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Letters of Credit: ISP98 Forms, UCC Article 5, UCP, Draw Procedures, and More

Drafting Commercial vs. Standby, Conditional vs. Unconditional, Limited Term vs. Evergreen, Transfer Provisions

Recording of a 90-minute premium CLE video webinar with Q&A

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Conducted on Thursday, May 25, 2023

Recorded event now available

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This CLE course will prepare counsel to draft and review commercial and standby letters of credit (LCs) that comply with Article 5 of the UCC as well as rules of practice, including International Standby Practices 1998 (ISP98) and Uniform Customs and Practice for Documentary Credits (UCP). The panelist will discuss standard LC forms currently used by the banking industry (including forms now available for LCs issued subject to ISP98), the various transaction types using LCs, procedures for issuance and drawing upon LCs, and critical provisions to consider in tailoring an LC to fit your transaction.


A letter of credit is an instrument in which a financial institution, at an applicant's request, agrees to honor a demand for payment made by a beneficiary. LCs are used in a variety of commercial transactions--including construction contracts, leases, and import-export transactions--to support an underlying obligation such as an obligation to pay a purchase price or assure the performance of a particular service.

There are two types of LCs--commercial and standby--both of which follow specific rules, forms, and procedures dictated by the UCC, ISP98 and/or UCP. Counsel must be able to draft and review LCs compliant with these rules and procedures and know the role of the applicant, issuer, and beneficiary in issuing and drawing upon LCs.

Counsel should also have an understanding of the different uses for LCs and how to tailor LCs to fit each transaction, including which rules apply to the LC, expiry dates and "evergreen" clauses, whether the LC should be transferable or not transferable, and whether single or multiple draws will be permitted.

Listen as our authoritative panel discusses negotiating and drafting the critical terms in LCs and provides guidance through the annotated ISP98 forms. The panel will highlight using LCs in commercial and financial transactions and issues that arise in making draws on LCs. The panel will also discuss alternative credit enhancements such as surety bonds and credit insurance and the advantages and disadvantages of each.



  1. Types of LCs: commercial vs. standby
  2. Collateral and other bank requirements for issuance
  3. LC rules and definitions
    1. UCC Article 5
    2. International Standby Practices 1998 (ISP98)
    3. Uniform Customs and Practice for Documentary Credits (UCP)
    4. Standard forms
  4. Deal-specific concerns
    1. Conditional vs. unconditional
    2. Limited (typically one year) term vs. evergreen
    3. Transferability
  5. Draw procedures
  6. Bankruptcy considerations
  7. Alternative credit enhancements


The panelist will review these and other high priority issues:

  • What essential components should counsel include when structuring and drafting LCs?
  • What UCC requirements should counsel consider when drafting LCs?
  • What common issues arise in LC practice, and how should those issues be handled?
  • What are the potential pitfalls in choosing ISP vs. UCP, and how can counsel address these issues?


Baker, Buddy
Buddy Baker

Vice President, Investment Banking Division
Goldman Sachs Bank USA

With over 30 years of experience in international trade finance, he authored  Users’ Handbook to Documentary...  |  Read More

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