Legal Research On The Principle Of The Fraud Exception In Letter Of Credit

As it is known, the documentary letter of credit is the most important means for settlement and payment in the area of international finance and trading. The mechanism of L/C provides the chance of remedying the breakage and imbalance of trustworthiness between parties, the sellers and buyers, and greatly promotes the development of international trade. It is the principle of abstraction and independence of L/C, the spirit of the mechanism of L/C that gives some illegal merchants the chance to engage in fraud, making use of L/C. In order to curtail fraud of L/C, Some countries accepted the fraud exception, at the same time, they stuck to the principle of independence and abstraction. According to this principle, Banks were all allowed to dishonor and refuse to pay for the draft presented and the counts can ban the banks' payment through issuing injunction. Thus the principle of fraud exception was established step by step. Nowadays, China has become one member of WTO, with the open of financial business and the development of economic trade, the risk of L/C fraud would be getting worse. Therefore, based on the deep research of fraud exception principle and analysis of typical cases on L/C fraud, this thesis presents the personal points on the legislation and juridical practice of fraud exception principle in our country, in order to handle the L/C fraud cases better in the future.The paper in question is divided into six chapters. The first chapter is introduction. It has introduced some aspects of L/C, UCP, the L/C fraud and the establishment of fraud exception principle, and gave somebasic knowledge for the research of the following chapters. The second chapter is the abstraction and independence principle. In this section, it has discussed the details about the two principles, such as the concept, characteristics and theoretical bases of the fraud exception principle, and the relationship between the two principles. The third chapter is the adoption of the fraud exception principle of L/C, in which it has analyzed the regulations in UCC and the certain rules in China laws, also the requirements and procedures of adopting the fraud exception principle, and the situations inappropriate for the adoption of the fraud exception principle. Chapter four is on some legal issues related to banks when fraud has taken place, including the rights and obligation enjoyed and assumed by the banks, in addition to the proceedings that banks should be complied with in the cases of fraud exception. Chapter five has spelled out the issue of injunction passed by the courts, and named the essence of injunction and its elements for application, based on a typical case in our country. Chapter six is about the practice of the fraud exception principle in China on the basis of a typical case, as well as the perfection of Chinese laws related to the fraud exception principle of L/C. Finally, a conclusion has been made.