06:

TRANSPORTATION
DOCUMENTS AND MEANS
OF PAYMENT
 1 BILLS OF LADING
Carriage is an important feature of international contracts for the sale of goods. A bill of
lading is A document which is issued by A carrier to the shipper (Ship cheyyan uddeshikkunna seller),
acknowledging that the carrier has received the shipment of goods and that they have been
placed on board A particular vessel. The bill of lading is therefore an important document
because it is evidence of when the goods have passed to the carrier.
Bills of lading may be negotiable or non-negotiable.
• Negotiable bill of lading- the person who legally owns the bill of lading owns the goods and
has the right to re-route them. A negotiable bill is issued to the seller's order, rather than to
a named recipient of the goods. The carrier holds the goods until it receives an original bill
of lading endorsed by the seller, which has been presented by the seller to the bank for
payment.
• A non-negotiable bill of lading (which includes all airway bills), the bill of lading names a
recipient to whom the carrier must deliver the goods.
The bill of lading does three things:
a) It provides evidence that the goods described in it have been received by the carrier.
b) It either provides evidence of, or contains within it, the contract of carriage and the terms on which
the goods are to be carried
c) It can be a document of title to the goods being shipped.
A bill of lading may be one of four types:
d) An inland bill of lading relates to a contract for transporting goods overland to the seller’s
international carrier
e) An ocean bill of lading relates to a contract for carriage of goods from a seller in one country to a
specified port in another country.
f) A through bill of lading combines the contracts for inland and marine carriage. It covers transport
from one specified point to another.
g) An airway bill relates to a contract for carriage of goods by air (both domestic and international)
from one point to another.
 2 MEANS OF PAYMENT
In a normal sale of goods, payment is effected in cash, by cheque or by automatic
clearing between one bank and another. 

3 INTERNATIONAL BANK
TRANSFERS
A common and straightforward method of making an international payment is to
carry out an international bank transfer. Here the buyer orders their bank (in country
A) to transfer money to a receiving bank (in country B) where it will be credited to the
seller.
 4 UNCITRAL MODEL LAW ON
INTERNATIONAL CREDIT TRANSFERS
The UNCITRAL model law on international credit transfers sets out the terms on which funds are
transferred from a buyer to a seller through the international banking system, and the rights and
liabilities that ensue.
The model law applies to credit transfers where any sending bank and its receiving bank are in different
states
The UNCITRAL model law on international credit transfers defines a credit transfer as 'the series of
operations, beginning with the originator’s payment order, made for the purpose of placing funds at
the disposal of a beneficiary. 
An international credit transfer would involve the sender in country a instructing their bank x (the
sending bank) to send a payment order and fund directly to bank y in country b (the receiving and the
beneficiary's bank) where the beneficiary has an account. Often, however, the receiving and the
beneficiary's bank are not the same, and indeed there may be intermediary banks along the way
 4.1 OBLIGATIONS OF THE SENDER OF A
PAYMENT ORDER
• The sender of a payment order is the buyer of the goods. They are normally therefore the
originator of the credit transfer, since the originator sends a payment order to the originator's
bank
• Originator- the issuer of the first payment order in a credit transfer
• Intermediary bank- any receiving bank other than the originator’s bank and the beneficiary’s
bank
The key obligation of the sender is to pay the receiving bank for the payment
order when the bank accepts it. Problems arise if:
• The person sending the payment order did not have authority to do so
• The payment order was forged
Chila cases il automatic clearance okke nadakkum.. Appo Fraud ppd okke indavan chance und. There are
three steps in the model law to prevent this happening:
• The sender is only bound by the payment order if the sender issued it himself or it was
issued by another person who had authority to bind the sender (article 5(4)(a) and (b)).
• A purported sender is bound if the payment order is subject to authentication
procedures agreed between the sending and receiving banks, and the receiving bank had
carried out this authentication (article 5(2)(b)).
• A sending and receiving bank cannot agree between themselves that the purported
sender is bound in this way if the authentication process is not commercially reasonable
(article 5(2)(a) by implication)..
 4.3 OBLIGATIONS OF THE SENDER OF A
PAYMENT ORDER

The sender of a payment order is the buyer of the goods. They are normally
therefore the originator of the credit transfer, since the originator sends a
payment order to the originator's bank.
Article 5 (6) sets out the one real obligation of a sender. "To pay the receiving
bank for the payment order when the receiving bank accepts it.
 4.4 HOW DOES THE SENDER MAKE
PAYMENT TO THE RECEIVING BANK
An originator may not have an account with the originator's bank and may
therefore pay the amount of the credit transfer, plus the applicable fees, to the
originators bank in cash. This is often the case when an individual originates the
payment order. In most cases, however, the originator will have an account with
the sending bank, which will have an account for the originator at the receiving
bank.
(Linked bank il koodi alla transfer nadakkunnath engil korach fees okke kodukkendi varum)
 4.5 OBLIGATIONS OF THE RECEIVING
BANK

The receiving bank is required to execute a payment order that it accepts.

