Legal Research On Dishonor Of Letter Of Credit

Nowadays, letter of credit (L/C) has become the most widely used settlement in China's international trade. As China's foreign trade develops rapidly, trade of L/C in bank service mushrooms at the same time, but the dishonor of L/C led by high rate of discrepancies has slowed down the speed of foreign trade and increased the costs, as a result, more and more disputes arising from it have to be settled by courts, people lose confident in L/C. Therefore, on the base of Uniform Customs and practice for Documentary Credits (UCP600) and "Some Provisions Concerning letter of credit" promulgated by Supreme People's Court's, this thesis studies the practices of dishonor of L/C of various countries, discusses the issue of dishonor of L/C from the aspects of practice and commercial law theory by comparative analysis and logical reasoning methods, in order to figure out the specific rules on the issue of dishonor of L/C and make some recommendations to the future relevant legislation of China.This thesis falls into three parts:The first part studies the underlying reasons for dishonor of L/C by the aspect of analysis of rights and obligations, meanwhile discusses the due and qualified essentials of dishonor of L/C in accordance with the UCP600, and also discusses the meanings and liabilities of improper payment and improper dishonor. In the author's opinion, L/C should be encouraged to put into use in the field of settlement and dishonor of L/C should be reduced, and the rules of dishonor of L/C of UCP 600 are appropriate.The second part discusses the question that when the documents consist with each other apparently but actually include a fraud inside, which principle should be adhered to, the principle of independence of L/C or the principle of fraud exception, In the author's opinion, the principle of fraud exception should be adhered to, therefore, in order to prevent fraud, the banks have the right of dishonor of L/C, otherwise the applicant has the right to apply for an injunction of dishonor.The third part That the letter of credit to pay the current legislative status , existing deficiencies, China's credit system as well as the existing problems related proposals, especially on the issue of dishonor of L/C. It must be understood that L/C is a tool of payment rather than dishonor, the bank should only be entitled to dishonor in case of fraud. Finally, the author proposes to learn from the judicial procedure of the injunction of dishonor of L/C in US, and set up China's own relevant injunction judicial procedure.