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Confirmed irrevocable credit

A confirmed irrevocable credit gives the beneficiary the highest degree of assurance that he will be paid for his goods. It provides him with the greatest security, particularly where the confirming bank to the irrevocable credit is the seller’s own bank. By adding its confirmation to the credit, the correspondent, advising bank, thereby undertakes to honour the documents which conform with the terms and conditions of the credit and are presented within the prescribed time limit. In this case, the beneficiary has recourse not only against the issuing bank in respect of its undertaking, but also separate and independent recourse against the confirming bank in respect of its independent promise of payment under the documentary credit. With a confirmed irrevocable credit, the exporter removes any political and transfer risks which may prevail in the buyer’s country. The confirmed irrevocable credit imposes on the confirming bank an absolute obligation to pay and provides the seller with an absolute assurance of payment. In the words of Jenkins LJ in Hamzeh Malas and Sons v British Imex Ltd:4

It seems to me plain enough that the opening of a confirmed letter of credit constitutes a bargain between the banker and the vendor of the goods, which imposes upon the banker an absolute obligation to pay, irrespective of any dispute there may be between the parties as to whether the goods are up to the contract or not…A vendor of goods selling against a confirmed letter of goods is selling under the assurance that nothing will prevent him from receiving the price. That is no mean advantage when goods manufactured in one country are being sold in another.