Jurisprudence and private law

A Legal Analysis of the Effects of Abstract Payment Obligations

Document Type : Original Article

Authors

Fatemeh Behnam 1
Alireza Alipanah 2

1 PhD student, Private Law, Shiraz University, Shiraz, Iran

2 Assistant Professor, Department of Private Law, Faculty of Law, Shahid Beheshti University, Tehran, Iran

https://doi.org/10.22034/jpl.2025.735819
Abstract
Unilateral undertakings constitute a juridical act of a unilateral nature which, upon its formation, immediately gives rise to a binding obligation incumbent upon the issuer (the applicant/opening party). Until such time as the issuer effects payment of the amount of the credit to the beneficiary, the issuer acquires no enforceable right vis‑à‑vis the beneficiary.
The issuer’s obligations toward the beneficiary include: the duty to examine the documents; the duty to exercise due care and to act in good faith; the duty to notify the beneficiary of any discrepancies or non‑conformities; and the duty to pay the credit.
Upon payment of the credit amount, the issuer acquires certain rights against the beneficiary, including rights arising from the breach of warranties as to the genuineness, accuracy, and authenticity of the documents and from the absence of fraud, on the one hand; and, on the other hand, rights deriving from subrogation following payment.
The beneficiary, prior to receipt of the credit amount, bears no obligation toward the issuer or any secondary (confirming or nominated) bank. Evidently, upon presentation of the documents and receipt of payment, the aforementioned obligations become established upon the beneficiary.

Keywords

Abstract Payment Obligations &‌‌‌ndash
Beneficiary &‌‌‌ndash
Issuance of the Letter of Credit &‌‌‌ndash
Secondary Bank
Jurisprudence and private law
Volume 2, Issue 6
Summer 2025
Pages 80-98

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