The Legal Status of Transfer of Commercial and Stand-by Letters of Credit: A Comparative Study of the Iranian and American Legal Systems and International Legal Documents

Commercial and Stand-by Letter of Credit are two of the fastest and safest international payment instruments. What has made them even more desirable is their negotiability; this is because it exempts people involved in international commercial contracts from paying greater fees and spending long hours applying for a new letter of credit. However, the reason why negotiability has led to greater speed and security of letter of credit is undoubtedly the unique mechanism of transfer and the precise conditions governing it. These advantageous conditions have given birth to desirable consequences in the legal field. Therefore, the greater our awareness and knowledge about this mechanism, and its conditions and effects, the greater would be the benefits that can be derived from it. Such knowledge also depends on a comprehensive study and review of the successful experiences of others. The present article is a step towards providing a comprehensive picture of the rights governing the transfer of letter of credit through the application of the current provisions in the United States legal system as a pioneer system whose approaches in certain cases can boldly be asserted to be unique. A review of the United Nations and the International Chamber of Commerce, who play a strategic role in this regard and whose regulations are accepted by the majority of industrialized and developed countries, plus the Iranian legal system, can make the study more tangible and practical.