Terms Of Letter Of Credit


A Letter of Credit is a letter written by a bank to a vendor to assure formally that a buyer’s payment to a seller shall be received on time. However, due to a certain situation, if the purchaser is unable to make the full payment, the bank shall be responsible for covering the amount of the purchase. A Letter of Credit is not issued for every small purchase that the buyer makes. It is issued in cases of wealthy purchases, such as international trades.

The letter should be written very professionally and without any errors. The letter should mention the right date on which the purchase was made. The writer should also mention other important details, such as the order of goods, the amount payable, the date on which the full amount of payment shall be made, etc. The letter should be concluded by thanking the reader for their patience.

Sample Letter

The following is a sample of a Letter of Credit.


Chanakya Mishra

Chief General Manager,

South Indian City Bank,

4-Pusa Road,

Old Rajinder Nagar,




Averill Campbell

Assistant General Manager,

Den and Smith Co. Ltd.

42-Westfield Stratford City,


Subject: Letter of Credit for Payment of 150 Den and Smith Jeans

Dear Mr. Averill Campbell,

I am writing to you on behalf of one of our account holders, Mr. Pradeep Kumar, about his purchase from your particular store, Den and Smith Co. Ltd. on DD/MM/YYYY. Mr. Kumar had placed an order of 150 Jeans, the total cost of which is amounted to be £8780.

As had been discussed by Mr. Kumar in his earlier official talks with you, the two parties had decided to make and receive the payment in two installments. The first installment of £5620 had been made by him and received by you on DD/MM/YYYY. The second installment was to be settled on DD/MM/YYYY. However, due to certain unfavorable conditions, Mr. Pradeep Kumar was unable to clear off the payment. Hence, he had requested to extend the date of the final installment to DD/MM/YYYY. Kindly treat this letter as a formal assurance to guarantee the clearance of your payment on DD/MM/YYYY. In case Mr. Kumar is not in a condition to make the payment by DD/MM/YYYY, South Indian City Bank shall be liable to make the payment to you and clear off the settlements between Mr. Pradeep Kumar and Den and Smith Co. Ltd.

Please be assured that you shall receive the due amount on the date promised. We acknowledge you for your patience and cooperation.

Thanking you.

Yours sincerely,

Chanakya Mishra

Chief General Manager,

South Indian City Bank

Related Post

Leave a Reply

Your email address will not be published. Required fields are marked *

19 + 12 =