On The Principle Of Letter Of Credit Fraud Exception To The Application Of Standards

Fraud exception rule is one and only exception to independent doctrine—the most essential doctrine of letter of credit. Nowadays letter of credit fraud happens more and more frequently and will destroyed letter of credit system fundamentally if people let it alone. The fraud exception rule was invented to prevent letters of credit fraud, and it did succeed in one perspective, ensured the longstanding status of letters of credit as an effective and safe payment tool.Unfortunately, as to the standard, not only regulations between Countries vary, but also regulations of a single country are somewhat different. There is no unambiguous and uniform provision concerning such things as the definition of letters of credit fraud, what proof should the plaintiff provide, etc. Besides, because of the uncertainty of the standard, the domestic court has huge power of free discretion. And this situation leads to two possibilities, one is the different judicial opinions of similar cases, the other is the abuse of fraud exception rule. In practice, the latter are more common. And as in substance the fraud rule is just an exception to letters of credit system, the abusing of the rule will destroy the system of letters of credit more severely.Under the guideline of such aim articulated above, the writer comparatively analyzes foreign country's laws governing letters of credit fraud, in order to find out specific and useful regulation and avoid mistakes they have made. After analyzing current laws governing letters of credit fraud, the writer suggested that our country should introduce the material fraud standard into our law frame. To make it more practical, the writer studied every single parts constituting the material fraud standard such as identity of fraudster, scope of fraud and degree of fraud which includes the meaning of materiality and the intent of beneficiary, etc. Besides, to make this provisions locally and adaptively, the writer studies how to make that relevant introduced law provision fits into our legal system perfectly and makes corresponding suggestions. Through putting forward suggestions under the guideline of advanced thoughts and based on comparative method, the writer hopes that our laws governing letters of credit fraud become perfect gradually.