Acceptance is indicated by:
• Issuing a payment order to the beneficiary's bank to carry out the payment order received
(article 72(c))
• Debiting the sender's account at the receiving bank for the value of the payment order
(article 72(d))
• Giving notice of intention to the sender of acceptance (article 72(b))
• Failing to give notice that it does not accept the payment order within the required time
(within one banking day of receipt) (article 72(e)) (Beneficiary bank accept cheythittillengil athum notify
cheyyanam sender de bank ne)
Execution is by:
 Placing funds at the disposal of the beneficiary (i.E. In his bank account) (article 10(1)), or
 If the receiving bank is not the beneficiary's bank, the receiving bank issuing a payment
order to the beneficiary's bank, which is then obliged to place funds at the beneficiary's
disposal (article 8(2)).
Problems may arise with credit transfers, e.g. If there are inconsistencies in the payment order
(e.g. The amount given in words and numbers do not match)
(article 8(3), (4) and (5)). When this happens, the receiving bank is obliged to:
• Notify the sender of the problem (article 11)
• Seek the assistance of the next receiving bank to complete the bank transfer if the problem
arose at the receiving bank (article 13)
• Repay the sending bank the amount credited to it, with interest, if the credit
transfer fails (article 14).
 4 . 5 . 1 O B L I G AT I O N S TO E X E C U T E A PAY M E N T
ORDER

The obligation of a receiving bank other than the beneficiary's bank is to issue a
payment order that will properly implement the payment order received. The
obligation of the beneficiary's bank is to place the funds at the disposal of the
beneficiary. Until the receiving bank accepts the payment order, it has no
obligation to execute it.
In most cases a receiving bank (that is, not the beneficiary's bank) accepts a
payment order at the point when it issues it own payment order intended to carry
out the payment order received. A beneficiary’s bank accepts a payment order at
the point when it credits the account of the beneficiary.
 4.6 BANK’S LIABILITY FOR FAILURE TO
PERFORM ONE OF ITS OBLIGATIONS
In addition to the money back (+ interest) guarantee outlined above, a bank may also have
liability to pay additional interest if the credit transfer is delayed through its fault (article 17(1)).
(Receiving bank nte nthelum issues moolam payment nthelum fail aakuvanel delay vananthin oru interest koode kootiyitt aayirikkum
senderkk receiving bank kodukkendath)

4.7 COMPLETION OF CREDIT TRANSFER AND

ITS CONSEQUENCES
A credit transfer is completed when the beneficiary's bank accepts a payment order for the
benefit of the beneficiary: article 19. At that point the banking system has completed its
obligations to the originator. At this point:
• The matter becomes a private banking issue between the beneficiary and his bank
• The other banks in the process have fulfilled their obligations.
 5 BILLS OF EXCHANGE
A bill of exchange is an unconditional order in writing by one person to another to pay a
specified sum to a specified person. The parties to a bill of exchange are the drawer, the drawee
(the bank) and the payee initially. The drawee may become its acceptor by accepting the bill.
The payee may become an endorser by endorsing the bill to another holder or the hearer
 6 UN CONVENTION ON INTERNATIONAL
BILLS OF EXCHANGE AND
INTERNATIONAL PROMISSORY NOTES

