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March 30, 2017

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The manager of the international department of the McAllen Bank learns on the way to work that the ship
on which a local exporter shipped some goods has sunk. The manager has received all the documents required in the letter of credit and is ready to pay the exporter for the shipment. In view of the news about the ship, the manager now knows that the foreign customer will never receive the goods.

Should the manager pay the exporter, or should he withhold payment and notify the overseas customer?

  • economics - ,

    The fact that the bank manager knows the ship sank is immaterial. The proper paperwork has been received to authorize payment. If the purchaser did not pay for insurance, and the shipper provide it, it is the purchaser's loss.

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