The Research On The Payment Obligation Of The Confirming Bank

The letter of credit as the most important international settlementinstruments nowadays, using the bank credit making up the shortage ofcommercial credit, plays a very important role in the international trade. Itis recognized as the blood of international business. Along of the increasingpace of the international commerce, the requirement of the stable situationof the country’s politics and economy is becoming more and more strictly.The seller prefer the credit of a local bank to pay rather than the one locatedin the buyer’s country. Then comes the confirmed credit, having anadvantage of double bank credit, makes up the limitation and risk of theissuing bank credit, and at the same time provides the facility for thebeneficiary to bring a lawsuit.However, there is still no systematic legislation for the confirmedcredit, which leading to the inconsistency in the practice and the judicialdifferences. The confirming bank takes a captious rule examining thedocuments presented by the beneficiary, and then turns out the highdishonor rate in the letter of credit transaction. No right to relive makes theconfirming bank even cautious to pay. The misunderstanding ofconfirmation prevents some bank fearing of the bad effect of issuingconfirmed credit, especially the banks in China. The beneficiary has noresort but to the silent confirmation, which is not governed by the law ofletter of credit. This thesis tries to clarify the legal nature of the payment ofconfirming bank, analyze the cases worldwide, and find the solutions to the problem.This thesis consists of the following chapter.Chapter One, The Synopsis of The Confirmed credit, is divided intotwo sections. Section1briefly shows the circuit of the confirmed credit,and looks into the legal relationship between the confirmer and other partsof the confirmed credit. Section2compares the confirmed credit withsurety, independent guarantee and standby letter of credit.Chapter Two, The Condition and Character of the Payment Obligationfor the Confirming Bank, is divided into three sections. Section1expoundsthe precondition of the payment for a confirmed credit. Section2discussesin which circumstance should the confirming bank pay the beneficiary.Section3analyzes the legal character of the payment obligation.Chapter Three, The Confirming Bank Facing Fraud, is divided intothree sections. Section1analyzes the significance of the fraud exception inletter of credit and its standards. Section2discusses the character andresponsibility of dishonor in fraud exceptions. Section3discusses theprotection of the confirming bank in fraud exceptions.Chapter Four, The Relief of The Confirmed Bank, is divided into foursections. Section1shows the dilemma when the issuing bank refuse therequest or is on the verge of bankruptcy. Section2discusses the rationalityof the right of subrogation when facing the dilemma above. Section3unscrambles the legal precedent and the legislation of the right ofsubrogation in American. Section4facing the current situation of the rightof subrogation in our country, tries to find the way to improve it.