Principle Of Fraud Exception And Its Judicial Application

The principle of independence and abstraction has been regarded as the base of letter of credit . However, the principle has its own flaw in the operation and letter of credit has been evilly used by fraud so that fraud has been an international issue. Since it was established by the US Sztejn case, the principle of fraud exception is accepted by most courts of the world, though different criterion of judicial practice they have. Because of the difference in judicial tradition, the application in different country is also different, especially about determining fraud ,adducing evidence, the range of exemption, and the exercise of injunction. As for injunction in China, too much judicial interference incurred a lot of international criticism and damaged the fame of the court and the bank seriously. In order to adopt the common international practice, we must improve the ability to understand the operation system and find a balanced point between the principle of independence and the principle of fraud exception. That is, if material fraud exists in the transaction, the court can issue injunction to prohibit the bank from accepting or paying letter of credit .The article is divideded into five chapters:Chapterâ… This chapter introduces the operation character of L/C ,basic principle of L/C and the imperfection of the principle so that to narrative the necessity of applying such remedy on fraud in letter of credit.Chapterâ…¡This chapter analysis on relevant issues on the principle of fraudexception ,including the uncertain meaning and common performance offraud on L/C.This chapter put its emphasis on the basic theory of the principle of fraudexceptionChapterâ…¢This chapter introduced the historical development phases of the judicialapplication of the principle of fraud exception. This chapter has made acompared study of them.Chapterâ…£This chapter introduces the judicial application of principle of fraud exception in various aspects of the judicial remedy such as the standard of confirming fraud, application of injunction and immunization of fraud exception. This chapter is the main part of this article.Chapterâ…£. This chapter first introduces the current status of China's legislation and make the author's suggestions in accordance with judicial practice.