Document background
The Irrevocable Letter of Credit (LC) is a fundamental instrument in international trade finance, particularly crucial when parties are operating across different jurisdictions and need secure payment mechanisms. This document type emerged from the need to provide certainty in international trade transactions and has evolved under both US domestic law (primarily UCC Article 5) and international banking practices (UCP 600). An LC Irrevocable serves as a bank's unwavering commitment to pay the beneficiary upon presentation of compliant documents, regardless of any disputes between the underlying parties. It is particularly valuable in situations where parties don't have established trading relationships or when dealing with high-value transactions where payment security is paramount. The document's irrevocable nature means it cannot be modified or cancelled without the agreement of all parties involved, providing essential security for international trade transactions.
