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a. Credit Agreement between a bank and a company b. Credit Agreement between a company and its suppliers c. Bank undertaking responsibility on behalf of its customer, in case the customer fails to pay to his supplier d. Agreement that facilitates a company to stretch the credit period extended by its supplier e. Agreement that facilitates the supplier to contract the credit period that is extended to a company.
Answer (C) IS CORRECT
Letters of Credit are documents that prove the seller has performed the duties specified by an underlying contract (e.g., the sale of goods contract) and the goods/services have been supplied as agreed Normally Financial Instituition or Bank act as a Mediator between seller and purchaser.
c
c is the correct answer.
a Letter of credit is an acknowledgement letter issued on behalf of the Customer by the Customer's bank to which the Bank accept the liability of Honouring the Bills in the event of Maturity of the bills--at sight, after sight and after date.
Option 'C' is the Correct answer
C is the righ answer
C. Bank undertaking responsibility on behalf of its customer, in case the customer fails to pay to his supplier
letter of credit is a is an instrument issued by a bank in favour of the beneficiary (suppliers) at the request of openers (importers/buyers) under which bank undertakes to honour bill(s) drawn under the L/C complying with the terms incorporated in the Letter of Credit by the openers and opening bank. If the L/C is payable at sight, to pay at sight, and if the L/C states usance, then to undertake to pay at maturity and then effect payment at maturity as per its undertaking.
C....It is a written instrument issued by a bank at the request of its customers(importer)
The letter of credit (also known as L / C, documentary credit2 or "credoc") is a document proving a commitment by a buyer's bank to pay to the seller. The bank undertakes by this document to pay the seller, on behalf of the buyer, if the seller provides the documents (transport document, invoice, insurance document, packing list, The signatures, the bill of exchange if necessary, the deadline for submitting the file), in accordance with the conditions set out in the documentary credit [What?] 3. These documents are supposed to attest to the performance of its obligations by the seller. The term "documentary credit" is an abuse of language: the letter of credit differs fundamentally from the documentary credit in that it is not a payment instrument (but a guarantee). The settlement of an international commercial transaction benefiting from a letter of credit may be made by check, by draft, or by documentary delivery.
LC is the contingent liability undertakes by the bank to pay on behalf of the customer if documents being provided to it deems fit and proper and are in accordance with LC terms and conditions.
