Informality as a Bilateral Assurance Mechanism: Comments on Ronald Mann's The Role of Letters of Credit in Payment Transactions

Ronald Mann's study of documentary defects in the presentation of commercial letters of credit1 is a valuable contribution to the commercial law literature in at least three respects. First, it offers a detailed and thorough empirical survey of an important though specialized aspect of commercial practice. Mann collected and coded a data sample of 500 randomly selected letter-of-credit transactions, personally evaluating each transaction to determine whether the documentary presentation by the beneficiary of the letter of credit (i.e., the seller) complied with the letter's formal terms. Then, for each case in which he found one or more documentary defects, Mann went on to classify the defects and to evaluate their commercial and practical significance. He also measured how quickly and readily the issuing bank and the applicant (i.e., the buyer) responded to - and ultimately waived - the defects, in addition to collecting various other information about the transaction and the parties involved. The creation of this data set required significant time, effort, and both professional and scholarly judgment; and the result is a level and quality of information that goes substantially beyond the qualitative information gleaned from his interviews with bank officers, not to mention the anecdotal information that motivated the study in the first place.