Page:Harvard Law Review Volume 32.djvu/35

 HARVARD

LAW REVIEW

VOL. XXXII NOVEMBER, 1918 NO. 1

LETTERS OF CREDIT

THE ordinary circular letter of credit, familiar to tourists, has never played much part in the operations of trade and finance. My aim is not to deal immediately with this form of letter but rather to discuss the legal difficulties growing out of the various forms of so called "commercial letters of credit" used in financ-ing over-seas trade. This method of trade financing has not been much used by us in our domestic operations, and has come into common use in our foreign trade only since the war. On this account, in spite of the enormous volume of business in which these letters now figure, they show a great lack of uniformity in form and content, and some lack of certainty in their practical construction and their legal scope and meaning. Commercial letters of credit, while in use for a long time in our business world, have attained no standardization either of kind, form1 or legal construction. They may be mere informal advices, or more or less formal authorizations from a purchaser to draw on certain bankers here or abroad, or directions to given bankers to accept vendor drafts on certain conditions, or sometimes they are merely requests to negotiate the sale of such drafts. Ordinarily


 * 1 J. P. Beal, "Utility of Letters of Credit in Export Trade — a Plea for Standard Forms," 95 Bankers' Magazine (N. Y. 191 7), 271. " It is interesting to note the many different forms used by various banks; they all seem to be different in some respects- Some banks merely write an explanatory letter on their regular letter heads, while others have forms set up on which to record the various points in relation to terms of the credit."