letter of credit

An engagement by a bank or other person made at the request of a customer that the issuer will honor drafts or other demands for payment upon compliance with the conditions specified in the credit. A credit may be either revocable or irrevocable. The engagement may be either an agreement to honor or a statement that the bank or other person is authorized to honor. U.C.C. No. 5-103. Letters of credit are intended generally to facilitate purchase and sale of goods by providing assurance to the seller of prompt payment upon compliance with specified conditions or presentation of stipulated documents without the sellers having to rely upon the solvency and good faith of the buyer. Lustrelon, Inc. v. Prutscher, 178 N.J.Super. 128, 428 A.2d 518, 523.
@ commercial letter
Type of letter of credit used by buyer of merchandise who sends it to bank in district in which he is to buy and seller then presents his bill of sale, etc. to obtain payment.
@ confirmed letter
Type of letter of credit in which local bank gives its guarantee that seller's draft will be honored if the bank which issued letter fails to honor it.
@ export letter
Type of letter of credit forwarded to seller or exporter advising him that a credit has been established in his favor by a foreign bank and further consenting to honor the seller's or exporter's draft for the goods.
@ general and special letter of credit
@ general letter of credit
@ special letter of credit
general and special letter of credit.
A general letter of credit is one addressed to any and all persons, without naming any one in particular, while a special letter of credit is addressed to a particular individual, firm, or corporation by name.
@ import letter
Type of letter of credit issued by a foreign bank to a local seller permitting him to draw draft on the foreign bank against shipment of the merchandise.
@ irrevocable letter
Type of letter of credit in which issuing bank guarantees that it will not withdraw the credit or cancel the letter before the expiration date. A letter of credit which cannot be modified or revoked as regards the customer or the beneficiary without his or her consent.
@
\
- open credit (See also open letter of credit)
@ revocable letter
Letter of credit in which the issuing bank reserves the right to cancel and withdraw from the transaction upon appropriate notice.
@
@ standby letter
A letter of credit which commits the issuer to honor the credit not upon evidence of performance by the beneficiary, as by presenting evidence of the shipment of goods to the customer, but upon evidence or a mere declaration of the customer's default in the underlying transaction with the beneficiary.
@ straight credit
A letter of credit that does not run in favor of purchasers of drafts drawn thereunder.
@
- time credit
@ transferable credit
A letter of credit that authorizes the beneficiary to assign the right to draw thereunder.
@ traveler's letter
Type of letter of credit used by one traveling abroad in which the issuing bank authorizes payment of funds to holder in the local currency by a local bank. The holder signs a check on the issuing bank and the local bank forwards it to the issuing bank for its credit
@

Black's law dictionary. . 1990.

Look at other dictionaries:

  • letter of credit — letter of credit: a document issued to a beneficiary at the request of the issuer s customer in which the issuer (as a bank) promises to honor a demand for payment by the beneficiary in order to satisfy or secure the customer s debt compare… …   Law dictionary

  • Letter of credit — Credit Cred it (kr[e^]d [i^]t), n. [F. cr[ e]dit (cf. It. credito), L. creditum loan, prop. neut. of creditus, p. p. of credere to trust, loan, believe. See {Creed}.] 1. Reliance on the truth of something said or done; belief; faith; trust;… …   The Collaborative International Dictionary of English

  • Letter of credit — Letter Let ter, n. [OE. lettre, F. lettre, OF. letre, fr. L. littera, litera, a letter; pl., an epistle, a writing, literature, fr. linere, litum, to besmear, to spread or rub over; because one of the earliest modes of writing was by graving the… …   The Collaborative International Dictionary of English

  • letter of credit — n. a letter from a bank asking that the holder of the letter be allowed to draw specified sums of money from other banks or agencies, to be charged to the account of the writer of the letter …   English World dictionary

  • letter of credit — n an official letter from a bank allowing a particular person to take money from another bank …   Dictionary of contemporary English

  • Letter of credit — After a contract is concluded between buyer and seller, buyer s bank supplies a letter of credit to seller …   Wikipedia

  • letter of credit — An obligation issued by a bank on behalf of a bank customer to a third party. There are many different kinds of letters of credit. The two most common are commercial letters and standby letters. A commercial or trade letter of credit is a bank… …   Financial and business terms

  • letter of credit — documentary credit A letter from one banker to another authorizing the payment of a specified sum to the person named in the letter on certain specified conditions. Commercially, letters of credit are widely used in the international import and… …   Accounting dictionary

  • letter of credit — documentary credit A letter from one banker to another authorizing the payment of a specified sum to the person named in the letter on certain specified conditions (see letter of indication). Commercially, letters of credit are widely used in the …   Big dictionary of business and management

  • letter of credit — noun a document issued by a bank that guarantees the payment of a customer s draft; substitutes the bank s credit for the customer s credit • Hypernyms: ↑document, ↑credit • Hyponyms: ↑commercial letter of credit, ↑traveler s letter of credit,… …   Useful english dictionary

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