Standby Letter Of Credit for New Zealand

Standby Letter Of Credit Template for New Zealand

A Standby Letter of Credit (SBLC) is a financial instrument issued by a bank under New Zealand law, serving as a guarantee of payment or performance. This document represents a bank's irrevocable commitment to pay a specified sum to the beneficiary upon presentation of compliant documents stating a default or non-performance by the applicant. Governed by New Zealand banking regulations and typically incorporating international banking practices (ISP98 or UCP 600), it provides a secure method of risk mitigation in commercial transactions. The document outlines specific conditions for drawing, expiry terms, and documentation requirements while ensuring compliance with both local and international banking standards.

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What is a Standby Letter Of Credit?

The Standby Letter of Credit is a fundamental financial instrument used in commercial transactions where one party seeks financial security from another. It serves as a contingent obligation issued by a bank, providing assurance of payment or performance in various business contexts. Under New Zealand jurisdiction, these documents are particularly valuable in international trade, construction projects, and financial transactions, offering a reliable mechanism for risk mitigation. The SBLC contains crucial information including the credit amount, validity period, drawing conditions, and required documentation for claims. It operates within the framework of New Zealand banking law while typically incorporating international banking practices, making it a versatile tool for both domestic and international business operations. The document is especially useful when parties need a bankable security instrument that can be called upon in case of specified defaults or non-performance events.

What sections should be included in a Standby Letter Of Credit?

1. Letter Reference and Date: Unique reference number of the SBLC and date of issuance

2. Issuing Bank Details: Complete details of the bank issuing the SBLC, including name, address, and SWIFT code

3. Beneficiary Details: Full name and address of the party in whose favor the SBLC is issued

4. Applicant Details: Full name and address of the party requesting the SBLC

5. Credit Amount: The maximum amount available under the SBLC and the currency

6. Availability and Expiry: Terms of availability including expiry date and place

7. Drawing Terms: Specific conditions and documentation required for drawing under the SBLC

8. Form of Demand: Exact format and content requirements for making a complying demand

9. Governing Law and Jurisdiction: Specification of New Zealand law as governing law and jurisdiction details

10. Reference to International Rules: Statement of which international rules (ISP98 or UCP 600) govern the SBLC

What sections are optional to include in a Standby Letter Of Credit?

1. Transferability Clause: Include when the SBLC needs to be transferable to other beneficiaries

2. Partial Drawings Clause: Include when multiple partial drawings are to be permitted

3. Automatic Extension Clause: Include when the SBLC should automatically extend for additional periods

4. Counter-Guarantee Reference: Include when the SBLC is issued under a counter-guarantee from another bank

5. Special Payment Conditions: Include when specific payment routing or timing requirements apply

6. Multiple Currency Drawing Option: Include when drawings can be made in different currencies

7. Force Majeure Clause: Include when specific force majeure provisions are required beyond standard banking practice

What schedules should be included in a Standby Letter Of Credit?

1. Schedule A - Form of Demand: Template for the beneficiary's written demand for payment

2. Schedule B - Required Documents: Detailed list of documents required to accompany any demand

3. Schedule C - Authorized Signatories: List of persons authorized to sign demands (if restricted)

4. Appendix 1 - Underlying Transaction Details: Reference to the underlying commercial transaction (if required)

5. Appendix 2 - Special Instructions: Any special instructions for document presentation or payment

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

New Zealand

Publisher

Genie AI

Document Type

Letter of Credit

Cost

Free to use
Relevant legal definitions
Relevant Industries

Banking and Financial Services

International Trade

Construction and Infrastructure

Manufacturing

Energy and Utilities

Real Estate and Property Development

Mining and Resources

Telecommunications

Export/Import

Shipping and Logistics

Relevant Teams

Treasury

Trade Finance

Legal

Finance

Risk Management

Commercial Operations

International Banking

Compliance

Credit

Documentary Credits

Relevant Roles

Treasury Manager

Trade Finance Manager

Chief Financial Officer

Financial Controller

Risk Manager

Commercial Director

Project Finance Manager

Banking Relationship Manager

International Trade Specialist

Corporate Finance Manager

Legal Counsel

Compliance Officer

Credit Risk Officer

Operations Manager

Documentary Credits Specialist

Industries
Contract and Commercial Law Act 2017: This is the primary legislation governing contract formation, enforcement, and commercial transactions in New Zealand. It provides the fundamental legal framework for the creation and execution of SBLCs as contractual instruments.
Reserve Bank of New Zealand Act 2021: This act governs banking operations and financial institutions in New Zealand, including the issuance of financial instruments like SBLCs. It provides regulatory oversight for banks and financial institutions that issue SBLCs.
Anti-Money Laundering and Countering Financing of Terrorism Act 2009: This legislation is crucial for ensuring compliance with AML/CFT requirements when issuing SBLCs, particularly in international transactions.
Personal Property Securities Act 1999: Relevant when SBLCs are used as security instruments or in secured transactions, this act governs the creation and enforcement of security interests in personal property.
International Standardized Banking Practice (ISP98): While not strictly legislation, these international rules are commonly incorporated into SBLCs in New Zealand and provide standardized practices for standby letters of credit.
Uniform Customs and Practice for Documentary Credits (UCP 600): Another important international banking practice code that may be incorporated into SBLCs, especially those used in international trade.
Financial Markets Conduct Act 2013: This act regulates financial products and services, which may be relevant when SBLCs are used in connection with financial market transactions or as financial products.
Teams

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