A number of parties may benefit directly from the issuer's credit engagement.
But, letter of credit law distinguishes between the transfer of the right to draw under a credit and the assignment of the right to take the credit proceeds. That is, credit law reflects strong reservations on free alienation of the right to draw and credit law displays no reservations concerning the free alienation of the right to take the credit proceeds.
In letter of credit law, transfer is a misleading term. In effect, when a beneficiary transfers the credit, he usually causes the issuer to issue a new credit to the transferee.
But letter of credit law prohibits transfer of letter of credit except for the case of stipulation of the term, 'transferable'. In the meaning, the language of the UCP500 is rather ambiguous on the extent of the beneficiary's right to transfer.
So. this study examines the transfer of letter of credit based on UCP500 art.48, 62UCC 5-116, 95UCC 5-112, 113.
The conclusion is as follows :
First, transfering bank does not contain issuing bank. So, issuing bank cannot reject the request of the transfer by the beneficiary.
Second, in the case of transferable letter of credit, issuing bank does not have the right against second beneficiary that have against first beneficiary. But in the case of transfer by law, issuing bank have the right against second beneficiary that have against first beneficiary.