Abstract:
Letter of credit is an undertaking by a bank to make a payment either directly to a named beneficiary or through a confirming or advisory bank within a specified time against the presentation of documents. Import of public goods by public body constitutes the major share of import of the country. All of the payment to such import by public bodies is to be made through LC. The process of LC involves the participation of at least four contracting parties and it relies on documents. As it purely relies on documents, it is not free from problems. The problem exacerbates when we come to LDCs like Ethiopia where the law on LC is outdated and where there is no modern mechanisms of controlling such problems. Exposing those problems by examining the current Ethiopian laws on the matter and the practice in the selected institutions is the main objective of the study. To achieve the objectives the researcher has employed both doctrinal and non doctrinal legal research methods. The thesis, however, only emphasizes on import LC in public contracts. The result of the study shows that, among others, lack of up to date law on the matter and the enactment of MOFEC directive which dictates public bodies to open LC only in CBE are the main problems in the area. The researcher would like to recommend the replacement of the current Ethiopian laws on LC with laws that contains provisions about rights and duties parties, accompanying documents of LC and all types of LCs. The researcher also recommends the repeal of MOFEC directive no. 4/2003 in a way of enabling public bodies to open LC in any efficient bank which can extend more favorable terms and conditions to the public bodies
