial affect on the behaviour  of the women in the travelling communities by asserting dominance of other women within their community. This has an effect on their behaviour, experiences and life chances for both the males and females of the travelling community. Their behaviour is different dependent on their gender, for example the males are more dominant over the females and the females are to follow strict rules on how to ‘behave’ with and to men and what are expected of them as wives and homemakers. Although this theory allows the social care worker to understand how the McPhail family operates. It also emphasises gender based differences that woman is the nurturer and the man is the provider/breadwinner. This creates generations of sexual inequality. And maintains male power throughout adult society, As a social care worker, both these perspectives can provide useful insight as to how the McPhail family operates but also provides background information for assisting them to settle into a society that in many ways is different to the society they have been brought up in. For a social care worker having a clear understanding of the functional/dysfunctional theory can allow them to sensitive to the needs of the family. For example, the education of the younger children. Putting them into the correct school that has the provisions to assist with the lack of education that these children have had due to the continual movement of the family. Placing them into a school that has educational support unit to assist them in catching up with the mainstream classes. These units will also assist with the behavioural issues that the children have when interacting with teachers and other children within the school. This also has an effect on where the family is housed, as they will need to be close enough for this type of school. Social policies are a set of rules, laws or legislation that governs social issues within society and are also set out to resolve these issues. Social policy has a major impact on the everyday lives of individuals by controlling certain behaviours and situations. Social policy is usually born from a private issue that is common to many individuals within society and when noticed by the government through politicians or people with power they then become a public issue which when it becomes public can be easier to solve and policies are put into place to resolve the issues. There are many different factors or influences that can lead to the development of a social  policy, and they can also be shaped by the influence of European, National and local government. For example, economics of the nation has a major influence on social policy. This has for Scotland provided free prescriptions. This came about when in the 1950’s the British government introduced prescription charges which created millions of pounds that the government used to fund statutory agencies but when the Scotland re-formed its government, the prescription charges where reduced and finally abolished in 2010, thus enabling families on a low income to receive medication otherwise unavailable to them due to the prescription charges. Another example of influences that form social policies is demographics. Looking at the national census, it shows that the growing population and the fact the people are living longer due to the advances in medical science and positive live changes of individuals. But looking mainly at the elderly population, in previous years, the elderly died younger due to lack of income to support them with medication and care but with changes in legislation influence by national and European government has provided free care and benefits. This was done by establishing the Community Care and Health (Scotland) Act 2002, which provides free nursing and personal care with benefits to the elderly population. There is also the influence of the media. As society has progressed with technology so has the availability of information through media coverage. Individuals are finding out more on what the issues of the individuals are and how they can affect them. The media uses many different means of influencing the country but the main channels are television, internet, radio and newspapers. By broadcasting issues of concern, this raises public interest and can insight policies to be made to combat these issues. For example the Patients Rights (Scotland) Act 2011, this came about after a news report on the waiting times of local hospitals where publish. This information became public knowledge on a wider scale and got the people that have an influential say demanding for action to be taken. Which for this issue, it has had a beneficial effect but there are issues that may not such as, if a sex offenders details are available to the public. This has a domino effect as these issues change public opinion on matters of care and families, which is another influence on how social policies are created. Public opinions are brought to the attention of the government by pressure groups or lobby groups. For example MIND is a charitable organisation  that campaigns the government to makes changes to legislation that creates awareness and better rights for individuals with mental health issues. This can be seen through their campaign of the Benefits and Welfare Reform. MIND are campaigning to protect individuals on benefits with mental health issues and their campaign is to provide better assessment tools, changes to Disability Living Allowance and the cut backs, creating more user friendly language when applying for benefits and changing the contents of the new Work Programmes that are being set out by the government. Social policy and the influences that create our policies have an effect on all everyday families and in the case of the McPhail family, their private issue of discrimination of their family by the people living around them has came to the attention of the local authority. The Anti-Social Behaviour etc (Scotland) Act 2003, this act protects the McPhail family through their beliefs and way of life. This acts aim is to protect the family and allows the local authority and local police to intervene on their behalf to stop the issues that are causing them alarm or distress. This can cause social exclusion. Most individuals have a social support network, but for the McPhail family this does not seem to be the case. There are organisations that provide services to assist the McPhail family with the daily living in a community that is unfamiliar to them. These organisations are provided by four main sectors. Firstly there is the statutory sector, which in the case of the McPhail family provides assistance with housing for the family and home care for both Betty (42) and Jacob (68). This sector is funded by the government and provided by the local authority. There is the voluntary sector such as Cornerstone which can provide support to Jacob (68) and the family coming to terms with his terminal illness. This organisation is funded by private donation, fundraising events and can also be funded through government grants. There is also the private sector with agencies such The Richmond Fellowship that provides services such as care (personal care or waking night care) and support (days out and shopping trips) but this service comes at a cost to the individuals as this service is paid for by the client. Finally there is the unpaid or informal carer, which in the case of the McPhail family is Betty (42) who looks after Jacob (68) and provides all his care needs when there is no assistance from the local authority or any other care organisation. This is generally unpaid and  considered within their family as Bettys duty.

Rights and Duties in a Letter of Credit Transaction

