Sight Draft for Standby Letter of Credit

Summary

This template is a sight draft for a standby letter of credit to make a demand upon the issuing bank for a payment to be made at sight in immediately available funds. This template includes practical guidance, drafting notes, and an optional clause. Under a letter of credit, a sight draft is used by the beneficiary to make a demand for payment upon the issuing bank. The sight draft, along with any other documents required for a demand under the letter of credit, would be presented by the beneficiary to the issuing bank at its address indicated in the letter of credit. The basic terms of a draft include identification of the beneficiary who is demanding payment, the issuing bank who will make the payment, the payee who will receive the payment (typically the beneficiary or the beneficiary's bank), the amount being demanded, and the tenor which is the date the payment is to be made. For a sight draft, the tenor is "at sight" meaning the issuing bank is to pay the draft when sighted by the bank. The bank has a reasonable amount of time to review the sight draft and any accompanying documents, in accordance with laws indicated as governing the letter of credit, and then must pay the beneficiary in immediately available funds. In contrast, some standby letters of credit call for a time draft, whereby the issuing bank will pay the amount at a defined future date. For a template of a time draft for a standby letter of credit, see Time Draft for Standby Letter of Credit. The capitalized terms used in this template should be conformed to the defined terms in the letter of credit or other relevant agreements between the parties. This template may be used in conjunction with Irrevocable Standby Letter of Credit and Exhibits and read in conjunction with the practice note Letters of Credit: Parties and Documentation. See also Letter of Credit and Reimbursement Agreement. For a full listing of key content covering letters of credit in financing transactions, see Letter of Credit Resource Kit.