Irrevocable Letter of Credit

An irrevocable letter of credit is very common in international transactions, usually involving trade. It is almost the exact same as a normal letter of credit, but in this case, the money will be paid out, no matter what, and the letter can’t be cancelled. The letter can be modified, though, if all parties, including the issuing bank, agree to the changes. If the obligations of the agreement are not met, the letter will become null and void.

Tips for writing an irrevocable letter of credit

-   Make sure all the obligations are achievable by both parties before confirming the letter

-   Make sure everyone understands all the terms

-   Do not try and sneak in previously unagreed upon clauses
Sample irrevocable letter of credit

Royal Bank

US">Toronto, Ontario

Dear Royal Bank,

We have authorized you, M ararian Consulting, to draw on the account of Boeing Corp for the amount of $40,000 on the date of May 1st, 2010, as long as all the obligations of your previous agreement have been met. If this is the case, this letter cannot be revoked. If you do not complete your obligations in relation to your agreement with Boeing, this letter will be null and void.

Signature

Underwriting party

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