Fact Pattern 22-1
First State Bank issues a letter of credit in favor of Oboe Company, an American firm, to facilitate an international sales contract to buy resources from Lapland Mining, Ltd., a Finnish company.
-Refer to Fact Pattern 22-1.First State Bank

Question

Quizplus · Accepted Answer

As the issuer of the letter of credit, First State Bank is obligated to make payment to Lapland Mining, Ltd. once the proper documents are presented. The bank acts as an intermediary, providing assurance to both the buyer and seller that payment will be made once the terms of the contract have been met. However, the bank is not responsible for ensuring that the parties perform the contract – that is the responsibility of the parties themselves.

Fact Pattern 22-1 First State Bank Issues a Letter of Credit in Favor