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experts!!

im really struggling to understand the differences between a deferred payment lc and a acceptance one. is it the draft that matters all? what are the benefits that a bank will have with a draft?

Hi Pals,

In some Countries drafts are submitted to a fiscal tax, so ICC decided to include Deferred Payment L/C and negotiation of drafts and/or documents, to avoid such fees. Someone states that an accepted draft could be discounted better than a normal draft in the so called Bank Acceptance Market, but I am not sure than drafts expiring in few days are attractive. So in conclusion , due to the local law, specially Common Law, accepted draft will be required rather than deferred payment undertaking, but the use and the fate must be considered similar.

Other comments appreciated

Ciao

there are certain differences between a lc available by deferred payment undertaking and available by acceptance. under a acceptance credit, the bank accept the draft drawn on it. this is called bankers acceptance. the draft is then returned to the drawer who will represent it on maturity. since a draft is a negotiable instrument, the drawer can easily sell the draft in the forfiating market. but this is not the case with the deferred payment undertaking. a undertaking is to a particular person and can not be transferred to others.

but this does not mean that a lc available by acceptance has absolute advantage over the lc available by deferred payment undertaking. considering the issue of holder in due course, some one may prefer deferred payment undertaking

dear experts,

i will appreciate if some one explain me holder in due course and how a endorsee gets better title over the original owner

Holder in Due Course is a person or entity who acquires a negotiable instrument
(1) for value
(2) in good faith, and
(3) without notice that the instrument is overdue / dishonored /subject to a valid claim by another person/ not authentic.

how a holder in due course gets a better title is a different story. it lies in the very heart of the negotiable instrument act. say A draws a bill of exchange on B as a part of sales of goods. as soon as B accept the draft, it becomes independent of the underlying contract. (this was one of the crucial point of banco santander case). now if A sales the draft to C, then C can has a claim both against A and B. however if C gets the draft by fraud (and therefore is not a holder in due course) and sell it to D, D will have claim only against C. even then D is getting a better title than C.