Problem
Voest-Alpine Trading USA Corporation of the U.S. entered into a contract with Jiangyin Foreign Trade Corporation (JFTC) of China to sell JFTC 1,000 metric tons of styrene monomer (a kind of plastic) at a total price of US$1.2 million. To finance the transaction, JFTC applied for and had issued on its behalf an irrevocable commercial letter of credit ("L/C"), issued by Bank of China, in favor of Voest-Alpine. The letter of credit required payment to Voest-Alpine once the goods had been shipped to Zhangjiagang, China, upon presentation to the Bank of China of the documents described in the L/C. The L/C indicated that the transaction would be subject to the Uniform Customs and Practice (UCP) rules of the International Chamber of Commerce, as most international letters of credit are. By the time the product was ready to ship, the market price of styrene monomer had dropped significantly from the original contract price between Voest-Alpine and JFTC. JFTC requested a price concession from Voest-Alpine in light of the change in market conditions, but Voest-Alpine declined and went ahead with the shipment.
In addition to numerous other typographical errors, the text of the letter of credit issued by the bank listed Voest-Alpine's name as "Voest-Alpine USA Trading Corp." instead of "Voest-Alpine Trading USA Corp." The destination port was also misspelled in one place as "Zhangjiagng", missing the third "a". After JFTC proved unwilling to waive the discrepancies, the Bank of China refused to honor the L/C (refused to pay on the letter of credit).
i. Was the Bank of China's refusal to pay proper? State the most compelling reasons FOR refusal, and AGAINST refusal, then state YOUR conclusion, then EXPLAIN the reasons for your conclusion.
ii. Was JFTC's conduct ethical? Why or why not? State the most compelling reasons FOR and AGAINST, then state YOUR conclusion, then EXPLAIN the reasons for your conclusion.
iii. Should Voest-Alpine have reduced the contract price when the market price dropped? Why or why not? State the most compelling reasons FOR and AGAINST, then state YOUR conclusion, then EXPLAIN the reasons for your conclusion.