The contractual obligations between a creditor who holds a letter of credit and the issuing and confirming banks are determined by the terms of the letter of credit, as amplified by the terms implied by law. The issuing and confirming banks are, therefore, under a duty to the creditor-beneficiary to honour the credit either on demand if the credit is an open one, or if the credit is a documentary letter of credit, on fulfilment of the conditions set out in that letter of credit. The seller will usually be required to present to the buyer, or his bank, a clean bill of lading for the goods specified in the letter of credit, an invoice and a marine insurance policy, in addition to any other documents expressly required to be presented under the terms of the credit. The documents must be presented within the period specified in the credit (if any), and the bank which has issued the credit is entitled to insist that the documents presented shall correspond exactly to the requirements of the credit. If they do not, the bank can refuse to take up the documents presented to it although the goods actually shipped are of the description and quality required to fulfil the underlying contract of sale. Where a transaction is financed by a letter of credit the bank is only concerned with the delivery of the proper shipping documents, and it has the right to reject the documents presented if they do not comply with the requirements of the credit in all respects. Since the basis of the commercial documentary credit is that the bank deals in documents the courts will insist on strict compliance with the terms of the credit as a condition precedent to the enforcement of the creditor’s claim. In Equitable Trust Co. of New York v. Dawson Partners 1 Lord Sumner said: “There is no room for documents which are almost the same, or which will do just as well”.

The documents presented by the creditor under the letter of credit must, therefore, conform to the conditions contained in the credit as to the description of the goods. Thus, in Bank Melli Iran v. Barclays Bank D.C.O. Ltd.,2 the plaintiffs, a Persian bank, authorized the defendants to issue a letter of credit for £40,000 representing the value of “100 new Chevrolet trucks” against the presentation of a delivery order, insurance policy, invoice and a United States Government certificate that the trucks were new. The defendants issued a letter of credit in accordance with the buyer’s instructions, and