The UN convention on international bills of and international promissory

notes sets out the terms on which buyers may pay sellers by means of a
written instrument. A bill of exchange represents a right to receive payment,
and this right can be transferred.
 6.2 HOW MUCH THE BILL IS FOR
The sum payable on a bill is deemed to be a definite sum. This is even if the bill states
that it is to be paid:
 With interest
 By instalments
 According to a rate of exchange indicated in the bill
 To be determined as directed by the bill
 In a currency other than the currency in which the sum is expressed in the bill
If there is a discrepancy between the sum expressed in words and the sum expressed
in figures, the sum payable by the instrument is the sum expressed in words: article
8(1).
 6.3 WHEN THE AMOUNT IS PAYABLE
A bill is payable on demand if it states that it is payable at sight or on demand or on presentation, or
if no time of payment is expressed: article 9(1). The time of payment of a bill payable on demand is
the date on which the instrument is presented for payment: article 9
A bill which is payable at a definite time and which is accented or endorsed or guaranteed after
maturity is a bill payable on demand as regards the acceptor, the endorser or the guarantor.
According to article 9(3) a bill is deemed to be payable at a definite time if it states that it is payable:
a) On a stated date, or at a fixed period after a stated date, or at a fixed period after the date of the
instrument
b) At a fixed period after sight (determined by the date of acceptance or, if the bill is dishonored by
non-acceptance, by the date of protest or, if protest is dispensed with, by the date of dishonor)
c) By instalments
 6.4 PARTIES TO THE BILL
• The payee : The payee is the person or persons to whom the bill's drawer has instructed payment to
be made.
• The drawer : The drawer is the person who has instructed payment to be made.
• The drawee and the acceptor : He drawee is the person - who is instructed by the drawer to pay the
payee
• Holder : The person who holds the bill (this might be the payee, the drawer, or the drawee)
• Endorsee : Anyone to whom the bill is transferred to make them the beneficiary of the bill
The drawee is not liable on a bill until they accept it: article 40(1)
An acceptance must be written on the front or back of the bill and may be effected: article 41:
a) By the signature of the drawee accompanied by the word 'accepted' or similar import; or
b) By the signature alone of the drawee.
 6 . 4 . 4 T H E G U A R A N TO R

Payment of a bill, whether or not it has been accepted, may be guaranteed, as to the whole or
part of its amount, for the account or a party of the drawee. A guarantee may be given by any
person, who may or may not already be a party: article 46. A guarantee must be written on the
instrument or on a slip affixed therefore and it may be effected by a signature alone on the
front of the bill. A signature alone on the front of the bill, other than that of the drawer or the
drawee, is a guarantee.

6.5 TRANSFERRING AN INTERNATIONAL

BILL OF EXCHANGE
Instead of presenting the bill to the acceptor for payment, the payee may instead choose to
transfer the right to receive payment to another person (for instance, a supplier they owe
money to). The transfer is effected by the process of endorsement with the payee becoming
the endorser, and the supplier becoming the endorsee
 6.5.1 ENDORSEMENT
An endorsement must be written on the instrument or on a slip affixed thereto
(allonge). It must be signed: article 14(1). An endorsement may be:
(a) In blank, that is, by a signature alone or by a signature accompanied by a
statement to the effect that the bill is payable to a person in possession of it;
(b) Special, that is, by a signature accompanied by an indication of the person to
whom the bill is payable.

A signature alone, other than that of the drawee, is an endorsement only if placed on
the back of the bill
 6.5.2 LIABILITY OF THE ENDORSER

Endorsers agree that upon dishonour of the bill by non-acceptance or by non-

payment, and upon any necessary protest, they will pay the bill to the holder,
or to any subsequent endorser or any endorser’s guarantor who takes up and
pays the bill: article 44(1).
(Endorsee bill kond chellumbol bill dishonour aayi poyal Endorser aa payment koduthirikkanam)
 6.5.3 THE HOLDER OF A BILL

As a bill is transferred either by endorsement or simply by transfer, the person to

whom it is transferred is known as the holder of the bill.
A person is a holder if they are:
a) The payee in possession of the bill; or
b) In possession of all which has been endorsed to them. Or on which the last
endorsement is in blank, and on which there appears an uninterrupted series of
endorsements. This is even if any endorsement was forged or was signed by an
agent without authority: article 15(1)
 6.6 PRESENTING THE BILL FOR THE
PAYMENT
To obtain payment of the bill, it must be duly presented for payment. This means that
the holder must present the bill to the drawee or the acceptor on a business day at a
reasonable time: article 55. (bill present cheyyenda place bill il paranjittillengil Drawee de address il venam bill
present cheyyan)

6.6.1 DISHONOUR FOR NON PAYMENT

A bill is dishonoured by non-payment under article 58:

(a) if payment is refused upon due presentation or if the holder cannot obtain the
payment to which they are entitled
(b) if presentation for payment is dispensed with and the instrument is unpaid at
maturity
 6.7 PROTESTING THE BILL FOR
DISHONOUR
If an instrument is dishonoured by non-acceptance or by non-payment, the holder may
exercise a right of recourse only after the instrument has been duly protested for
dishonour: article 59.
A protest is a statement of dishonour drawn up at the place where the bill has been
dishonoured and signed and dated by a person authorised in that respect by the law of
that place. The statement of dishonour must specify:
(a) The person at whose request the bill is protested
(b) The place of protest
(c) The demand made and the answer given, if any, or the fact that the drawee or the
acceptor could not be found: article 60.
Correct time nu bill present cheythittum dishonour aayi poyi
 6.8 HOW MUCH IS PAYABLE BY THE
LIABLE PARTY?

