The Principle of Strict Compliance in Relation to Letters of Credit

question 46

Multiple Choice

The principle of strict compliance in relation to letters of credit in Canada provides that

• A) the seller must present documents that strictly comply with the terms of the credit before he or she is entitled to receive payment.
• B) the purchaser must strictly comply with the terms of the credit before he or she is allowed to obtain the goods from the shipper.
• C) the buyer's bank is not allowed to pay anyone until it receives independent notification that the goods are received by the buyer.
• D) the shipper is not permitted to give the goods to anyone but those identified in the letter of credit.
• E) the seller's bank can demand strict compliance with the bank's policies when deciding whether to pay the seller.

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Definitions:

Preprinted Promissory Note

A written, standardized promise to pay a specified amount of money on demand or at a defined time, with predefined terms.

Due Date

The specified day by which an obligation must be fulfilled or a task completed.

Indorsement

A signature or stamp placed on a document that confirms and details the signing authority's approval of the document.

Warranty Liability

The legal obligation of a seller to compensate the buyer for defects or issues with a product or service that were guaranteed against in a warranty.