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Simple English definitions for legal terms
notation credit
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A quick definition of notation credit:
Notation credit is a type of letter of credit that requires anyone purchasing or paying a draft or demand for payment made under it to note the amount of the draft or demand on the letter. A letter of credit is an agreement between a bank and a customer, where the bank agrees to honor a draft or other demand for payment made by a third party (the beneficiary), as long as the draft or demand complies with specified conditions. There are different types of letters of credit, such as commercial, standby, and documentary, each with its own specific requirements and purposes.A more thorough explanation:
A notation credit is a type of letter of credit that requires anyone purchasing or paying a draft or demand for payment made under it to note the amount of the draft or demand on the letter. This type of credit is often used in commercial transactions.
For example, if a company purchases goods from a supplier using a notation credit, the supplier must note the amount of the payment on the letter of credit when they receive it. This ensures that the payment is properly recorded and accounted for.
Overall, notation credits are a useful tool for ensuring that payments are properly documented and tracked in commercial transactions.