The Company entered into a contract with "Manufactures to purchase two forest green vine pruning machines valued at $650,000 each.

The parties agreed that the machinery would be shipped on the SS Ship on 1 May 2021 from the Port of Brindisi in Italy and that payment would be made on the production of the usual documents by documentary credit. The contract defined the usual documents as;

1. a clean bill of lading stating the place of dispatch and destination, the name of the carrier and be signed by the carrier or their agent;
2. the commercial invoice; and
3. a certificate of insurance.

The Company entered into a contract with the International Bank to pay the letter of credit when presented. The International bank entered into a contact with the Italian Bank of Brindisi to confirm and negotiate the payment.

The letter of credit described the goods being purchased as Italian Forest Green Vine Pruning Machines. The commercial invoice described the goods as Vine Pruning Equipment.

The Bill of Lading was a claused bill of lading, noting that the machinery did not appear to be in good condition.

All other information provided in the documents was correct and conformed to the agreement between the parties.

On receipt of the documents the confirming bank telephoned the purchaser asking whether they would waive the requirement for a clean bill of lading, the purchased advised that they would not do this.

The bank officer after speaking to the seller of the equipment and on the recommendation of the the seller made arrangements to have the machinery inspected to see whether it was in good condition. The bank officer was of the view that if the inspector advised that the machinery was in good order and condition, he could make the payment. The bank officer advises his instructing officer at the International Bank of his proposed course of action.

Advise: The International Bank on what are the banks duties under a documentary letter of credit; is it appropriate for the bank to arrange for the inspection of the the equipment and make a decision whether to make payment based on the outcome of the inspection?