Rights and Duties in a Letter of Credit Transaction Introduction The letter of credit is the most commonly used method of payment for goods in international trade. This thesis highlights the imbalance of the rights and duties of the parties in a letter of credit transaction by emphasising deficiencies in the letters of credit system. In addition, on those areas where there is lack of justice and equity and which make the system of the letters of credit vulnerable for fraudulent activities. This thesis is structured in five chapters. First chapter after briefly discussing the structure of the letter of credit system, such as parties to the letter of credit transaction, kinds of letters of credit, step by step procedure of the transaction, different type of the documents used and the common defects in those documents, it also explains about the division of the risk under such a transaction and how the applicant’s risk has increased under UCP and very often the buyer is paying for the goods he had not contracted for. Second chapter after brief discussion of the drafting and interpretation of the UCP, explains about the reluctance of the courts to intervene in order to balance the rights and duties of the parties in a letter of credit transaction, status of the UCP, scope of the banks duties and in addition the disclaimer clauses under UCP. Chapter three explores the autonomy of the letters of credit, the doctrine of strict compliance and the ways in which the courts deal with documentary compliance. It further considers that overprotection of the â€Å"independence principle†, and the lack of â€Å"reasonable care† on the part of banks provides opportunities of fraud to the sellers to obtain payment without actually performing their duties to banks and buyers. Chapter four explains â€Å"fraud exception† to the autonomy principle in detail, the position of the fraud exception in England and the history of the English cases relating to the fraud. In addition it also examines the reasons for such an enormous increase in the number of cases relating to fraud. Finally, chapter five considers some of those methods, which can be used to avoid such an increase in fraud cases and also provides few suggestions to balance the rights and duties amongst all the parties to the letter of credit transaction. Chapter 1 Structure of a Letter of Credit Transaction Commercial letters of credit have been used for the centuries as a most common method of payment, in international trade. Letters of credit used in international transactions are governed by the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits (UCP). A commercial letter of credit is a contractual agreement between a bank (issuing bank), on behalf of one of its customers (buyer), authorizing another bank (advising or confirming bank), to make payment to the beneficiary (seller). The issuing bank, on the application of its customer (buyer), opens the letter of credit, and makes a commitment with the buyer to honour the credit, if the documents presented by the beneficiary are conforming to the terms and conditions of the credit. Thus, the issuing replaces the customer to make payment to the seller. Elements of a Letter of Credit An undertaking given by issuing bank to make payment Issuing bank gives undertaking on behalf of a applicant To pay a given amount of money to the seller On presentation of required documents under the letter of credit Within a specified time as provided by the letter of credit Documents must be in compliance to the terms and conditions of the letter of credit Documents must be presented at a specified place provided by the letter of credit Beneficiary Beneficiary is normally the provider of the goods or services and is entitled to payment as long as he can provide the conforming documents required by the letter of credit. The letter of credit is a distinct and separate transaction from the underlying contract (contract between seller and buyer). All parties deal in documents and not in goods. The issuing bank is not liable for the performance of the underlying contract between the buyer and seller. The issuing banks obligation to the buyer-applicant is to examine all documents to insure that they are in compliance with the terms and conditions of the credit. To get the payment it is for the beneficiary to provide all the required documents. If the seller-beneficiary conforms to the letter of credit, the seller must be paid by the bank. Issuing Bank Letters of credit only concerns with the documents, not with the goods, therefore the duty of issuing bank to pay to the beneficiary and than to be reimbursed from its customer will only be completed upon the completion of the terms and conditions of the letter of credit. Under the provisions of the Uniform Customs and Practice for Documentary Credits, the bank is entitled to have a reasonable time after receipt of the documents from the beneficiary, to examine the documents and then to make the payment. The issuing bank provides a guarantee to the seller that if the documents presented by the beneficiary are in compliance with the terms and conditions of the credit, then the bank will make the payment to the seller. Generally the documents presented include a commercial invoice, bill of lading or airway bill and an insurance document etc. Advising Bank An advising bank is usually a foreign correspondent bank of the issuing bank which advises the seller-beneficiary. Generally, the beneficiary wants to use a local bank to insure that the letter of credit is valid. In addition, the advising bank is responsible for sending the documents to the issuing bank. The advising bank has no other obligation under the letter of credit. Therefore, if the issuing bank does not pay the beneficiary, the advising bank is not obligated to pay. Confirming Bank At the request of the issuing bank, the correspondent bank may confirm the letter of credit for the seller-beneficiary and obligates itself to insure payment under the letter of credit. The confirming bank is usually the advising bank. There are two main types of Letters of credit: (1) Revocable (2) Irrevocable Revocable Letter of Credit Revocable letter of credit is not a commonly used type of the letters of credit. This type of letter of credit can be revoked by the issuing bank at any time, without notification to the beneficiary, for any reason. Such type of letter of credit can not be confirmed by the correspondent bank and the bank will act as an advising bank only. A revocable letter of credit can not be revoked after the presentation of the documents, if the documents are conforming to the terms and conditions of the letter of credit and the payment has been made. Irrevocable Letter of Credit Use of irrevocable letters of credit is very common in international trade. Irrevocable letter of credit can not be revoked or changed without the consent of the beneficiary. Issuing bank will make the payment to the seller, if the seller presents the documents complying with the terms of the credit, as agreed between seller and buyer. Such a letter of credit can only be changed with the permission of both buyer and seller. If it is not clear from the letter of credit that whether it is revocable or irrevocable, it automatically considers as irrevocable. Irrevocable letters of credit are of two kinds: Unconfirmed credit In case of unconfirmed letter of credit, advising bank does not confirm the credit to the seller and the issuing bank is the only party responsible for payment to the beneficiary. Advising bank will only pay to the seller after getting payment from the issuing bank and there is no risk for the advising bank. Confirmed credit In this type of credit, advising bank confirms credit to the seller. When the advising bank confirms that the documents presented are conforming to the terms of the credit, it will make the payment to the seller, and after that advising bank will contact with the issuing bank to get the payment. This type of letter of credit is commonly used, when the seller is unfamiliar with the issuing bank. Such a type of letter of credit is quite expensive because the banks have some liability. Step-by-step process In international trade as the buyer and seller are in different countries so when the buyer and the seller of the goods agree to conduct business, than because of the gap of time between delivery of goods and the payment, usually the seller wants a letter of credit as a guarantee of payment from the buyer. Than the buyer makes a request to his bank called the issuing to open a credit in the favour of the seller. at the request of the buyer, issuing bank issues a letter of credit in favour of the seller and forwards it to the corresponding bank called the advising or conforming bank., which is usually located in the seller’s country. Advising bank than either confirms the credit or not, depending upon the type of credit, and forward it to the seller. Seller than ships the goods and collects the documents required in order to meet the requirements of the letter of credit and finally to get the payment in time. Seller presents the required documents to the advising or confirming bank in order to get the payment in time. Advising or confirming bank examines the documents presented by the seller to check that whether they are conforming to the terms and conditions of the letter of credit. If the documents are in compliance, advising or confirming bank, in case of confirmed letter of credit, will make payment to the seller and will be reimbursed from the issuing bank and in case of unconfirmed