Confirmed Letter of Credit Law and Legal Definition

A confirmed letter of credit is a letter of credit on which at least two banks namely the issuing bank and the confirming bank are obliged to make payment. It directly creates the obligation of a financing agency doing business in the seller’s financial market to a contract of sale.

In Texas Trading & Milling Corp. v. H.I.T. Corp., 1986 U.S. Dist. LEXIS 20873 (D.N.Y. 1986), the court observed that “A confirmed letter of credit is one on which at least two banks are obliged to make payment: the issuing bank and the confirming bank. N.Y. U.C.C. Law § 2-325. While confirmed credit is usually requested by a party that is not familiar with the issuing bank and thus requires that a bank in his locale confirm the letter, it does not follow that because an issuing bank is in the seller's locale its irrevocable letter of credit is automatically "confirmed". Indeed, when a bank confirms a letter of credit it becomes directly obligated on the credit to the extent of its confirmation as though it were its issuer.”