Research On The Legal Problems Related To The Soft Clauses Of The Letter Of Credit

The payment of Letter of credit has been called the lifeblood of international business. Since the establishment of this system, both parties in international trade would like to use it. The establishment of this system has greatly promoted the exchanges of different countries and developed the world’s total trade. But there are also many problems about the letter of credit. Soft clauses is one of the important legal issues discussed in this article.There are five chapters in this paper, I am going to start with the analysis of the basic system of letters of credit, and then extend to the basic theory and the legal nature of soft clauses. Through the above-mentioned analysis and some relevant cases combined, I advance some measures for judicial relief and prevention of the soft clauses, as well as some recommendations of system improvement.Firstly, talking about with the basic concept of the credit, the first chapter introduces the concept and the causes of the letter of credit, the parties in the letter of credit, the nature of the letter of credit and the basic principles of letters of credit, to lay a theoretical foundation for the analysis of soft clauses in letter of credit.Chapter Ⅱ describes the basic theory of soft clauses, including the concept, the causes of soft clauses and how to identify them. The soft clauses are unilaterally under control of the applicant or the issuing bank, so that the beneficiaries would be at a disadvantage place. Accordingly there is no guarantee for the beneficiary to submit documents to the bank in order to receive the payment. And then this paper analyzes the reasons for the letter of credit through internal and external reasons, classifies the soft clauses according to the different steps combined with application skills of soft clauses. At last, the classification of the credit let us recognize skills and principles of the soft clauses.ChapterⅢ discusses the effectiveness and legal nature of soft clauses, and this is the core issue about soft clauses. By comparing soft clauses with the conditions attached to the legal document, the recoverability of the letter of credit, the credit fraud, the soft clauses can be divided into four categories according to different situations. How to determine the nature of soft clauses must combine the subjective and objective conditions. Similarly the effectiveness identification of the soft clauses should also be a combination of different factors.ChapterlV give some measures about the relief of soft clauses, including relief under the system of credit and the underlying contract. Relief under the credit system borrowed from the principles of the fraud exception applies. Under the basic contract the buyer can be investigated for breach of contract or the anticipatory breach of contract.Chapter V discussed the preventions for the soft clauses and commendations improving the credit system. To prevent the soft terms abusing of the letter of credit, we must not only take measures in our practice, but also regulate the design of the system through regulating the laws and regulations, defining the format of unity and balancing the interests of both the parties.In the final analysis, the soft clauses of the letter of credit is the result of defects of the credit system and the combined effect of some external reasons. This article analyzes comprehensive view of all aspects combined with the cases in practice, makes a detail exposition of the above issues. I want this article can play a certain reference to the guidance of the trade practices and improvement of the system of letters of credit.