A bank may honor a letter of credit when documents comply on their face even if notified that they are forgeries or that there is fraud in the transaction.

Question

Quizplus · Accepted Answer

According to the principle of strict compliance, banks are obliged to honor a letter of credit if the documents presented comply with the terms and conditions of the credit, regardless of any underlying fraud or forgery in the transaction. However, if the bank has reason to suspect fraud, it may request additional documentation or refuse to honor the credit.

A Bank May Honor a Letter of Credit When Documents