Wednesday 1 September 2010

CDCS Questions 3/500

1. What is the instrument to which the Letter of Credit can be historically
Related?


The term ‘Letter of Credit’ was perhaps first used with Traveller’s Letters of Credit
issued by banks in the western world to provide their clients with a means of obtaining cash from banks abroad for use during their foreign travel

2. What two key elements are a prerequisite to trigger the exchange of payment
for goods in the usual Documentary Credit cycle?

Payment is exchanged for documents in the Documentary Credit cycle provided the
stipulated documents are presented and the terms and conditions of the Credit are
complied with.

3. What two key elements provide commonality to the terms?
● Letters of Credit
● Commercial Credit
● Documentary Credit
● Standby Letters of Credit

All four terms generically refer to the same product which undertakes payment to
the Beneficiary on the conditions that the documents stipulated in the Credit are
presented and all terms and conditions of the Credit are complied with.