Irrevocable Payment Undertaking

An Irrevocable Payment Undertaking (IPU) is a binding commitment to pay an agreed amount that cannot be canceled or altered.

Financial Instruments such as letters of credit, promissory notes, and bank guarantees often use IPUs. International trade transactions, legal settlements, and project financing agreements typically involve IPUs.

Payment obligations under an IPU are unconditional and enforceable. The issuing party promises to pay the specified amount by a given date, regardless of circumstances. For example, if a buyer fails to fulfill contract terms, a bank must still make the payment under an IPU.

IPUs provide security to recipients, ensuring payment certainty and mitigating risks. Beneficiaries, such as exporters, contractors, and creditors, rely on this security for financial transactions.