ABSTRACT
This chapter deals with some of the more common terms and devices that we can meet when contracts extend beyond one country. When exporting/importing there is often a significant delay between the goods leaving the control of the contractor and reaching the purchaser. A letter of credit is an arrangement between two banks. One bank, agrees to pay money usually to a contractor, when, and only when, the contractor has satisfied precisely the requirements stated in the letter. When the contractor has delivered the goods to the carrier or shipper he will submit his claim/invoice to the paying bank. This claim must be in the precise form required by the letter of credit and be accompanied by all the documents necessary, again precisely in accordance with the letter. These organisations provide insurance cover for contractors against the risk of non-payment due to the financial failure of an overseas customer or due to political risks, such as a revolution.
