Assume that DownPillow sells pillows to a Japanese buyer and forwards documents and a draft for acceptance. Assume also that DownPillow discounts the trade acceptance to a U.S. bank, which then discounts the instrument in the credit markets. If the pillows turn out to be moldy and worthless, which of the following statement(s) is (are) true?
A) The Japanese buyer does not have to pay because the pillows are damaged.
B) The U.S. bank must reimburse whoever bought the instrument and can bring a lawsuit for payment against DownPillow.
C) The Japanese buyer must still honor and pay the acceptance upon presentation.
D) A and B.
E)All of the above.
C
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