Abstract

Purpose: This study aimed to deal with disputes between the seller and the buyer in connection with the Letter of Credit (LC) in a sales contract. The Contracts for the International Sale of Goods (CISG) provides the rules on the fundamental breaches which can lead to termination of the sales contract but the CISG is not enough to govern issues arising from the LC disputes when the sales contract is not clear about the payment terms. This paper tried to find some solutions to the disputes by considering international rules, such as the Principles of European Contract Law (PECL). Research design, data and methodology: The methodology applied in this study was an analysis of some court decisions and extended literature review. Results: The study revealed that in contracts for the sale of international goods, the buyer was obliged to open an LC as manner of payment. If the buyer failed to open an LC or amend the terms of the LC, the seller could avoid the contract because this could deprive the seller’s expected interest. Conclusions: Few studies in Korea have been comprehensively analyzed in terms of the obligations of regarding the LC with respect to the CISG in court cases. This study suggests safeguarding the buyer and seller when the LC is considered absolute or conditional.