Legal Effects Arising from the Opening of Letters of Credit on the Buyer and the Beneficiary

Documentary credit is one of the most important payment mechanisms in international trade, providing greater security and certainty for the parties through the independent undertaking of the issuing bank. The opening of a documentary credit not only facilitates the performance of the underlying sales contract but also gives rise to various legal effects concerning the buyer (applicant) and the beneficiary (seller). On the one hand, the buyer is obligated to provide the necessary funds and reimburse the bank for payments made under the credit; on the other hand, the beneficiary acquires the right to claim payment upon presentation of documents that comply with the terms and conditions of the credit. Furthermore, the independence principle of documentary credits and the doctrine of strict compliance play a significant role in determining the scope of the parties' rights and obligations. This article aims to examine and analyze the legal effects arising from the opening of a documentary credit with respect to the buyer and the beneficiary, focusing on their legal relationship with the issuing bank. The research adopts a descriptive-analytical method, and the required data have been collected through library research, legal sources, regulations, and relevant international practices. The findings indicate that the opening of a documentary credit creates reciprocal rights and obligations for both the buyer and the beneficiary while enhancing legal certainty and reducing the risks associated with international commercial transactions.