LETTERS OF CREDIT 37 dressee against holder? It will be observed that the forms of con- tract sometimes used to secure the issuer, prior to his issuance of the letter, cover all loss or damage to him arising from his issuance of the letter and so fully protect him.^^ No inequitable result would follow from the application in this way of estoppel; for the estoppel is raised by the circumstance that the addressee has relied and acted upon a reasonable understanding of the letter as acknowledging that the issuer holds moneys or fimds of the holder. Why is this estoppel not as available to enable an addressee who acts prorhptly to protect himself in case a holder breaks his con- tract, as it is to enable him to draw drafts where the contract has not been broken but the issuer seeks to cancel his letter? Perhaps some such conception was in the mind of the Court in Krakauer v. Chapman. V Of the several common-law theories developed in the cases grow- ing out of the old time letter of credit, we have already seen that the offer theory was on the whole the orthodox theory in the sense that it has the support of the larger number of judicial opinions, but that it failed to explain all the cases; whereas the theory of the letter as an acknowledgment of money held to the use of th^ ad- dressee on condition will explain all the cases and has the support of some of the strongest decisions. Apphed to the forms of export letters of credit now in use and to the problems arising thereunder, the guarantee theory and the theory of notification of a contract between holder and issuer for the benefit of addressee are both as unsatisfactory as they proved to be when appHed to the cases of the past, and they may be dismissed without further comment. Of the two more satisfactory theories, that of money held to the use of addressee best meets the test of the present day forms of such letters and the needs of business under the problems they raise. The offer theory is impotent to give effect to the words "confirmed" or "irrevocable" on which the business man sets such store; is inadequate where the issuer in an instalment contract seeks to cancel as to subsequent instalments after the delivery of one or more instalments; is inadequate where the holder seeks to ^ See form in Hough, Practical Exporting, 548; also Vaughan v. Mass. Hide Corporation, 209 Fed. 667 (1913), where issuer's indemnity contract also provides for lien on goods and special trust receipts.
