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Would any one please convey the comprehensive definition of Stand By L/C?

Dear khaledjahangir,

simple def:
Under commercial LC, you need to perform something to get proceeds like we need to ship the goods as per LC terms in order to get proceeds.

Standby LC: Non performance/in case of default.
Example: LC clause the payment would be effected on presentation of ''unpaid invoice''

A and B are in to the contract. B will issue stand by LC on behalf of A based on which A will ship the goods to the country of B. in case of B fails to pay the proceeds. A will claim the same thorough presentation of UNPAID invoice thorugh bank channel.(unlike commercial LC, only unpaid invoice is enough to get the proceeds)

Thanks & Regards
Dinesh Kumar

There is no definition of standby letter of credit in ISP98. It is difficult to provide a precise definition. A standby letter of credit is a letter of credit which is not a commercial letter of credit.

A commercial letter of credit generally relates to “living” or active transport documents or documents of title. A standby letter of credit is, therefore, an undertaking to pay against the presentation of documents that do not relate to the current transportation or delivery of goods or services.