National Park Bank issued a letter of credit addressed to Ronconi & Millar, beneficiary, at the request of its account party, Sun Herald, "covering the shipment of 1,322 tons of newsprint paper in 72½-inch and 36½-inch rolls to test 11-12, 32 lbs. at 8½ cents per pound net weight-delivery to be made in December 1920 and January 1921." The letter of credit did not require that a testing certificate from an independent laboratory accompany the documents. When Ronconi & Millar's invoice and draft were presented to the bank, the documents described the paper as was required in the letter of credit. However, the bank refused payment because it had no opportunity to test the tensile strength of the paper. (Interestingly, the market price of newsprint paper had fallen sharply in the time period between the contract of sale and the presentation of documents, amounting to over $20,000 in this case.) Ronconi & Millar transferred their rights to collect payment to Maurice O'Meara, a financial institution, who brought this action to collect the full amount of the drafts. Maurice O'Meara claims that the issuing bank had no right to test or inspect the paper.
1. Had the bank been aware that the newsprint shipment did not conform to the requirements of the underlying sales contract, would it have still been required to pay under the letter of credit?
2. If the bank pays for documents that conform to the letter of credit, but the goods themselves turn out to be nonconforming, is the buyer legally justified in refusing to reimburse the bank?