An agreement under which one party agrees to pay drafts drawn by a creditor is called a: ______.

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A letter of credit is an agreement in which a bank or other financial institution promises to pay a creditor on behalf of a buyer if certain conditions are met, such as the delivery of goods or completion of services. The bank or financial institution guarantees payment to the creditor, providing a degree of security to both parties. A contract of surety and a guaranty contract are similar in that they involve a party agreeing to pay a debt or obligation of another party, but they typically do not involve payment of drafts. A debtor's agreement is an agreement between a borrower and creditor outlining terms of repayment but does not involve payment of drafts.

An Agreement Under Which One Party Agrees to Pay Drafts