Letters of Credit

It is often stipulated in contracts that the buyer establishes through the medium¹ of his banker a credit with a bank in the country of the exporter, and this credit is available to the exporter on producing evidence² of having handed over the consignments to dock-companies³, forwarding agents⁴, railway companies, etc.

This document credit may be unconfirmed (revocable)⁵ or confirmed (irrevocable)⁶, in the latter case it cannot be withdrawn before the fixed term has expired.

When letters of credit are to be made out the following correspondence takes place:

• request to open a credit,

• advice of the beneficiary⁷, viz. the seller of the goods, by the party establishing the letter of credit.

Payments under the conditions stated above are based on the confidence of the buyer and his assumption⁸ that the seller will supply goods in perfect accordance with specifications.

173

1. through the medium

2. on producing evidence

3. dock-company

4. forwarding agents

5. unconfirmed = revocable

6. confirmed = irrevocable

7. beneficiary n

8. assumpion n

NOTES

• через посредство

• по предъявлении доказа­тельств

• портовая компания, порт

• экспедиторская (экспедиру­ющая) компания

• отзывный, неподтвержденный

• безотзывный, подтвержден­ный

• получатель (денег)

• зд. предположение, уверен­ность

EXAMPLES OF DOCUMENTS CONCERNING THE ESTABLISHING OF LETTERS OF CREDIT

1. Bank requesting another bank in a foreign country to open credit in favor of an exporter.

Dear Sir,

At the request and for account of D. Baumgarten, Haifa, please open a confirmed irrevocable credit in favour of Joseph Miles, London, up to the amount of £ 1,400 (fourteenhundred Pounds Sterling) to be paid to him against delivery to you of the following documents:

Bills of Lading, full set, clean on board, made out endorsed to our order, freight prepaid.¹

Original Customs Invoice, in quintuplicate,², relating to 1000 electric cookers³ of British origin, as per order No. S+414 dd. 1.6.2006 placed by D. Baumgarten, shipped from London to Haifa.

Proportional payments against partial shipments are per­mitted.

This credit remains valid in London until 30th September 2006 incl.

Please advise this credit to the beneficiary without engagement on your part. Kindly reimburse⁴ yourselves by a sight draft on our

Head Office, G, Gracechurch St., London E.C. 2, mentioning the number of this credit as well as the reference number of the Bank of England E2B4 34.388, for your payments under this credit increased by your charges and send all documents to us by airmail. We hereby engage to honour the dispositions in virtue of this cre­dit,⁵ provided same have taken place in accordance with its terms.

Yours truly,

The Anglo-Palestine Bank Ltd.

Branch Tel-Aviv

2. Buyer writing to seller about establishing an irrevocable credit.

Gentlemen,

We have taken due note that goods against Order Pa 4/285 are ready and shipping instructions are being sent to you from London.

Following on our letter of 28th March we have today established an irrevocable credit for $ 13,740.00 and requested the Bank of the Manhattan Company, New York to advise you of the fact.

The credit is good for shipment on or before July 31st. We assume however, you will lose no time in carrying out our shipping instructions well before expiration of the credit.

Yours faithfully,

3. Revocable letter of credit.

Dated London... Amount £...