QUESTION: 219

Issuing Bank, a foreign bank, maintains an account with First National Bank, a U.S. bank. Issuing Bank issues a letter of credit in favor of ABC, InC. , a U.S. corporation. The letter of credit contains a boycott provision. The letter of credit provides that any negotiating bank may obtain reimbursement from Issuing Bank's account at First National Bank by certifying that the conditions of the letter of credit have been met. Issuing Bank does not send First National Bank a copy of the letter of credit. May First National Bank reimburse negotiating banks for the letter of credit when it contains a boycott provision?

Yes. First National Bank did not know of it, so it may reimburse a negotiating bank.
No. First National Bank is under a duty to determine the underlying conditions of any letter of credit it pays.
No. First National Bank should request a copy of the letter of credit at the time of its payment and then refuse to pay once it is aware of the provision.
Yes, provided ABC Company is not a participant in the boycott.

Answer(s): A

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QUESTION: 220

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

Implement the letter of credit because there is no boycott language on its face
Require ABC to indemnify the bank against any potential loss for participation in a boycott
Not implement the letter of credit
Have the letter of credit confirmed by a bank in Country X

Answer(s): C

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QUESTION: 220

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

Implement the letter of credit because there is no boycott language on its face
Require ABC to indemnify the bank against any potential loss for participation in a boycott
Not implement the letter of credit
Have the letter of credit confirmed by a bank in Country X

Answer(s): C

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QUESTION: 220

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

Implement the letter of credit because there is no boycott language on its face
Require ABC to indemnify the bank against any potential loss for participation in a boycott
Not implement the letter of credit
Have the letter of credit confirmed by a bank in Country X

Answer(s): C

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QUESTION: 219

QUESTION: 220

QUESTION: 220

QUESTION: 220

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