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[dulari]

according to UCP-600 , what do we mean " underlying transaction or underlying contracts"

Please define it in a vary easy and simple words

[shahriar]

dear,

let me help you. first the applicant and beneficiary agrees to make some business. then the beneficiary makes an offer in the form of proforma invoice. there may be other terms and condition over advance payment, quality of goods etc. when all these terms are agreed upon, the buyer or the applicant reaches the issuing bank for issuing an LC. for an issuing bank, all these are underlying contract. the issuing bank is not bound by this contract.

for example there may be a contract that supplier will supply only FRESH vegetables. now if the vegetable is not fresh then the seller is in breach of contract. but for issuing bank this breach does not affects its undertaking as this contract is an underlying one.

[bysuma]

Hai,

According to Article no 4(b), an issuing bank should discourage any attempt by the applicant to include, as on integral part of the credit, copies of the underlying contract, proforma invoice and the like.