## Facts

- A buyer, Adastra Knitting Mills, Inc., arranged for North Carolina National Bank (NCNB) to issue an irrevocable commercial letter of credit in favor of Courtaulds North America, Inc., to pay for acrylic yarn purchases.
- The credit authorized Courtaulds to draw drafts at “60 days date,” up to stated amounts, with an expiration later extended to allow drawing and negotiation on or before August 15, 1973.
- The letter of credit required that each draft be accompanied by a “Commercial invoice in triplicate stating that it covers … 100% Acrylic Yarn …” (along with other pricing and delivery terms).
- Courtaulds presented a draft to NCNB within the credit period, supported by commercial invoices describing the goods as “Imported Acrylic Yarn,” not “100% Acrylic Yarn.”
- Courtaulds attached packing lists to the invoices; the packing lists stated that cartons were marked “100% Acrylic.”
- NCNB refused to honor the draft, citing nonconformity because the commercial invoice did not state “100% Acrylic Yarn” as required.
- Courtaulds contended the invoice and attached packing list should be read together to satisfy the credit and argued NCNB had waived strict compliance based on prior acceptances of similar documentation.
- The district court granted summary judgment to Courtaulds, holding the presentation conforming (or, alternatively, that NCNB had waived discrepancies) and awarded damages.
- NCNB appealed.

## Issues

1. Whether the presentation strictly complied with the letter of credit when the commercial invoice described the goods as “Imported Acrylic Yarn” rather than “100% Acrylic Yarn.”
2. Whether an attached packing list referencing “100% Acrylic” could cure a defect in the commercial invoice where the credit required the invoice itself to state the specified description.
3. Whether the issuing bank waived its right to insist on strict compliance by previously honoring draws supported by similar documentation.

## Decision

- The Fourth Circuit reversed and directed entry of judgment for NCNB.
- The court held the documents did not strictly comply because the commercial invoice failed to state the required “100% Acrylic Yarn” description.
- The court rejected treating the packing list as a substitute or corrective for the invoice’s required language.
- The court rejected waiver based on prior dealings as insufficient to override the letter of credit’s express documentary conditions.

## Legal Principles

- An issuing bank’s obligation under a letter of credit is documentary and independent of the underlying sales contract; the bank may look only to facial compliance with the credit’s terms.
- Strict compliance governs: where a credit requires a specific document to contain a specific description, the required document must match the credit’s terms; “equivalents” or near matches are inadequate.
- Defects in a required document generally cannot be cured by reference to other accompanying papers when the credit allocates the statement to a particular document (here, the commercial invoice).
- Prior acceptance of discrepant documents, without amendment of the credit’s terms, does not necessarily waive the bank’s right to insist on strict compliance for later presentations.

## Conclusion

The court held that the bank properly dishonored because the commercial invoice did not contain the exact goods description demanded by the letter of credit, and neither attached packing lists nor prior practice relieved the beneficiary from strict documentary compliance.


Courtaulds N. Am., Inc. v. N.C. Nat’l Bank, 528 F.2d 802 (4th Cir. 1975)