El Banco Sem is a Uruguayan bank that issues a letter of credit to its customer, Industrias la Plata SA, to pay for machinery imported from Canada. The autonomy principle implies an "autonomous" condition into the contract that requires Banco Sem to inspect the goods before it can make payment to the Canadian exporter or its bank. Inspection ensures that the goods are as they are described in the contract.

Question

Quizplus · Accepted Answer

The autonomy principle in letters of credit means that the bank's obligation to pay is independent of the underlying contract between the buyer and seller. The bank is only concerned with the documents presented, not the actual goods or their inspection.

El Banco Sem Is a Uruguayan Bank That Issues a Letter