letter of credit, advising or confirming bank will forward the documents to the issuing bank. Than the Issuing bank will, after examine of the documents, debit the buyers account if the documents are in compliance to the terms of the letter of credit. In the end, Issuing bank forwards the documents to the buyer. Most commonly used documents in a letter of credit transaction include: Commercial Invoice This includes description of the goods, their price, FOB origin, and name and address of the buyer and the seller. The buyer and seller information must be in compliance with the description provided in the letter of credit. Bill of Lading It is a document which shows the receipt of goods for shipment by a freight carrier. It is an evidence of the control of the goods and also acts as an evidence of the carriers obligation to transport the goods to their proper destination. Warranty of Title A warranty given by a seller to a buyer of goods that states that the title being conveyed is good. It is generally issued to the purchaser. Letter of Indemnity It is a letter specifically indemnifies the purchaser against a certain stated circumstance. Indemnification is generally used to guarantee that shipping documents will be provided in good order when available. Common Defects in the documents presented A discrepancy is some defect in the documents presented by the seller, which show their non-compliance with the terms of the letter of credit. Issuing bank can not change the terms and conditions of the letter of credit with out t he permission of the buyer. Therefore to avoid any delay in getting payment. Beneficiary should be careful in preparing the required documents. Common defects in the documents presented by the seller include: If the description of the goods is not consistent. There is some error in the insurance documents. If the draft amount is not equal to invoice amount. Loading and destination ports are not same as provided by the letter of credit. Merchandise description is not same as in the credit. If any of the documents required by the credit is not presented. Documents are generally inconsistent such as quality, etc. If the names of the documents required are not correct, as mentioned in the credit. Invoice is not signed as provided in the letter of credit. If prior to the presentation of the draft, Letter of Credit has expired. If the date mention in the bill of lading is different from the date stated in the credit. If there are some changes in the invoice which are not authorized by the letter of credit. In international sales, as the seller and the buyer are in different countries, there is a common problem of payment due to the difference of time between dispatch and delivery. Obviously, seller would like to receive payment for the goods when delivering them to the carrier and the buyer would prefer to delay the payment of the price until receipt of the goods. Therefore, a letter of credit solves this problem between the seller and the buyer. Generally, there are three separate transactions in a letter of credit transaction. The first is between a seller and a buyer, called an underlying transaction, by which the seller provides contracted goods to the buyer. The second transaction is between the buyer-applicant and the bank (issuer of the letter of credit), in which the bank issues a letter of credit to the seller-beneficiary. Finally, the letter of credit itself creates a relationship between the issuer and the beneficiary, in which, the issuer makes payment for goods upon the beneficiary’s presentation of the required documents, in accordance with the terms and conditions of the letter of credit as agreed between seller and buyer. The bank’s performance of payment is conditional on the delivery of conforming documents by the beneficiary. The banks are called issuers and are usually the applicant’s bank. Normally the issuing bank opens a letter of credit in its own name and requests its correspondent bank to notify the seller about the letter of credit. Sometimes, the issuing bank asks the correspondent bank not only to inform the seller of the issuing bank’s undertaking but also to add a confirmation. In this case, the credit is known as a confirmed credit and the correspondent bank as a confirming bank. The payment obligation of the issuing bank depends upon the beneficiary’s presentation of complying documents to the confirming bank or to any other nominated bank, in accordance with the terms and conditions of the credit. Under general practice, presenting â€Å"complying documents† means that they comply with the conditions of the credit â€Å"on their face†. From banking point of view, compliance â€Å"on their face† of the presented documents is sufficient. The â€Å"independence principle† (which will be discussed later) is the fundamental principle of the letter of credit system, which prohibits banks from looking beyond facial compliance of the documents, and therefore exclude whether or not there is actual performance by the seller-beneficiary. In fact, letters of credit system has emphasised the independence principle to such an extent that banks are ignoring the performance of the underlying contract very confidently. As a result, all the risk is on the honest buyers, who are sometime paying for goods that they had not contracted for. Importance of the research The primary purpose of the letter of credit system is to facilitate international trade, rather than to provide an opportunity to the banks to make profit. As the fraud is very common in these days, but UCP is not designed to prevent fraud. The number of frauds relating to the letters of credit has increased over the years. Buyers are particularly vulnerable to such practices under the letter of credit system. This situation shows that there is some ambiguity in the letter of credit system and a lack of balance between the rights and duties of the parties to a letter of credit transaction, which is being exploited very easily by fraudsters. Division of risk under a Letter of Credit Transaction As we have discussed above, a letter of credit transaction consists of three linked but independent contracts. The first step is that the buyer makes a contract with the seller for the sale of goods, called the underlying contract. Subsequently the buyer signs an application form requesting the bank to open a credit, which is an arrangement between the buyer and the bank. The third step is that the issuing bank informs the seller, who is the beneficiary of the letter of credit, of the credit and promises to pay against the stipulated documents provided the terms and conditions of the credit are met. The letter of credit allocates risk between the applicant and the beneficiary. By postulating a letter of credit, the beneficiary may greatly reduce the risk of not being paid and ultimately allowing the beneficiary of the letter to reallocate the risk of non-payment for delivered goods which do not conform to the underlying sale contract. Generally, banks are reluctant to dishonour a credit, since to do so may damage the bank’s reputation as a credit issuer. The cost of honour, however, falls on the honest applicant, not the bank. â€Å"If the beneficiary has breached the underlying transaction, payment under the credit to him will occasion loss, but that loss will not be the bank’s; it will be the applicant’s.