Documentary Letter of Credit Law and Legal Definition

Documentary letter of credit means a letter of credit that is payable when presented with a certificate of title or invoice. Hence, a documentary letter of credit requires that a draft on the letter of credit be accompanied by some document, such as a document of title or a certificate of default. This is in contrast to a clean letter of credit which is payable merely upon the presentation of a draft with no accompanying documents. A standby letter of credit is one whereby the issuer agrees to pay the beneficiary upon presentment of documentation indicating that the account party has defaulted on a payment obligation. Therefore, a standby letter of credit will often be a documentary letter of credit since the issuer will require some kind of accompanying documentation to indicate or establish that there has been a default, making it liable to pay.