Without Recourse

Without Recourse is a common clause in international trade for negotiable instruments or letters of credit, meaning that the holder (such as an exporter or bank) has no right to recourse against the endorser or drawer if the payer refuses payment or is unable to pay. It is typically used in financing arrangements under drafts, promissory notes, or letters of credit. Use cases include: exporters requiring importers to issue without-recourse drafts to mitigate foreign exchange collection risks; or banks purchasing instruments without recourse in forfeiting or factoring transactions. Note: Without recourse does not absolutely exempt liability; if fraud or an invalid instrument exists, the right of recourse may be restored; and the applicable law must be clearly stipulated. Compared with 'with recourse,' the former places the risk on the holder, while the latter allows recourse against the endorser. It differs from a 'without recourse letter of credit,' which means the issuing bank has no right of recourse against the beneficiary after payment. In practice, it should be used prudently in conjunction with the Negotiable Instruments Law and the Uniform Customs and Practice for Documentary Credits.