† Increase in the applicant’s risk and decrease in the bank’s risk under UCP UCP is the governing law of the letters of credit, therefore there should be a balance regarding the rights and duties of the parties, but UCP contains rules that reduce bank risk. There is no provision asking for judicial intervention to compensate letter of credit parties in case of bank’s negligence. The provisions in favour of banks fall into two categories. The first provides sweeping immunity from liabilities that national legal systems may impose. Example of such a disclaimer is Article 15. Under Article 15, banks assume no liability for the genuineness, falsification or legal effect of any documents and therefore the issuer is immune from the liability for paying against forged documents, which on their face appear regular. Therefore, the payment by the issuing bank does not show that the buyer has received the goods, which he had contracted for. The security, which the beneficiary is getting under the letter of credit system is not the same with the security of the buyer. The second category of pro-bank provisions contains rules that set precise boundaries on what the banks must do, which reduces uncertainty about bank responsibility and provides clear guidance to bank employees. For example, the customer cannot stipulate non-documentary conditions of payment, and time limits on examination of documents are fixed rather than open-ended. In case of any loss, the buyer, which is the applicant for a credit, can take action against the seller for breach of contract or fraud, but has no right of action against the bank for bank’s negligence in examining the documents, which can be ineffectual for several reasons, such as insolvency of either the applicant or the beneficiary. Hence the burden of risk on the applicant is more than any party in a letter of credit transaction and in most of the cases, buyers are paying for the goods, they have not contracted for. Chapter 2 UCP and letters of credit Originally UCP has been drafted by the Banking Commission of the ICC, which was comprised of the representatives of the banking community, which shows the dominance of the banks and banking experts. Their dominance in UCP drafting, hints that in drafting UCP, ICC was acting as a private legislature. It looks that the rules contain in the UCP are much beneficial for the banks than any other party, and giving a limited chance to the judiciaries to interfere to protect customers from any careless behaviour of the banks. The authority to interpret the UCP rests in the ICC Commission on Banking Technique and Practice, which can apply these interpretations to solve the problems arising in any case. Because of wide publicity and distribution of commission’s answers, their interpretation can be considered as an official interpretation of the UCP. Commission can enhance, interpreting, and sometimes amend the provisions of the UCP. The banks which deal with the letters of credit, act upon these interpretations and any amendments. As in theory, commission is only answerable to ICC members, therefore the chances of any challenge to such interpretation is very low. Role of courts in balancing the rights and duties of the parties In Discount Records Ltd. v. Barclay Bank Ltd., the judge was reluctant to â€Å"interfere with bankers’ irrevocable credit and not least in the sphere of international banking†. The position is same in many other cases. The apparent reason for the reluctance of the judges to interfere looks that they are afraid from the threats of the banking experts that their decisions would have an unfavourable affect on international trade. The difficulties of the courts to balance the rights and duties of all parties to a letter of credit transaction have increased. In Mannesman Handel AG v. Kaunlaran Shipping Corporation, the Swiss bank argued that the bank was in rejecting the documents by the German company relying on the independence principle and the discrepancies appeared on the documents. The court was asked not to apply the good faith principle otherwise the court â€Å"would be calculated to undermine if not destroy the doctrine of strict compliance and to blur if not extinguish the distinction between transactions concerning goods and transactions concerning documents.† Normally the judicial decisions relating to the legal aspects of documentary credits base on either the express intentions of the parties or established business practice at the time, the parties entered in a contractual relationship. In cases where the UCP provisions are different from business practice, a court will apply the UCP if the UCP is incorporated in the contract of the parties. It shows that courts have assented to the entire documentary credit system being run by the banking industry and eventually abstaining the courts to intervene to balance the legal rights and duties amongst all the parties. Should the UCP have the status of law? Leading scholar Professor Ross Buckley says: â€Å"originally, the UCP was neither designed nor intended to be law. It was prepared as a set of standard terms to be incorporated by reference into letters of credit by those parties who chose to do so.† This has also been confirmed by the UCP in the preface of UCP 500, which states that the UCP is not legislation but a compilation of rules made by bankers for their own industry. Therefore there is a dispute as to whether the UCP is a code of the law, or just customary practices, or some mutually consented regulations relating to letters of credit. However in fact, UCP is the governing law of the letters of credit. The Scope of the Banks Duties Before analysing the wording of the disclaimers used, the scope of the duties undertaken by the banks involved must be identified. Whereas the type of credit and the documentary stipulations therein will usually have been negotiated by the commercial parties and included in their sales contract, the terms and conditions under which a bank undertakes to open a documentary credit will normally appear in the banks standard application form which the importer will be required to complete. Although the application would normally refer to the UCP, it is important to note that the provisions of the UCP would not automatically apply in English law if not expressly incorporated by the parties to the credit and, even if expressly incorporated, its provisions can be excluded, or modified by the express terms of the credit. The duty to issue an efficacious credit The importers failure to procure the issue of a documentary credit which conforms to the terms of the sales contract may be treated by the exporter as a breach of a condition precedent to his performance and a repudiation of the contract by the importer. Whether the applicant can sue the issuing bank in respect of its culpable failure to issue (or to issue in good time) a conforming and efficacious credit is, however, by no means clear. The duty to issue a conforming credit An initial problem arises where the applicant requires the issue of a confirmed credit, that is, a credit in which a second bank, normally in the beneficiarys country, adds its own independent undertaking, to pay against the stipulated documents, to that of the issuing bank. Is the issuing bank in breach of contract towards the applicant if it is unable to procure the confirmation? The answer must depend upon the issuers conduct on receiving the application from the applicant. The second aspect of the duty to issue a conforming credit raises the question of liability for the acts of other banks involved in the transaction. Clearly, if the issuing bank opens a credit which specifies documentation other than that called for by the applicant, then in the absence of a disclaimer it will be in breach of its contract with the applicant under the doctrine of strict compliance. The position should be the same where the issuing bank unreasonably delays issue of the credit so that the beneficiary incurs loss. A difficulty arises, however, when it is not the issuing bank itself which causes the error or delay in complying with the applicants instructions, but the issuers correspondent bank. The doctrine of privity of contract would appear to prevent contractual liability arising in this context. However, in any event, it appears that there is no reason for holding that, in the absence of a disclaimer; an issuing bank should not be liable for the consequences of errors by its correspondents. Duty to receive and examine documents The doctrine of strict compliance means that issuing banks which pay against non-conforming documents are in breach of their contractual obligations to the applicant. The issuer is not, however, a guarantor of the documents conformity; its duty is discharged by the exercise of reasonable care to ascertain that the documents comply on their face with the terms of the credit. Duty to make payment under the terms of the credit The party with the primary interest in enforcing the banks obligation to pay against conforming documents is the beneficiary although it is clear that this obligation is also owed to the applicant. Furthermore, any variation of the payment terms would be a clear breach of contract. Duties of correspondent banks In so far as the confirming bank gives an undertaking in exactly the same terms as the issuing bank, it clearly owes precisely the same duties to the beneficiary. However, since a confirming bank looks to the issuing bank alone for reimbursement, it may be prima facie unlikely that it owes any duty to the applicant, even where the applicant is paying the confirmation fee. There are, however, some judicial dicta which might support the recognition of such a duty. Bank’s risk under UCP (exemption clauses) Article 15 and 18 (b) of the UCP 500, limits the liability of the banks in a letter of credit transaction and which have almost made it a risk free transaction for the banks. Article 15 says: â€Å"Banks assume no liability to or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document(s) or for the general and/or particular conditions stipulated in the document(s) or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any document(s) or for the good-faith or acts and/or omissions, solvency, performance or standing of the consignors, the carriers, the forwarders, the consignee or the insurers of the goods or any other person whomsoever.