An issuer has an obligation to honor drafts under a letter of credit if the conditions specified in the letter have been satisfied.This obligation includes the bank's obligation to assure that the goods sold by the seller in fact conform to the contract.

Question

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The bank's obligation under a letter of credit is to ensure that the documents presented comply with the terms of the letter of credit, not to verify the actual quality or conformity of the goods to the contract.

An Issuer Has an Obligation to Honor Drafts Under a Letter