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

Under a documentary credit, a bank is presented with an invoice describing the goods as '500 cotton shirts', while the credit requires '500 cotton shirts, blue'. Nothing else is wrong. Which approach reflects the standard of examination applied to documents?

The bank should reject the documents. Under the strict compliance approach the invoice description must correspond with the credit, and the omission of 'blue' is a discrepancy. The bank looks only at the documents, not the goods actually shipped.

  1. AReject, because the invoice description must correspond with the credit's descriptionCorrect
  2. BPay, because the goods actually delivered were blue shirts
  3. CPay, because the difference is too small to matter in international trade

Explanation

Banks apply a strict documentary standard: the invoice description must correspond with the credit. A missing term is a discrepancy, and the bank does not look at the actual goods. The second and third options wrongly allow the bank to excuse differences.

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