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  • Irrevocable and confirmed credits

     
     

    The UCP 600 have moved firmly away from revocable credits and Article 2 defines a credit as 'any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation'. Moreover, Article 3, headed 'Interpretations', states that a credit is irrevocable even if there is no indication to that effect. Finally, Article 10 makes it clear that a credit cannot be cancelled without the agreement of the beneficiary.

    However, it is not impossible for revocable credits to be opened since article 1 of the UCP 600 allows any part of the Rules to be modified or excluded. It is consequently still possible for a buyer to establish a revocable credit and it remains prudent, therefore, for sellers to continue to stipulate in their sale contracts that the buyer will open an irrevocable, confirmed letter of credit. And, of course, to make sure when the credit arrives that it incorporates UCP 600 or, expressly describes itself as irrevocable.

    A confirmed credit brings the advantages of 'a definite undertaking of the confirming bank, in addition to that of the issuing bank'. However, UCP 600 does not assume a credit to be confirmed where the text does not say otherwise. Consequently, as before, if a seller wants to impose upon his buyer an obligation of a confirmed letter of credit, he must impose such an obligation in the sale contract (e.g. 'Payment by irrevocable letter of credit to be confirmed by first class New York bank acceptable to the Sellers…') and - when the letter of credit is received - to make sure that it has been confirmed by an acceptable confirming bank.

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