QUESTION 10 - Financing

Importers Ltd in State P contracted with Overseas Exporters Ltd in State R to purchase 10 new passenger cars.Importers Ltd secured an irrevocable letter of credit from Home City Bank in State P that named Overseas Exporters Ltd as the beneficiary.The credit required Overseas Exporters Ltd to produce a Bill of Lading naming the bank as the consignee (plus other appropriate documents) in order for it to collect payment on the credit.

When Overseas Exporters Ltd placed the cars aboard a carrier for shipment, it received the required Bill of Lading and other documents.

Importers Ltd then heard from another competitor that Overseas Exporters Ltd had placed 'near new' (but not brand new) cars on the ship for the sale to Importers.

After hearing of this accusation, for which it does not have any proof, Importers Ltd promptly notified Home City Bank of this and asked the bank not to pay Overseas Exporters Ltd on the letter of credit.The bank refused.Importers Ltd has now brought legal action to prevent the Home City Bank from making payment.

(a) Should a Court in State P grant Importers Ltd request to stop its bank from making payment on the letter of credit?(2 marks) (b) What if the Bill of Lading stated that the cars were not new but 'near new', would the bank be required to pay on this change of facts? (3 marks)