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 guaranty
◇ A letter of credit is usu. requested by a buyer of merchandise (the issuer's customer) to be issued to the seller (the beneficiary) in order to secure the payment for the merchandise. In effect the letter of credit is considered to extend a line of credit or substitute the issuer's credit for the customer's.
commercial letter of credit: a letter of credit which is used to satisfy payment for merchandise and which usu. requires the beneficiary to present a draft and some documentary proof (as of shipment or receipt of the merchandise) when making a demand for payment
irrevocable letter of credit: a letter of credit which the issuer cannot revoke or modify without the consent of the issuer's customer or the beneficiary
stand·by letter of credit: a letter of credit which is used to secure payment in case of default by the issuer's customer and which requires the beneficiary to present some documentary proof of such default when making a demand for payment

Merriam-Webster’s Dictionary of Law. . 1996.

letter of credit
I noun credit account, credit note, guaranty, negotiable instrument, paper credit, security associated concepts: financial guarantee, letter of delegation, letter of exchange, letter of introduction, letter of license, letters testamentary II index draft

Burton's Legal Thesaurus. . 2006


letter of credit
n.
A promise made by a bank or other financial institution to another bank or financial institution that it will honor demands for payment on behalf of a specified customer under specified conditions.

The Essential Law Dictionary. — Sphinx Publishing, An imprint of Sourcebooks, Inc. . 2008.


letter of credit
A letter from a bank or other financial institution guaranteeing payment of a certain amount on behalf of a customer. The letter of credit substitutes the bank's credit for the customer's credit. Letters of credit are used primarily to facilitate international transactions.
Category: Business, LLCs & Corporations → Business Accounting, Bookkeeping & Finances
Category: Business Cash Flow Problems & Bankruptcy
Category: Business, LLCs & Corporations → Business Tax & Deductions
Category: Personal Finance & Retirement → Taxes → Tax Audits

Nolo’s Plain-English Law Dictionary. . 2009.

letter of credit
International
Also known as a documentary credit.
The most frequent form of payment in international trade. A letter of credit is a contract under which a bank agrees to pay the seller, in connection with the export of specific goods, against the presentation of specified documents relating to those goods. The letter of credit is issued at the request of the buyer (who is then referred to as the applicant for the credit) in favour of the seller (the beneficiary of the credit).
For more on letters of credit, see Practice note, Letters of credit: overview (www.practicallaw.com/1-107-3740).
+ letter of credit
USA
A three-party instrument or document issued by a bank that guarantees the payment of a customer's draft up to a stated amount for an express period of time. The purpose is to substitute the issuing bank's credit for that of the applicant and eliminate the risk to the beneficiary that the applicant will not pay. Letters of credit are irrevocable unless expressly stated otherwise. They are used in many circumstances and are prevalent in international trade.
There are several different types of letters of credit including:
• Commercial − used as a primary means of making payments (such as paying for goods shipped from overseas).
• Standby − used as a secondary source of payment (in lieu of a guaranty) or as a direct payment on a debt issue (such as monthly interest payments on municipal bonds).
• Performance − issued to guarantee performance under a contract.
• Confirmed − provided by a correspondent bank and guaranteed by the issuing bank.
For the purpose of the UCC a letter of credit is a definite undertaking that satisfies the requirements of Section 5-104 of the UCC by an issuer to a beneficiary at the request or for the account of an applicant or, in the case of a financial institution, to itself or for its own account, to honor a documentary presentation by payment or delivery of an item of value (UCC §5-102(a)(10)). A letter of credit is an asset type over which an entity can grant a security interest under Article 9 of the UCC.
Glossary

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.


letter of credit
n. A financial instrument, typically issued by a bank, in which the issuing institution commits to pay a draft presented by a third party in a specified format or meeting certain criteria.

Webster's New World Law Dictionary. . 2000.


letter of credit
A written instrument from a bank or merchant in one location that requests that anyone or a specifically named party advance money or items on credit to the party holding or named in the document.

Dictionary from West's Encyclopedia of American Law. 2005.


letter of credit
A written instrument from a bank or merchant in one location that requests that anyone or a specifically named party advance money or items on credit to the party holding or named in the document.

Short Dictionary of (mostly American) Legal Terms and Abbreviations.

letter of credit
n.
   a document issued by a bank guaranteeing to provide a customer a line of credit (automatic loan up to a certain amount) for money or security for a loan. Such a letter is used primarily to facilitate long-distance business transactions.

Law dictionary. . 2013.

Look at other dictionaries:

  • 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 — 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 …   Black's law dictionary

  • 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 …   Black's law 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. 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

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