A letter of credit is independent of the underlying contract between a buyer and seller, requiring the issuer to ascertain whether the contractual conditions have been met.

Question

Quizplus · Accepted Answer

A letter of credit is indeed independent of the underlying contract between the buyer and seller in terms of its operation, meaning the bank deals with documents and not the actual performance under the contract. However, it does not require the issuer to ascertain whether the contractual conditions have been met; it only requires that the documents presented comply with the terms of the letter of credit.

A Letter of Credit Is Independent of the Underlying Contract