Applicant. The “Applicant” is the customer of the Bank. It is the person for whom the Bank issues a letter of credit.
Issuer. The “Issuer” is a Bank that issues the letter of credit for the account of its customer, the Applicant.
Beneficiary. The “Beneficiary” is the person who is entitled to obtain payment under a letter of credit. It is the person for whose benefit the letter of credit is issued.
Adviser. An “Adviser” is a Bank institution that notifies the Beneficiary of the issuance of a letter of credit. An Adviser simply gives notice. An Adviser does not become obligated to the letter of credit.
Confirmer. A “Confirmer” is a Bank which becomes obligated on a letter of credit by engaging either that it will itself honor a credit issued by another Bank or that such a credit will be honored by the Issuer or a third Bank. The Confirmer is actually liable on each letter of credit it confirms.
Draft. A “Draft” is an order to pay. A “sight draft” is payable on demand. A “time draft” is payable at a specified time. There is no special form that a draft must adhere to unless the letter of credit specifies the form.
Commercial or Payment Letter of Credit. A “Commercial” letter of credit is a letter of credit providing for payment to be made against documents. Commercial letters of credit are issued to enable the Applicant to purchase goods and are expected to be drawn upon to pay for those goods. Sometimes commercial letters of credit are called “Payment” letters of credit.
Standby Letter of Credit. A “Standby” letter of credit entitles the Beneficiary to draw funds upon presentation of documents demonstrating that the Applicant has failed to perform an obligation to the Beneficiary.