Question: Flyby Knight (FK) contracts to sell 12 helicopters to Air Nigeria, for $8 million each....

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Question: Flyby Knight (FK) contracts to sell 12 helicopters to Air Nigeria, for $8 million each. Payment is to be made by letter of credit, issued by the Bank of Nigeria, confirmed by Citibank in New York, and due when the confirming bank receives a bill of lading indicating all helicopters are on board ship, ready for sailing to Nigeria. FK loads the aircraft on board ship, and the next day delivers the bill of lading to Citibank. The same day, Air Nigeria informs FK that its inspectors onboard ship have discovered serious flaws in the rotator blades and the fuel lines. Air Nigeria states it will neither accept nor pay for the helicopters. Is FK entitled to its $96 million? (a) FK is entitled to no money. (b) FK is entitled to no money provided Air Nigeria can prove the helicopters are defective. (c) Air Nigeria is obligated to pay FK the full price. (d) Bank of Nigeria is obligated to pay FK the full price. (e) Citibank is obligated to pay FK the full price. Strategy: Payment is to be made by confirmed letter of credit. Ask yourself what that means. In such a case, the confirming bank is obligated to pay the seller, when the bank receives a bill of lading indicating that conforming goods have been delivered. What about the fact that the goods seem defective? That is irrelevant. It is precisely to avoid long distance arguments over such problems that sellers insist on these letters. (See the "Result" at the end of this section.)