LC is any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honor a complying presentation.

In other words is a written undertaking by a bank (the issuing bank), at the request of the importer/buyer (the applicant), in favor of an exporter/seller (the beneficiary), whereby the bank agrees to pay against bills of exchange and/or commercial documents that comply with the terms and conditions of the LC.