Compare Article 5-109 (a) of the ( Amercian) Uniform Commercial Code Essay - 1

Compare Article 5-109 (a) of the ( Amercian) Uniform Commercial Code with the approach under english, the full question is in the attachment - Essay Example This also stands to be true in a scenario when the transaction being backed by a letter of credit does not actually take place. On the one side, the letters of credit extend to the sellers the assurance of a guaranteed payment, while on the other side they safeguard the interests of the buyers by necessitating the presentation of the right documents that to a large extent ensure performance. Such documents may be the like of insurance forms, transportation documents and quality related certificates. The underlying dogma supporting the autonomy principles associated with letters of credit is that the transaction backed by a letter of credit stands to be autonomous of the sales deed formalized by the buyer and the beneficiary. To put it simply, the two essentially contractual arrangements mentioned above are regarded as being independent of each other. In other words, the utility of a letters of credit is pragmatically solemnized by the severance of services and documents. It is this principle that is the legal ground on the basis of which banks agree to such transactions. As already mentioned, a letter of credit is the legal and financial instrument, which extends to the beneficiary the security of getting the payment due to one. Yet, this bolstering of security to the beneficiary in a way dilutes the security against risk or loss to the account party. Thus, in the letters of credit, the balance of risk is tilted more in favour of the seller. Though the autonomy principle practically assures the expected commercial results in business transactions, this principle stands to be defective and inequitable when the underlying transaction is vitiated by a fraud. Under such circumstances, the autonomy principle gets limited by the fraud exception. In the United States, in Maurice O’Meara Co v National Park Bank, the court of law simply denied the possibility of invoking a fraud exception.