† Article 18(b) further states: â€Å"Banks assume no liability or responsibility should the instructions they submit not be carried out, even if they have themselves taken the initiative in the choice of such other bank(s).† The UCP 500 places the applicant-buyer in an absurdly vulnerable position through its disclaimer clauses. To some extent there is a lack of duties on the part of the bank to verify the authenticity of the documents. Hence it might not be wrong to say that albeit there is a waste increase in the use of letters of credit, does not signify that the UCP is fairly drafted. Letters of credit and its users It is also very important that whether all the parties to the letter of credit, particularly applicant-buyer are conscious about the presence of these exemptions, e.g. by providing a copy of these exemption clauses of the UCP or by giving a notice of these exemption clauses. It is a rule that to enforce an exemption clause, a reasonable notice should be given to the other party but in practice, buyers are assume to have the notice of the UCP and that they are familiar with the provisions of the UCP. Further, the application for the issuance of a letter of credit and the letter of credit document itself only contain a simple sentence: â€Å"Subject to UCP for Documentary Credits†, without any attachment of the provisions of the UCP or any notice of such exemption clauses. Hence it is debatable that why the courts do not look, while dealing with the cases relating to the letters of credit, that whether a reasonable notice has been given relating to the exemption clauses and do not interfere to balance the rights and duties of the parties to a letter of credit transaction? Chapter 3 Doctrine of strict compliance and independence principle It is a basic rule of the letter of the credit transaction and which is widely recognised that the letters of credit are transactions independent of the underlying contracts on which they are based. According to this principle, the issuer has no concern with the underlying contracts between buyer and seller. Its concern is with documents only, rather than the goods or any type of services. Obviously there are some doubts about this principle, i.e. to what extent this principle should be applied. Which some tome may cause injustice to the applicant under certain circumstances. Independence Principle Generally, letter of credit is a contract between the issuer and the seller of the goods, which is independent of the underlying contract between the seller and the buyer. The independence principle is mentioned in Article 3 and Article 4 of the UCP. Article 3 states: â€Å"Credits, by their nature, are separated transactions from the sales or other contract(s), even if any reference whatsoever to such contract(s) is included in the Credit.† Article 4 further says: â€Å"In credit operations all parties concerned deal with documents and not with goods, services and/or other performances to which the documents may relate.† From the very beginning independence principle governs letter of credit transactions and very clearly states that the credits are completely separate from their underlying transactions and the issuer makes payment depending on the conformity of the documents presented according to the terms and conditions of the credit without considering the performance of the underlying contract by the beneficiary. Rights and Duties in a Letter of Credit Transaction Rights and Duties in a Letter of Credit Transaction Introduction The letter of credit is the most commonly used method of payment for goods in international trade. This thesis highlights the imbalance of the rights and duties of the parties in a letter of credit transaction by emphasising deficiencies in the letters of credit system. In addition, on those areas where there is lack of justice and equity and which make the system of the letters of credit vulnerable for fraudulent activities. This thesis is structured in five chapters. First chapter after briefly discussing the structure of the letter of credit system, such as parties to the letter of credit transaction, kinds of letters of credit, step by step procedure of the transaction, different type of the documents used and the common defects in those documents, it also explains about the division of the risk under such a transaction and how the applicant’s risk has increased under UCP and very often the buyer is paying for the goods he had not contracted for. Second chapter after brief discussion of the drafting and interpretation of the UCP, explains about the reluctance of the courts to intervene in order to balance the rights and duties of the parties in a letter of credit transaction, status of the UCP, scope of the banks duties and in addition the disclaimer clauses under UCP. Chapter three explores the autonomy of the letters of credit, the doctrine of strict compliance and the ways in which the courts deal with documentary compliance. It further considers that overprotection of the â€Å"independence principle†, and the lack of â€Å"reasonable care† on the part of banks provides opportunities of fraud to the sellers to obtain payment without actually performing their duties to banks and buyers. Chapter four explains â€Å"fraud exception† to the autonomy principle in detail, the position of the fraud exception in England and the history of the English cases relating to the fraud. In addition it also examines the reasons for such an enormous increase in the number of cases relating to fraud. Finally, chapter five considers some of those methods, which can be used to avoid such an increase in fraud cases and also provides few suggestions to balance the rights and duties amongst all the parties to the letter of credit transaction. Chapter 1 Structure of a Letter of Credit Transaction Commercial letters of credit have been used for the centuries as a most common method of payment, in international trade. Letters of credit used in international transactions are governed by the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits (UCP). A commercial letter of credit is a contractual agreement between a bank (issuing bank), on behalf of one of its customers (buyer), authorizing another bank (advising or confirming bank), to make payment to the beneficiary (seller). The issuing bank, on the application of its customer (buyer), opens the letter of credit, and makes a commitment with the buyer to honour the credit, if the documents presented by the beneficiary are conforming to the terms and conditions of the credit. Thus, the issuing replaces the customer to make payment to the seller. Elements of a Letter of Credit An undertaking given by issuing bank to make payment Issuing bank gives undertaking on behalf of a applicant To pay a given amount of money to the seller On presentation of required documents under the letter of credit Within a specified time as provided by the letter of credit Documents must be in compliance to the terms and conditions of the letter of credit Documents must be presented at a specified place provided by the letter of credit Beneficiary Beneficiary is normally the provider of the goods or services and is entitled to payment as long as he can provide the conforming documents required by the letter of credit. The letter of credit is a distinct and separate transaction from the underlying contract (contract between seller and buyer). All parties deal in documents and not in goods. The issuing bank is not liable for the performance of the underlying contract between the buyer and seller. The issuing banks obligation to the buyer-applicant is to examine all documents to insure that they are in compliance with the terms and conditions of the credit. To get the payment it is for the beneficiary to provide all the required documents. If the seller-beneficiary conforms to the letter of credit, the seller must be paid by the bank. Issuing Bank Letters of credit only concerns with the documents, not with the goods, therefore the duty of issuing bank to pay to the beneficiary and than to be reimbursed from its customer will only be completed upon the completion of the terms and conditions of the letter of credit. Under the provisions of the Uniform Customs