letter of credit


letter of credit
Succinctly, a letter authorizing the addressee to pay money or supply a commodity to a third person on the credit of the writer. 24 Am J1st Guar § 20. Wilbert Ward, in his "American Commercial Credits" at page 9, says: "A buyer who can place in the hands of a seller a written instrument by the buyer's bank, authorizing the seller to draw in accordance with certain terms, and stipulating in legal form that such bills will be honored, has at his command an instrument which will make his business more attractive to the seller than would otherwise be the case. An instrument by which a bank gives formal evidence of its willingness to undertake this class of operation for one of its customers is what has come to be known as a commercial letter of credit." Ernesto Foglino & Co. v Webster, 217 App Div 282, 293, 216 NYS 225, 234.

Ballentine's law dictionary. . 1998.