Characteristics of a Documentary Letter of Credit:
1. a written obligation on the part of the bank to pay a specified amount subject to meeting of the conditions of the letter of
credit stipulated by the buyer
2. the bank assumes the obligation towards the seller on the basis of request by the
buyer
3. an irrevocable obligation
4. various types of letters of credit:
a. import, export (customer, supplier)
b. notified, confirmed
c. transferable, revolving, standby letter of
credit
5. one of the most important and best elaborated payment instruments
6. used in international and
domestic trade
7. certainty for the buyer
that payment of a specific amount will not be made until the seller meets the conditions set by the buyer
8. certainty for the seller that he or she will be paid
for the goods after the conditions of the letter of credit are met