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

Tarn Co sells goods to Baxa Ltd under a confirmed irrevocable credit. The issuing bank is in Baxa's country; a bank in Tarn's country has added its confirmation. The documents comply. From whom can Tarn Co demand payment?

Tarn Co can demand payment from the confirming bank. By adding its confirmation, that bank gives its own independent undertaking to pay complying documents, alongside the issuing bank's undertaking, so the seller has a local bank that is directly liable to it.

  1. AOnly the issuing bank, because the confirming bank acts merely as its agent for forwarding documents
  2. BOnly Baxa Ltd, because the credit does not replace the buyer's duty to pay
  3. CThe confirming bank, which has its own independent obligation to pay in addition to the issuing bank'sCorrect

Explanation

Confirmation adds the confirming bank's own undertaking to pay complying documents, giving the seller a local, second payment promise. It is not merely an agent for forwarding. The credit operates as payment mechanism, so the seller looks to the bank first, not the buyer.

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