Research On The Exemption Of Fraud Exception On Letter Of Credit

The letter of credit (L/C), a key payment tool in international trade, by which the bank's credit take the place of commercial credit in a transaction, has played a key role in the promotion of international business. The independent' abstract rule is the cornerstone of letter of credit (L/C) sales, but it protects fraud beneficiary in objectivity. So countries establish the exception rule of fraud on L/C to remedy it. However, the abuse of the exception rule would shock the benefit of third party acting in good faith in L/C business, which is the reason the exemption of fraud exception rule on L/C come into being.The exception rule of fraud on L/C in many countries, like statutory law in America, case law in Britain, it protects the right and benefit for the third party acting in good faith, while establishes the exemption of the exception rule of fraud. USA is the leader of regulating the exemption of fraud exception rule, and UK also confirm it by a series of cases. The exemption suggests: in order to protect the third party acting in good faith, who have already paid for the price, the bank must pay them, even if in fraud condition, and this is called the exemption of fraud exception rule.Our country's legislation in this aspect is more backward, mostly adopting domestic laws and international practices. There are some similar regulations in our legislation, but not perfect. So it's a crucial task for us to strengthen the research on the exemption of fraud exception rule.This article made research for some points for exemption of the exception rule of fraud. And the author made research in some case law , statutory law or judicial actions in some other countries , and put forward some advice .