Agreement laws related to Bank guarantee & letter of credit

Coming to the problem of allow of injunction against invocation of Bank guarantee Assurance, the Hon'ble Superior Judge has frozen the law regarding invocation/encashment of letter of Credit score and Bank Guarantee Assurance in its pronouncements such that it confesses of no discussion or question. As far back as in 1970, the Judge had in Tara pore and Co., Madras –vs- V.O Vehicles Export Moscow, AIR 1970 SC 891 ornately and perspicuously described the opportunity and ambit of legal disturbance in issues concerning Letter of Credit score and Bank Guarantee Assures in these words—

Letter of credit & Bank Guarantee 

Laws related to L/C & Bank Guarantee

The opportunity of an irrevocable letter of credit score is described thus in Halsbury's Laws and regulations of Britain (Vol.34, Passage 319 at page 185): ―It is often made a condition of a mercantile contract that the customer shall pay for the products by means of a verified letter of credit score, and it is then the duty of the customer to obtain his financial institution, known as the providing or coming financial institution, to issue an permanent credit score in favor of the supplier by which the lender performs to the supplier, either directly or through another financial institution in the vendor's country known as the reporter or discussing financial institution, to accept writes attracted upon it for the price of the products, against soft by the supplier of the shipping records

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The contract relationship between the issuing financial institution and the customer known as the Bank Guarantee is determined by the terms of the contract between them under which the correspondence starting the money score is issued; and as between the supplier and the lender, the issue of the money score properly informed to the supplier makes a new contract nexus and provides the lender directly responsible to the supplier to pay the sticker price or to accept the bill of exchange upon soft of the records.

The agreement thus created between the supplier and the lender is individual from, although additional to, the unique agreement between the customer and the supplier, by reason of the lender's challenge to the supplier, which is overall. Thus the lender is not eligible to depend upon terms of the agreement between the customer and the supplier which might permit the customer to decline the products and to reject payment therefore; and, on the other hand, the customer is not eligible to an injunction discipline the supplier from working with the correspondence of credit if the products are faulty.