Commercial Law, 2012 Bar — Question 3

MULTIPLE CHOICE

At the instance of CCC Corporation, AAA Bank issued an irrevocable Letter of Credit in favor of BBB Corporation. The terms of the irrevocable Letter of Credit state that the beneficiary must present certain documents including a copy of the Bill of Lading of the importation for the bank to release the funds. BBB Corporation could not find the original copy of the Bill of Lading so it instead presented to the bank a xerox copy of the Bill of Lading. Would you advise the bank to allow the drawdown on the Letter of Credit? A) No, because the rule of strict compliance in commercial transactions involving letters of credit, requiring documents set as conditions for the release of the fund, has to be strictly complied with or else funds will not be released. B) Yes, because an irrevocable letter of credit means that the issuing bank undertakes to release the fund anytime when claimed by the beneficiary, regardless of the kind of document presented. C) Yes, because the issuing bank can always justify to CCC Corporation that xerox copies are considered as faithful reproduction of the original copies. D) Yes, because the issuing bank really has no discretion to determine whether the documents presented by the beneficiary are sufficient or not.

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