International Business Law A Transactional Approach 2nd Edition By Larry A. – Test Bank

CHAPTER ELEVEN
INTERNATIONAL TRADE FINANCE

TRUE/FALSE

1. The seller assumes the risk of non-delivery in an open account transaction.
ANS: True

2. The party in whose favor the letter of credit is issued is known as the account party.
ANS: False

3. The bank acts a guarantor of payment in the documentary credit transaction.
ANS: True

4. A standby letter of credit acts a performance guarantee and serves the same purpose as a bank guarantee or performance bond.
ANS: True

5. Bill of exchange and draft are two names for the same type of negotiable instrument.
ANS: True

6. Under the UCP 500, a document titled “Letter of Credit” is presumed to be irrevocable.
ANS: True

7. In a documentary collections transaction, the bank acts as the buyer’s agent for collections purposes only.
ANS: True

8. The use of a draft or promissory note given by the purchaser (guaranteed by purchaser’s bank) to the exporter to obtain non-recourse financing is known as factoring.
ANS: False

9. The strict compliance rule says that the bank’s payment obligation to the beneficiary is primary, direct and completely independent of any claims that may arise in the underlying sale of goods transaction.
ANS: False

10. The issuing bank is responsible for inspecting letter of credit documents, remitting payment to the seller, and negotiating the documents to the buyer.
ANS: True

11. Banks are required to know or investigate common trade usage.
ANS: False