Suppose That an Issuing Bank Pays on Documents That Are

question 62

Multiple Choice

Suppose that an issuing bank pays on documents that are conforming to the requirements of the letter of credit,but the seller has shipped worthless goods to the buyer.Which of the following statements,if any,are true?

• A) As long as the documents strictly comply with the letter of credit requirements, the bank will not have to reimburse the buyer.
• B) If there is fraud in the transaction, the bank will have to reimburse the buyer and seek its remedies against the seller.
• C) The strict compliance principle insulates the bank from liability, since it assures the bank that the underlying contract between the buyer and seller is entirely independent from the letter of credit contract.
• D) As long as the documents strictly comply with the letter of credit requirements, the bank will not have to reimburse the buyer and the strict compliance principle insulates the bank from liability, since it assures the bank that the underlying contract between the buyer and seller is entirely independent from the letter of credit contract.

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Definitions:

Investment

The act of allocating resources, usually money, with the expectation of generating an income or profit, such as purchasing stocks, bonds, or real estate.

Projected Sales

Forecasted revenue from goods or services that a company plans to sell over a certain period.

Value-based Pricing

A pricing strategy that sets prices primarily based on the perceived or estimated value of a product or service to the customer, rather than on its cost of production or historical prices.

Industrial Instrument

Industrial instrument involves tools and devices designed for industrial applications, including measuring, controlling, and monitoring processes.