and Practice for Documentary Credits, the bank is entitled to have a reasonable time after receipt of the documents from the beneficiary, to examine the documents and then to make the payment. The issuing bank provides a guarantee to the seller that if the documents presented by the beneficiary are in compliance with the terms and conditions of the credit, then the bank will make the payment to the seller. Generally the documents presented include a commercial invoice, bill of lading or airway bill and an insurance document etc. Advising Bank An advising bank is usually a foreign correspondent bank of the issuing bank which advises the seller-beneficiary. Generally, the beneficiary wants to use a local bank to insure that the letter of credit is valid. In addition, the advising bank is responsible for sending the documents to the issuing bank. The advising bank has no other obligation under the letter of credit. Therefore, if the issuing bank does not pay the beneficiary, the advising bank is not obligated to pay. Confirming Bank At the request of the issuing bank, the correspondent bank may confirm the letter of credit for the seller-beneficiary and obligates itself to insure payment under the letter of credit. The confirming bank is usually the advising bank. There are two main types of Letters of credit: (1) Revocable (2) Irrevocable Revocable Letter of Credit Revocable letter of credit is not a commonly used type of the letters of credit. This type of letter of credit can be revoked by the issuing bank at any time, without notification to the beneficiary, for any reason. Such type of letter of credit can not be confirmed by the correspondent bank and the bank will act as an advising bank only. A revocable letter of credit can not be revoked after the presentation of the documents, if the documents are conforming to the terms and conditions of the letter of credit and the payment has been made. Irrevocable Letter of Credit Use of irrevocable letters of credit is very common in international trade. Irrevocable letter of credit can not be revoked or changed without the consent of the beneficiary. Issuing bank will make the payment to the seller, if the seller presents the documents complying with the terms of the credit, as agreed between seller and buyer. Such a letter of credit can only be changed with the permission of both buyer and seller. If it is not clear from the letter of credit that whether it is revocable or irrevocable, it automatically considers as irrevocable. Irrevocable letters of credit are of two kinds: Unconfirmed credit In case of unconfirmed letter of credit, advising bank does not confirm the credit to the seller and the issuing bank is the only party responsible for payment to the beneficiary. Advising bank will only pay to the seller after getting payment from the issuing bank and there is no risk for the advising bank. Confirmed credit In this type of credit, advising bank confirms credit to the seller. When the advising bank confirms that the documents presented are conforming to the terms of the credit, it will make the payment to the seller, and after that advising bank will contact with the issuing bank to get the payment. This type of letter of credit is commonly used, when the seller is unfamiliar with the issuing bank. Such a type of letter of credit is quite expensive because the banks have some liability. Step-by-step process In international trade as the buyer and seller are in different countries so when the buyer and the seller of the goods agree to conduct business, than because of the gap of time between delivery of goods and the payment, usually the seller wants a letter of credit as a guarantee of payment from the buyer. Than the buyer makes a request to his bank called the issuing to open a credit in the favour of the seller. at the request of the buyer, issuing bank issues a letter of credit in favour of the seller and forwards it to the corresponding bank called the advising or conforming bank., which is usually located in the seller’s country. Advising bank than either confirms the credit or not, depending upon the type of credit, and forward it to the seller. Seller than ships the goods and collects the documents required in order to meet the requirements of the letter of credit and finally to get the payment in time. Seller presents the required documents to the advising or confirming bank in order to get the payment in time. Advising or confirming bank examines the documents presented by the seller to check that whether they are conforming to the terms and conditions of the letter of credit. If the documents are in compliance, advising or confirming bank, in case of confirmed letter of credit, will make payment to the seller and will be reimbursed from the issuing bank and in case of unconfirmed letter of credit, advising or confirming bank will forward the documents to the issuing bank. Than the Issuing bank will, after examine of the documents, debit the buyers account if the documents are in compliance to the terms of the letter of credit. In the end, Issuing bank forwards the documents to the buyer. Most commonly used documents in a letter of credit transaction include: Commercial Invoice This includes description of the goods, their price, FOB origin, and name and address of the buyer and the seller. The buyer and seller information must be in compliance with the description provided in the letter of credit. Bill of Lading It is a document which shows the receipt of goods for shipment by a freight carrier. It is an evidence of the control of the goods and also acts as an evidence of the carriers obligation to transport the goods to their proper destination. Warranty of Title A warranty given by a seller to a buyer of goods that states that the title being conveyed is good. It is generally issued to the purchaser. Letter of Indemnity It is a letter specifically indemnifies the purchaser against a certain stated circumstance. Indemnification is generally used to guarantee that shipping documents will be provided in good order when available. Common Defects in the documents presented A discrepancy is some defect in the documents presented by the seller, which show their non-compliance with the terms of the letter of credit. Issuing bank can not change the terms and conditions of the letter of credit with out t he permission of the buyer. Therefore to avoid any delay in getting payment. Beneficiary should be careful in preparing the required documents. Common defects in the documents presented by the seller include: If the description of the goods is not consistent. There is some error in the insurance documents. If the draft amount is not equal to invoice amount. Loading and destination ports are not same as provided by the letter of credit. Merchandise description is not same as in the credit. If any of the documents required by the credit is not presented. Documents are generally inconsistent such as quality, etc. If the names of the documents required are not correct, as mentioned in the credit. Invoice is not signed as provided in the letter of credit. If prior to the presentation of the draft, Letter of Credit has expired. If the date mention in the bill of lading is different from the date stated in the credit. If there are some changes in the invoice which are not authorized by the letter of credit. In international sales, as the seller and the buyer are in different countries, there is a common problem of payment due to the difference of time between dispatch and delivery. Obviously, seller would like to receive payment for the goods when delivering them to the carrier and the buyer would prefer to delay the payment of the price until receipt of the goods. Therefore, a letter of credit solves this problem between the seller and the buyer. Generally, there are three separate transactions in a letter of credit transaction. The first is between a seller and a buyer, called an underlying transaction, by which the seller provides contracted goods to the buyer. The second transaction is between the buyer-applicant and the bank (issuer of the letter of credit), in which the bank issues a letter of credit to the seller-beneficiary. Finally, the letter of credit itself creates a relationship between the issuer and the beneficiary, in which, the issuer makes payment for goods upon the beneficiary’s presentation of the required documents, in accordance with the terms and conditions of the letter of credit as agreed between seller and buyer. The bank’s performance of payment is conditional on the delivery of conforming documents by the beneficiary. The banks are called issuers and are usually the applicant’s