Credit Issuing Bank Payment

The D/L is the most important way of payment in the international business,which transferred the commercial credit into the bank credit and extended functions of bank and facilitated the international trade. The real payment of the issuing bank is the main purpose of the L/C operation. Because of the incompletion of the Uniform Customs and Practice for Documentary credits (UCP500) and the scarcity of the written law about L/C in many countries,the standard for examination of documents,how to deal with fraud L/C and the issuing bank's liability for breach of contract are to be discussed theoretically,and the standards for practice are to be established. The payment of the issuing bank is an important theoretical and practical problem. Based on the UCP500,the Uniform Commercial Code ( UCC ),the Chinese Settlement Methods for Domestic Credits(SMDC) and the judicial precedents ,these questions are discussed preliminarily in this article ,and defaults in the legislation and in the judicial practice are pointed out ,and you also can see the suggestions on the legislation of credit.This dissertation is composed of five parts. First,the principle of L/C transaction . Second ,the legal base and status of payment of the issuing bank . Third ,the standard for examination of documents of the issuing bank . Fourth,suggestions and discussions on the payment of the issuing bank under fraud . Fifth,the liability of the issuing bank for the breach of contract .The conclusions and suggestions on these questions are made in every part.The first part is focused on the two parts of the autonomy principle of L/C and their reasons . The first one,the Independence and Abstraction,namely,the L/C is independent from the underlying contracts. The second one,the Documents Transaction. That is to say the documents under the credit must comply on the face with the terms and conditions of the credit ,the issuing bank should not check whether the goods ,services and other performances related to the documents really exist. The first one is like the abstraction of the negotiable instruments . The second one is like the formal act of the negotialbe bills. These two sides constitute the special principle of the credit operation . The above principle has been accepted in the international customs and the practices of the courts and banks .The speciality of the independence and abstraction may lead'to four legal results. The first one,the credit in the essence is the independent contract between the issuing bank and the beneficiary .The second ,the issuing bank is independent from the disputes between the two parties of the underlying contract. The third ,the issuing bank should not interfere with the performance of the underlying contract. The fourth,a beneficiary can in no case avail himself of the contractual relationship between the banks or between the applicant and the issuing bank.The purpose of the credit ,the protection for the rights of the bank and the negotiblity of the credit are the reasons why the autonomy principle of credit can exist.The second part of the article reviews the legal base for the issuing bank's payment,which is the consigning contract between the applicant and the issuing bank and the credit contract between the issuing bank and the beneficiary. The establishing time of the consigning contract in Chinese SMDC contradicts with that in Chinese contract law,it must be amended to meet the contract law.The credit transaction is the bilateral legal transaction ,the contract between the issuing bank and the beneficiary should establish as long as the beneficiary has no opposition . But it is also a special contract and custom,the consideration isunnecessary . The issuing bank's responsibility of first payment is determinded by these legal bases.In the third part,the standard for examination documents is explored. It is formal examination,not substantive examination. It has been accepted widely. The degree of strict compliance is controversial. The opinion in this article is that both the courts an...