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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

A credit is described as 'irrevocable'. Which consequence follows for the seller, Vesta Co?

An irrevocable credit cannot be amended or cancelled without the consent of the issuing bank, any confirming bank and the beneficiary. This gives the seller a firm payment undertaking, unlike a revocable credit which could be cancelled unilaterally.

  1. AThe credit cannot be amended or cancelled without the agreement of the issuing bank, any confirming bank and the beneficiaryCorrect
  2. BThe issuing bank may cancel it at any time before shipment without notice
  3. COnly the buyer can decide whether payment is made
  4. DThe seller must pay the bank's fees even if payment is made

Explanation

An irrevocable credit gives the beneficiary a firm undertaking: it cannot be changed or cancelled without the consent of the issuing bank, confirming bank (if any) and the beneficiary. A revocable credit would allow unilateral cancellation, so option B is wrong.

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