bank. Normally the issuing bank opens a letter of credit in its own name and requests its correspondent bank to notify the seller about the letter of credit. Sometimes, the issuing bank asks the correspondent bank not only to inform the seller of the issuing bank’s undertaking but also to add a confirmation. In this case, the credit is known as a confirmed credit and the correspondent bank as a confirming bank. The payment obligation of the issuing bank depends upon the beneficiary’s presentation of complying documents to the confirming bank or to any other nominated bank, in accordance with the terms and conditions of the credit. Under general practice, presenting â€Å"complying documents† means that they comply with the conditions of the credit â€Å"on their face†. From banking point of view, compliance â€Å"on their face† of the presented documents is sufficient. The â€Å"independence principle† (which will be discussed later) is the fundamental principle of the letter of credit system, which prohibits banks from looking beyond facial compliance of the documents, and therefore exclude whether or not there is actual performance by the seller-beneficiary. In fact, letters of credit system has emphasised the independence principle to such an extent that banks are ignoring the performance of the underlying contract very confidently. As a result, all the risk is on the honest buyers, who are sometime paying for goods that they had not contracted for. Importance of the research The primary purpose of the letter of credit system is to facilitate international trade, rather than to provide an opportunity to the banks to make profit. As the fraud is very common in these days, but UCP is not designed to prevent fraud. The number of frauds relating to the letters of credit has increased over the years. Buyers are particularly vulnerable to such practices under the letter of credit system. This situation shows that there is some ambiguity in the letter of credit system and a lack of balance between the rights and duties of the parties to a letter of credit transaction, which is being exploited very easily by fraudsters. Division of risk under a Letter of Credit Transaction As we have discussed above, a letter of credit transaction consists of three linked but independent contracts. The first step is that the buyer makes a contract with the seller for the sale of goods, called the underlying contract. Subsequently the buyer signs an application form requesting the bank to open a credit, which is an arrangement between the buyer and the bank. The third step is that the issuing bank informs the seller, who is the beneficiary of the letter of credit, of the credit and promises to pay against the stipulated documents provided the terms and conditions of the credit are met. The letter of credit allocates risk between the applicant and the beneficiary. By postulating a letter of credit, the beneficiary may greatly reduce the risk of not being paid and ultimately allowing the beneficiary of the letter to reallocate the risk of non-payment for delivered goods which do not conform to the underlying sale contract. Generally, banks are reluctant to dishonour a credit, since to do so may damage the bank’s reputation as a credit issuer. The cost of honour, however, falls on the honest applicant, not the bank. â€Å"If the beneficiary has breached the underlying transaction, payment under the credit to him will occasion loss, but that loss will not be the bank’s; it will be the applicant’s.† Increase in the applicant’s risk and decrease in the bank’s risk under UCP UCP is the governing law of the letters of credit, therefore there should be a balance regarding the rights and duties of the parties, but UCP contains rules that reduce bank risk. There is no provision asking for judicial intervention to compensate letter of credit parties in case of bank’s negligence. The provisions in favour of banks fall into two categories. The first provides sweeping immunity from liabilities that national legal systems may impose. Example of such a disclaimer is Article 15. Under Article 15, banks assume no liability for the genuineness, falsification or legal effect of any documents and therefore the issuer is immune from the liability for paying against forged documents, which on their face appear regular. Therefore, the payment by the issuing bank does not show that the buyer has received the goods, which he had contracted for. The security, which the beneficiary is getting under the letter of credit system is not the same with the security of the buyer. The second category of pro-bank provisions contains rules that set precise boundaries on what the banks must do, which reduces uncertainty about bank responsibility and provides clear guidance to bank employees. For example, the customer cannot stipulate non-documentary conditions of payment, and time limits on examination of documents are fixed rather than open-ended. In case of any loss, the buyer, which is the applicant for a credit, can take action against the seller for breach of contract or fraud, but has no right of action against the bank for bank’s negligence in examining the documents, which can be ineffectual for several reasons, such as insolvency of either the applicant or the beneficiary. Hence the burden of risk on the applicant is more than any party in a letter of credit transaction and in most of the cases, buyers are paying for the goods, they have not contracted for. Chapter 2 UCP and letters of credit Originally UCP has been drafted by the Banking Commission of the ICC, which was comprised of the representatives of the banking community, which shows the dominance of the banks and banking experts. Their dominance in UCP drafting, hints that in drafting UCP, ICC was acting as a private legislature. It looks that the rules contain in the UCP are much beneficial for the banks than any other party, and giving a limited chance to the judiciaries to interfere to protect customers from any careless behaviour of the banks. The authority to interpret the UCP rests in the ICC Commission on Banking Technique and Practice, which can apply these interpretations to solve the problems arising in any case. Because of wide publicity and distribution of commission’s answers, their interpretation can be considered as an official interpretation of the UCP. Commission can enhance, interpreting, and sometimes amend the provisions of the UCP. The banks which deal with the letters of credit, act upon these interpretations and any amendments. As in theory, commission is only answerable to ICC members, therefore the chances of any challenge to such interpretation is very low. Role of courts in balancing the rights and duties of the parties In Discount Records Ltd. v. Barclay Bank Ltd., the judge was reluctant to â€Å"interfere with bankers’ irrevocable credit and not least in the sphere of international banking†. The position is same in many other cases. The apparent reason for the reluctance of the judges to interfere looks that they are afraid from the threats of the banking experts that their decisions would have an unfavourable affect on international trade. The difficulties of the courts to balance the rights and duties of all parties to a letter of credit transaction have increased. In Mannesman Handel AG v. Kaunlaran Shipping Corporation, the Swiss bank argued that the bank was in rejecting the documents by the German company relying on the independence principle and the discrepancies appeared on the documents. The court was asked not to apply the good faith principle otherwise the court â€Å"would be calculated to undermine if not destroy the doctrine of strict compliance and to blur if not extinguish the distinction between transactions concerning goods and transactions concerning documents.† Normally the judicial decisions relating to the legal aspects of documentary credits base on either the express intentions of the parties or established business practice at the time, the parties entered in a contractual relationship. In cases where the UCP provisions are different from business practice, a court will apply the UCP if the UCP is incorporated in the contract of the parties. It shows that courts have assented to the entire documentary credit system being run by the banking industry and eventually abstaining the courts to intervene to balance the legal rights and duties amongst all the parties. Should the UCP have the status of law? Leading scholar Professor Ross Buckley says: â€Å"originally, the UCP was neither designed nor intended to be law. It was prepared as a set of standard terms to be incorporated by reference into letters of credit by those parties who chose to do so.