Documentary and Security Characteristics of Standby Letter of Credit in International Trade Law

From a legal viewpoint، although the standby letter of credit is used in a form similar to the commercial letter of credit، but this type of letter of credit is issued in order to perform the obligation of underlying contract، not to exchange goods. Indeed، the standby letter of credit، like bank guarantee، supports the beneficiary when the obligation of underlying contract is not performed completely، whereas the commercial letter of credit acts as a mechanism to ensure the payment of price to the beneficiary. This article tries to explain the documentary and security characteristics of the standby letter of credit in order to determine: «Whether it has truly documentary feature like the commercial letter of credit?» and «whether it acts as an exceptional and secondary instrument of payment both in form and intent like guarantees?»