Dissertation Submitted in Partial Fulfillment of the Requirements for Award of the Masters Degree in Commercial Law (LL.M) of Mzumbe University.Letters of credit are an important finance instrument for international trade. They are especially significant in cross-border transactions where traders do not know each other. Despite the attractiveness of the process, by choosing letters of credit, international traders often have trouble. In particular, they find it difficult to meet the level of documentary compliance demanded by many banks. In turn, this increases the risk of non-payment for goods or services invested. This also could have a profound impact on international trade patterns. Clearly, this suggests that the governing rules are not clear enough as to how strictly the doctrine is to apply. In addition, courts all over the world have not cured the deficiencies in the application of the rules. In fact, ICC have added to the confusion by creating a myriad of controversial judicial standards that apply to similar mistakes in the presented documentations. This thesis is an investigation into these issues. In so doing, it attempts to find out what could reduce the inconsistent interpretations of the doctrine of strict compliance and thus enhance the attractiveness of the letter of credit. The analysis covers all parties involved in the letter of credit process, and pays particular attention to those cases involving misspellings, discrepant descriptions of goods in commercial invoices, ambiguous or impossible letter of credit terms, and inaccurate data in presented documents. Among other things, the thesis reveals that courts have applied six different standards to the matter of misspellings alone. As a result, banks have applied the strict compliance rule very rigorously to protect their own interests in case litigation would ensue. The flipside is sellers left with the risk of not being paid. The question arises whether this is reasonable given the facts that only trivial mistakes may be a vitiating factor in the letter of credit transaction. Therefore it is recommended that there should be a reform of the law governing letter of credit including Tanzania enacting its domestic laws, flexibility on the court procedures in case of default