- 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.See also advice of credit.@ commercial letterType 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.See also commercial credit.@ confirmed letterType 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 letterType 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 creditgeneral 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 letterType 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 letterType 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 letterLetter of credit in which the issuing bank reserves the right to cancel and withdraw from the transaction upon appropriate notice.@@ standby letterA 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 creditA letter of credit that does not run in favor of purchasers of drafts drawn thereunder.@- time credit@ transferable creditA letter of credit that authorizes the beneficiary to assign the right to draw thereunder.@ traveler's letterType 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. HENRY CAMPBELL BLACK, M. A.. 1990.