A Study On The Fraud Exception Of The Letter Of Credit

The traditional Letter of Credit abides by the principle of independence (or autonomy), which means the Letter of Credit is independent of other contracts. If the beneficiary presents the documents listed in the credit instrument, the bank must pay the draft. The inherent system has given many chances for the beneficiary to forge or cheat. In order to prevent the fraud, people create and utilize the principle of the fraud exception, which breaks through the traditional principle of independence and develops the legal system of the Letter of Credit,This article is divided into four parts.Part I "The reasons on the principle of the fraud exception formation." It introduces the definition and features of the principle, then analyzes the reasons in the aspect of economics, sociology, jurisprudence.Part II "Comparative study on definition of fraud in the principle of the fraud exception." This part analyzes the legal systems of several main countries by the comparative and analytic method. The writer thinks when we define the fraud in the principle of the fraud exception, we should use the "material fraud" standard and list the fraud conducts exhaustively.Part III "The respective duties of the subjects in the principle of the fraud exception." In this part ,the words mainly analyzes the respective duties of the issuing bank, the court, the applicant once the principle of the fraud exception is used.Part IV "The Chinese legislation and execution on the principle of the fraud exception." The part firstly gives a summary of the recent legislation and execution of China on the principle of the fraud exception. Then the writer makes some comments and gives some suggestions to perfect the principle of fraud exception in China.