† This has also been confirmed by the UCP in the preface of UCP 500, which states that the UCP is not legislation but a compilation of rules made by bankers for their own industry. Therefore there is a dispute as to whether the UCP is a code of the law, or just customary practices, or some mutually consented regulations relating to letters of credit. However in fact, UCP is the governing law of the letters of credit. The Scope of the Banks Duties Before analysing the wording of the disclaimers used, the scope of the duties undertaken by the banks involved must be identified. Whereas the type of credit and the documentary stipulations therein will usually have been negotiated by the commercial parties and included in their sales contract, the terms and conditions under which a bank undertakes to open a documentary credit will normally appear in the banks standard application form which the importer will be required to complete. Although the application would normally refer to the UCP, it is important to note that the provisions of the UCP would not automatically apply in English law if not expressly incorporated by the parties to the credit and, even if expressly incorporated, its provisions can be excluded, or modified by the express terms of the credit. The duty to issue an efficacious credit The importers failure to procure the issue of a documentary credit which conforms to the terms of the sales contract may be treated by the exporter as a breach of a condition precedent to his performance and a repudiation of the contract by the importer. Whether the applicant can sue the issuing bank in respect of its culpable failure to issue (or to issue in good time) a conforming and efficacious credit is, however, by no means clear. The duty to issue a conforming credit An initial problem arises where the applicant requires the issue of a confirmed credit, that is, a credit in which a second bank, normally in the beneficiarys country, adds its own independent undertaking, to pay against the stipulated documents, to that of the issuing bank. Is the issuing bank in breach of contract towards the applicant if it is unable to procure the confirmation? The answer must depend upon the issuers conduct on receiving the application from the applicant. The second aspect of the duty to issue a conforming credit raises the question of liability for the acts of other banks involved in the transaction. Clearly, if the issuing bank opens a credit which specifies documentation other than that called for by the applicant, then in the absence of a disclaimer it will be in breach of its contract with the applicant under the doctrine of strict compliance. The position should be the same where the issuing bank unreasonably delays issue of the credit so that the beneficiary incurs loss. A difficulty arises, however, when it is not the issuing bank itself which causes the error or delay in complying with the applicants instructions, but the issuers correspondent bank. The doctrine of privity of contract would appear to prevent contractual liability arising in this context. However, in any event, it appears that there is no reason for holding that, in the absence of a disclaimer; an issuing bank should not be liable for the consequences of errors by its correspondents. Duty to receive and examine documents The doctrine of strict compliance means that issuing banks which pay against non-conforming documents are in breach of their contractual obligations to the applicant. The issuer is not, however, a guarantor of the documents conformity; its duty is discharged by the exercise of reasonable care to ascertain that the documents comply on their face with the terms of the credit. Duty to make payment under the terms of the credit The party with the primary interest in enforcing the banks obligation to pay against conforming documents is the beneficiary although it is clear that this obligation is also owed to the applicant. Furthermore, any variation of the payment terms would be a clear breach of contract. Duties of correspondent banks In so far as the confirming bank gives an undertaking in exactly the same terms as the issuing bank, it clearly owes precisely the same duties to the beneficiary. However, since a confirming bank looks to the issuing bank alone for reimbursement, it may be prima facie unlikely that it owes any duty to the applicant, even where the applicant is paying the confirmation fee. There are, however, some judicial dicta which might support the recognition of such a duty. Bank’s risk under UCP (exemption clauses) Article 15 and 18 (b) of the UCP 500, limits the liability of the banks in a letter of credit transaction and which have almost made it a risk free transaction for the banks. Article 15 says: â€Å"Banks assume no liability to or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document(s) or for the general and/or particular conditions stipulated in the document(s) or superimposed thereon, nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented by any document(s) or for the good-faith or acts and/or omissions, solvency, performance or standing of the consignors, the carriers, the forwarders, the consignee or the insurers of the goods or any other person whomsoever.† Article 18(b) further states: â€Å"Banks assume no liability or responsibility should the instructions they submit not be carried out, even if they have themselves taken the initiative in the choice of such other bank(s).† The UCP 500 places the applicant-buyer in an absurdly vulnerable position through its disclaimer clauses. To some extent there is a lack of duties on the part of the bank to verify the authenticity of the documents. Hence it might not be wrong to say that albeit there is a waste increase in the use of letters of credit, does not signify that the UCP is fairly drafted. Letters of credit and its users It is also very important that whether all the parties to the letter of credit, particularly applicant-buyer are conscious about the presence of these exemptions, e.g. by providing a copy of these exemption clauses of the UCP or by giving a notice of these exemption clauses. It is a rule that to enforce an exemption clause, a reasonable notice should be given to the other party but in practice, buyers are assume to have the notice of the UCP and that they are familiar with the provisions of the UCP. Further, the application for the issuance of a letter of credit and the letter of credit document itself only contain a simple sentence: â€Å"Subject to UCP for Documentary Credits†, without any attachment of the provisions of the UCP or any notice of such exemption clauses. Hence it is debatable that why the courts do not look, while dealing with the cases relating to the letters of credit, that whether a reasonable notice has been given relating to the exemption clauses and do not interfere to balance the rights and duties of the parties to a letter of credit transaction? Chapter 3 Doctrine of strict compliance and independence principle It is a basic rule of the letter of the credit transaction and which is widely recognised that the letters of credit are transactions independent of the underlying contracts on which they are based. According to this principle, the issuer has no concern with the underlying contracts between buyer and seller. Its concern is with documents only, rather than the goods or any type of services. Obviously there are some doubts about this principle, i.e. to what extent this principle should be applied. Which some tome may cause injustice to the applicant under certain circumstances. Independence Principle Generally, letter of credit is a contract between the issuer and the seller of the goods, which is independent of the underlying contract between the seller and the buyer. The independence principle is mentioned in Article 3 and Article 4 of the UCP. Article 3 states: â€Å"Credits, by their nature, are separated transactions from the sales or other contract(s), even if any reference whatsoever to such contract(s) is included in the Credit.† Article 4 further says: â€Å"In credit operations all parties concerned deal with documents and not with goods, services and/or other performances to which the documents may relate.† From the very beginning independence principle governs letter of credit transactions and very clearly states that the credits are completely separate from their underlying transactions and the issuer makes payment depending on the conformity of the documents presented according to the terms and conditions of the credit without considering the performance of the underlying contract by the beneficiary.