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

Westra Ltd opens an irrevocable documentary credit for its supplier, Norvik Co. Which statement best describes the issuing bank's obligation once the credit is issued?

The issuing bank cannot amend or cancel an irrevocable credit without the beneficiary's agreement, and that of any confirming bank. The credit is a firm payment undertaking given once issued, so the buyer's change of mind or the stage of shipment does not release the bank.

  1. AIt cannot amend or cancel the credit without the agreement of the beneficiary (and any confirming bank)Correct
  2. BIt may cancel the credit at any time before shipment without notice
  3. CIt may cancel only if Westra later changes its mind
  4. DIt is bound only after the goods reach Westra's warehouse

Explanation

An irrevocable credit is a firm undertaking that cannot be amended or cancelled without the consent of the beneficiary and any confirming bank. The buyer's change of mind, or the timing of shipment, does not alter this. Delivery to the warehouse is not a condition of the bank's liability.

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