Fraud Exception Study

Letter of credit is the most important way of payment in the international business, which joints the commercial credit and bank credit and changes international credit to bank credit and then extends functions of bank. The principle of the abstraction and independence of the Letter of credit is the main reason why letter of credit can play such an important role, which requires Letter of credit in depended from basic contract, the law connection between Issuing bank and beneficiary is depended on issuing bank and applicant, and the bank only be responsible for censoring the accordance of the bill and certificate and puts the contract on one side. Just because of the principle of the abstraction and independence of the Letter of credit, some illegal merchants can have the chance to make the fraud of Letter of credit by means of the bug of L/C trade. The independence of L/C is faced to challenge. All the counties of the world try their best to deal with the fraud of L/C in order to protect international trade system. The countries think that fraud exception should exist in the light of maintaining the abstraction and independence of L/C. So the fraud exception emerges as the times require.The article integrates four chapters, which introduces fraud exception from four aspects.The first chapter discusses the establishment of the principle of fraud exception.First of all, this chapter describes the definition, characteristic and basic law connection analysis, from which we can fully understand the L/C as a basic payment method.Then we analyses the reason and inevitability of fraud exception, and emphasize the principle of abstraction and independence of L/C from which we understand the basic principle is also the deep reason of the fraud exception which makes it very necessary to establish fraud exception. The last section of this chapter-the theory basis of fraud exception is the sole of this chapter. Every system has its theory support without exception of fraud exception.The second chapter connects link between the preceding and the following, and describes the establishment and development of the principle of fraud of exception. The fraud exception is not occasional but has its dictionary and origin, in which American statute law...