Terminology Confusion: 'Negotiate' and 'Discount'
DCInsight, Vol. 6, p. 11, January-March 2011
Wayne State University Law School Research Paper No. 2013-13
4 Pages Posted: 11 May 2013
Date Written: 2011
Abstract
This article discusses sources of confusion in L/C practice that result from the fact that law and banking give some terms different meanings. The confusion lies in the terms “negotiate” and “discount.” The misunderstandings have nothing to do with the grand controversies over negotiation credits, but they do bear on the use of drafts and deferred payment obligations, and resolving matters explains and perhaps justifies a UK court ruling that was not well received in international trading circles. The confusion arises when a nominated bank takes an acceptance or deferred payment undertaking (DPU) arising out of a letter of credit transaction.
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