Legal encyclopedia. The letter a

LETTER OF CREDIT

- this is a conditional monetary obligation accepted by the bank on behalf of the payer, to make payments to the beneficiary of the funds upon presentation of the documents to the latter that meet the conditions of A., or to authorize another bank to make such payments.

The following types of A can be opened by banks:

1) covered (deposited) and uncovered (guaranteed);

2) revocable and irrevocable (can be confirmed).

When a covered (deposited) A. is opened, the issuing bank transfers the amount A. (coverage) at the expense of the payer or the loan granted to him to the executing bank for the entire period of validity of A.

When uncovered

(Guaranteed) A. Issuing bank

Provides the executing bank the right to write off money from the

Correspondent account within the amount of A.

The procedure for debiting funds from the correspondent account of the issuing bank for a guaranteed AA is determined by agreement between banks.

Response is A., which can be changed or canceled by the issuing bank on the basis of a written order of the payer without preliminary agreement with the recipient of funds and without any obligations of the issuing bank to the recipient of funds after the withdrawal of A.

Irrelevant is A., which can be canceled only with the consent of the recipient of funds. At the request of the issuing bank, the executing bank can confirm irrevocable A. (confirmed by A.).

Irrevocable A, confirmed

Executing bank, can not be changed or canceled without the consent of the executing bank. The procedure for providing confirmation on an irrevocable confirmed A. is determined by agreement between banks.

A. is intended for settlements with one recipient of funds.

Conditions A. may be provided for the acceptance of the person authorized by the payer.

The recipient of funds may refuse to use A. before the expiration of its validity period, if the possibility of such a failure is provided by the conditions of A.

The order of settlements for A. is established in the main agreement, in which it is recommended to reflect the following:

1) the name of the issuing bank;

2) the name of the bank servicing the recipient of funds;

3) the name of the recipient of the funds;

4) the amount of A;

5) view A .;

6) the method of notifying the recipient of funds for the opening of A .;

7) a method for notifying the payer of the account number for the deposit of funds opened by the performing bank;

8) a complete list and precise description of documents submitted by the recipient of funds;

9) the validity term of the company, the submission of documents confirming the delivery of goods (works, services), and the requirements for the execution of these documents;

10) the payment condition (with or without acceptance);

11) responsibility for non-fulfillment (improper performance) of obligations.

In the main contract may be included other provisions relating to the calculation procedure for A.

The payment for A. is made in a non-cash order by transferring the amount of A. to the account of the recipient of funds.

Partial payments on A.

For violations committed in the performance of a letter of credit, banks are liable in accordance with the law.