The holder may exercise their rights on the bill against any one party, or
several, or all parties, liable on it and is not obliged to observe the order in
which the parties have become bound. Any party who takes up and pays the
bill may exercise their rights in the same manner against parties liable to
them: article 69(1).
 6.9 ADVANTAGES OF INTERNATIONAL
BILLS OF EXCHANGE
a) They provide a convenient method of collecting payments from buyers in a different state.
b) The seller can seek immediate finance, using term bills of exchange, instead of having to
wait until the period of credit expires (ie until the maturity of the bill). At the same time, the
buyer is allowed the full period of credit before payment is made.
c) On payment, the foreign buyer keeps the bill as evidence of payment, so that a bill of
exchange also serves as a receipt.
d) If a bill of exchange is dishonoured, it may be used by the drawer to pursue payment by
means of legal action in the drawee's country.
e) The buyer's bank might add its name to a bill to indicate that it guarantees payment at
maturity.
 7 LETTERS OF CREDIT
o Letters of credit provide a method of payment in international trade which gives the seller a risk-
free method of obtaining payment, and which ensures for the buyer that the seller complies to the
letter with the terms of the underlying sales contract
o A basic letter of credit is issued by the issuing bank at the request of the buyer, and advised to the
seller’s advising bank. Provided the requisite documents are presented by the seller, payment is
made by the advising bank and reimbursed by the issuing bank. Letters of credit are irrevocable
unless otherwise stated.
The procedure is as follows:
The buyer and the seller first of all agree a contract for the sale of the goods, which provides for
payment through a letter of credit.
The buyer (the applicant) then requests a bank in his country to issue a letter of credit in favour of
the seller. This bank which issues the letter of credit is known as the issuing bank.
The issuing bank, by issuing its letter of credit, guarantees payment to the seller (the
beneficiary/payee), provided the seller complies with the requirements as to
documentation. Banks are involved in the credits, not in the underlying contracts.
The issuing bank asks the seller's bank in the seller's country to advise the credit to
the seller.
The advising bank establishes the authenticity of, and agrees to handle, the credit
(on terms arranged with the issuing bank).
The advising bank (in the seller's country) might be required by the issuing bank to
add its own "confirmation' to the credit. The advising bank would then be adding its
own guarantee of payment to the guarantee already provided by the issuing bank.
A letter of credit arrangement must be made between the seller, the buyer and
participating banks before the sale takes place.
TYPES OF LETTER OF CREDIT:
a) Confirmed letter of credit: the advising bank (for a fee) confirms that payment will
be made to the seller provided the requisite documents are presented by the
seller, payment being made by the advising bank even if the issuing bank or buyer
fails to reimburse the payment
b) Unconfirmed letter of credit: the advising bank does not guarantee payment even
in the event of default by the issuing bank, but confirms that the letter of credit is
authentic.
c) Revocable letter of credit: can be amended or cancelled by the buyer at any time
without notice to the seller. They are rarely used since they give little protection
to the seller.
d) Irrevocable letter of credit: it cannot be amended or called without agreement of
all parties.
(e) Standby letters of credit are used in cases where another, less secure, method of payment
has been agreed. If the other method fails then the seller can claim payment under the standby.
These are subject to the UN convention on independent guarantees and standby letters of credit.
(Already veretho payment method und but oru dairyathin standby aayt letter of credit vachu)

(f) Revolving letters of credit are used where there is a course of dealings between buyer and
seller, so it is easier to keep a letter of credit open at all times which may revolve automatically or
subject to certain conditions
(g) The letter of credit may be time-revolving, which means it is reinstated after use for the next
regular shipment, until the amount of the credit has been used up. If it is value-revolving, once its
value has been used it can be reinstated in the same amount, for further shipments.
(h) A transferable letter of credit allows the seller to transfer the right to receive payment to
another person who was not party to the original contract, such as the original supplier of the
goods.
(i) A back-to-back letter of credit allows the seller to use the buyer's letter of credit as
security to issue a second letter of credit from him as buyer to the original supplier or seller.
 8 LETTERS OF COMFORT
A letter of comfort is a letter issued to a third-party lender by a parent company.
The letter acknowledges the parent company's approval of a subsidiary company's
attempt at raising finance. The letter of comfort does not guarantee the loan given
to the subsidiary company. It merely gives reassurance to the lender that the
parent company is aware of, and approves of, the situation.