Letter Of Credit

Letter Of Credit, a letter, open or sealed, from a banker or merchant, containing a request to some other person or firm to advance the bearer of the letter, or some other person named therein, upon the credit of the writer a particular or an unlimited sum of money. A letter of credit is either general or special. It is general when addressed to merchants or other persons in general, requesting an advance to a third person, and special when addressed to a particular person by name requesting him to make such an advance. A letter of credit is not a negotiable instrument. When a letter of credit is given for the purchase of goods, the letter of credit usually states the particulars of the merchandise against which bills are to be drawn, and shipping documents (bills of lading, invoices, insurance policies) are usually attached to the draft for acceptance.