Jenner & Block

"Standby Letter of Credit Rules and Practices Misunderstood or Little Understood by Applicants and Beneficiaries," Uniform Commercial Code Law Journal, Vol. 40 No. 2, Thomson West

In this article, Partner Carter H. Klein which appears in the just released Fall 2007 issue of the Uniform Commercial Code Law Journal, examines rules, practices, and practice pointers dealing with standby letters of credit that are frequently overlooked or misunderstood by applicants and beneficiaries.  He hopes that the article provides a better understanding for lawyers and their clients engaged in letter of credit transactions of how standby letters of credit work in practice and their legal effect in specific situations.  These situations include the use and endorsement of drafts, benefits of the International Standby Practices for applicants, confirmation of nonlocal bank letters of credit, the effect of draws by an interloper forging documents presented, the lack of legal recourse to the FDIC in the event of an issuer insolvency, limitations on the use of letters of credit to immunize the beneficiary from claims for penalty or windfall draws, and standby letters of credit as support for international counterguaranties.