This is a Documentary Letter of Credit to be issued by a Bank for a Beneficiary (Seller) on request by an Applicant (Buyer). It is a payment mechanism used in international trade to provide an economic guarantee for parties from a creditworthy bank. This is a transferrable documentary credit from the issuing bank to the Beneficiary.
A Documentary Letter of Credit is a payment mechanism used in international trade to provide an economic guarantee for parties from a creditworthy bank. The most common scenario for a Letter of Credit to be issued is where two parties enter into an agreement or a deal, and they do not know each other’s credibility well enough. Such letters of credit require the Beneficiary to present a draft and specified documents in order to receive payment, hence the name "documentary credit".
This Documentary Letter of Credit, in particular, is 'transferable', meaning that credit can be freely transferred to one or more secondary beneficiaries. In addition, it is irrevocable meaning that it cannot be cancelled or modified by the issuing bank.
This document should be carefully read by the Issuing Bank and the Beneficiary.
Both the Bank and Beneficiary should sign and return a copy, and once signed, both parties should get a copy. To avoid any future disputes, both parties may wish to have their signatures witnessed.
If either party wishes to amend the agreement in the future, both parties should agree to do so, and the original agreement and amendments should be recorded in writing and signed by both parties.
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