Part IV International Business Law, XXV Letters of Credit
Letters of credit1 play an important role in international sales as an instrument for payment in international documentary sales. They establish an undertaking of a bank acting on behalf of the buyer or the seller. The ‘documentary credit’ guarantees fulfilment of the seller’s claim of payment upon presentation of certain documents. The ‘standby letter of credit’ secures the obligation of the seller to perform the sales contract for the benefit of the buyer. On the basis of an agreement between the applicant (buyer) and his bank, the applicant’s bank (issuing...