NEWSLETTER-2017

251 LAW OF OBLIGATIONS definition would be helpful to capture various bank letters of credit that are issued, in practice. Certain scholars simply describe bank let- ters of credit as a guarantee granted by banks 2 . Other scholars define in a more specific way bank letters of credit as a type of agreement whereby, upon request of the customer, the bank guarantees to a third party, who is willing to transact with the customer of such bank, to pay the undertaken amount upon occurrence of the determined event regardless of the fulfillment of the customer of its obligations in its relationship with the third party 3 . In order to understand bank letters of credit, which are a type of guarantee agreement, the elements of guarantee agreement should be reviewed. Elements Directing the Addressee to a Course of Action The bank, as the issuer of the bank letters of credit, and with an aim to direct the guaranteed person ( i.e. , addressee) to a course of ac- tion, should undertake to compensate the consequences (such as loss of profit, suffered damages) of the act of the guaranteed person. Such course of action could be to perform an act, or non-performance of an act. Turkish law enables the guarantors to guarantee all of the ob- ligations of a third party, including performance or non-performance obligations. The aim of the bank to direct the guaranteed person to act in such a manner would characterize the relationship as a guarantee 4 . Undertaking a Risk The guarantor undertakes to compensate certain risks. With a guarantee agreement, the risks of an obligor of an underlying agree- ment that may arise upon occurrence of a detrimental event, or non- occurrence of an economically beneficial event for the creditor of the underlying agreement, would be secured. In order to be secured by a bank letter of credit, such a risk should be independent from the rela- Relationships between the Parties, and conditions of Validity, Journal of Bank and Finance Law, 2016, İstanbul, p. 645. 2 Vahit Dogan, Bank Letters of Credit, Ankara, 2002, p. 32. 3 Unal Tekinalp, Fundementals of Banking Law, C.I., Istanbul, 1988, p. 372. 4 Dogan, p. 34.