Role of Letter of Credit
UNIVERSITY OF MICHIGAN
T HE ROLE OF LETTERS OF CREDIT IN P AYMENT T RANSACTIONS
Ronald J. Mann UNIVERSITY OF MICHIGAN LAW SCHOOL
PAPER #00-002
This paper can be downloaded without charge at: The Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=214633
MLR R EVISED G ALLEYS1.DOC
05/03/00 12:36 PM
THE ROLE OF LETTERS OF CREDIT IN PAYMENT TRANSACTIONS
Ronald J. Mann* TABLE OF C ONTENTS I. THE BASIC L ETTER - OF-C REDIT TRANSACTION .....................................................0000 II. DISCREPANCIES IN LETTER - OF-C REDIT TRANSACTIONS.........................................0000 A. The Nature of the Discrepancies...............................................................0000 1. What Are the Discrepancies? ............................................................0000 2. When Do Discrepancies Appear? ......................................................0000 B. Waiving Discrepancies.............................................................................0000 III. W HY LETTERS OF C REDIT?..................................................................................0000 A. The Road Not Taken: Irrational Habit and Path Dependence ..................0000 B. The Classic Story : Assurance of Payment................................................0000 C. The Letter of Credit as a Verification Institution......................................0000 1. Verifying the Likelihood that the Buyer Will Pay ..............................0000 2. Verifying the Authenticity of the Transaction...................................0000 IV. C ONCLUSION ......................................................................................................0000 S TATISTICAL APPENDIX ....................................................................................................0000
* © 1999 by Ronald J. Mann. Professor of Law, The University of Michigan Law School. B.A. 1982, Rice; J.D. 1985,
T HE ROLE OF LETTERS OF CREDIT IN P AYMENT T RANSACTIONS
Ronald J. Mann UNIVERSITY OF MICHIGAN LAW SCHOOL
PAPER #00-002
This paper can be downloaded without charge at: The Social Science Research Network Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=214633
MLR R EVISED G ALLEYS1.DOC
05/03/00 12:36 PM
THE ROLE OF LETTERS OF CREDIT IN PAYMENT TRANSACTIONS
Ronald J. Mann* TABLE OF C ONTENTS I. THE BASIC L ETTER - OF-C REDIT TRANSACTION .....................................................0000 II. DISCREPANCIES IN LETTER - OF-C REDIT TRANSACTIONS.........................................0000 A. The Nature of the Discrepancies...............................................................0000 1. What Are the Discrepancies? ............................................................0000 2. When Do Discrepancies Appear? ......................................................0000 B. Waiving Discrepancies.............................................................................0000 III. W HY LETTERS OF C REDIT?..................................................................................0000 A. The Road Not Taken: Irrational Habit and Path Dependence ..................0000 B. The Classic Story : Assurance of Payment................................................0000 C. The Letter of Credit as a Verification Institution......................................0000 1. Verifying the Likelihood that the Buyer Will Pay ..............................0000 2. Verifying the Authenticity of the Transaction...................................0000 IV. C ONCLUSION ......................................................................................................0000 S TATISTICAL APPENDIX ....................................................................................................0000
* © 1999 by Ronald J. Mann. Professor of Law, The University of Michigan Law School. B.A. 1982, Rice; J.D. 1985,