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A Principled Exception to the Strict Complicance Rule in Trilateral Letter of Credit Transactions

Wayne State University Law School Research Paper No. 08-02

Banking and Finance Law Review, Vol. 18, p. 245, 2003

20 Pages Posted: 1 Feb 2008  

John Dolan

Wayne State University Law School

Abstract

Letter of credit law wisely emphasizes the need for a strict compliance rule when the beneficiary of a letter of credit presents documents to the issuer. Any other rule, especially a rule of substantial compliance, would render the issuer's document checkers adjusters charged with commercial duties and the need to make commercial judgments. The strict rule, the, is necessary for the letter of credit to work at the banking house. When the issuer sends the documents to the applicant, however, the exigencies of quick document examination without resort to commercial inquiry outside the banking house subside. Applicants are commercial parties. They know whether deviation from the strict standard is commercially unacceptable. This article argues, then, that Canadian courts should adopt a bifurcated approach: a strict standard at the banking house but a substantial standard at the applicant's shop.

Suggested Citation

Dolan, John, A Principled Exception to the Strict Complicance Rule in Trilateral Letter of Credit Transactions. Wayne State University Law School Research Paper No. 08-02; Banking and Finance Law Review, Vol. 18, p. 245, 2003. Available at SSRN: https://ssrn.com/abstract=1088834

John Dolan (Contact Author)

Wayne State University Law School ( email )

471 W. Palmer
Detroit, MI 48202
United States
313-577-4856 (Phone)

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