Secured Transactions: Purpose, Requirements, & Payment Flashcards Preview

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Flashcards in Secured Transactions: Purpose, Requirements, & Payment Deck (4)
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1

Letter of Credit:
Definitions

Applicant: person on whose account LC is issued.
Beneficiary: person entitled to having LC honored
Issuer: bank or person that issues LC
Correspondent Bank: bank handling payment
Nominated Person: person/bank designated to pay, negotiate, or give value
Presentation: delivery of document to issuer/nominated to honor or give value under LC
Record: tangible, electronic, or other medium that is retrievable in perceivable form

2

Letter of Credit:
Creation:

- Sales contract, including provision for LC
- Buyer applies to bank for credit
- Buyer's bank forwards LC to creditor's bank
- Correspondent bank sends LC to creditor
- Seller prepares goods for shipment & doc's for correspondent bank
- Sends documents to buyer's bank

3

Letter of Credit:
General

- Any record that is documented with a signature
- Consideration not required
- Can be revocable (domestic only unless agreed)
- Expire after one year
- If "perpetual" expire after 5 years
- One year statute of limitations

4

Letter of Credit:

- Issuer must honor upon presentment
- 7 days to honor or give notice of defect
- LC is independent of the underlying contract
***Domestic LC's are revocable, but, unless otherwise agreed, International LC's are not.***
***Generally, LC's are not transferable***

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