Study On Legal Issues Regarding Fraud Exception Of Independent Guarantees

The utilization of the independent guarantees becomes much more frequently with thefurther development of the international trade. Under the legal system of theindependent guarantees, the guarantor is entitled to check the payment request and therelated documents submitted by the beneficiary; and if the request and documentscomply with the stipulations of the independent guarantees facially, the guarantorshall pay the sum under the independent guarantees to the beneficiary. The attribute ofindependent makes procedures of the payment simple and convenient. Nevertheless,also because of such attribute of independent, deceitful request of payment is likely tooccur since the independent guarantees is independent from the underlying contractrelationship, pursuant to which the guarantor is not allowed to reject the payment byciting the defenses deriving from the underlying contract relationship.Both the legislation of most countries and the international practices acknowledge theprinciple of fraud exception as the exception of the attribute of independent under theindependent guarantees, for the purpose of balancing the interests of each party.Nevertheless, a unified recognition on issues such as the identification of the fraud,the applicable scope of the principle of fraud exception as well as the specific formsof the judicial remedies has not been arrived yet, pursuant to each country’slegislations or case laws, based on which, the thesis hereby discusses and analyzes theabove issues in depth. Furthermore, the thesis also conducts a research on the specific application of the principle of fraud exception under the legal system of independentguarantees applied in China.This thesis (excluding the Preamble and the Peroration) is consisted of four chaptersas bellows:Chapter I analyses the reason for the occurrence of the fraud under the system ofindependent guarantees. First, it elaborates the legal attributes of the independentguarantees by comparing the independent guarantees with the affiliated guaranteesand the documentary letter of credits. Next, the author combs various legalrelationships involved in the transaction of independent guarantees and analyzes themain rights and obligations of the parties to each legal relationship. Finally, the author,starting with the legal attributes and the systems of the independent guarantees,illustrates the reasons by which the fraud occurs easily under the independentguarantees.Chapter II mainly focuses on the specific application of the principle of fraudexception in the independent guarantees. First, the author illustrates the juridicaltheory basis of the principle of fraud exception and explains the development status ofthe above principle. Next, the author analyzes the applicable scope of the principle offraud exception from the aspects that whether the principle could be applied to thefraud implemented in the underlying contract and the situation of fraud committed bya third party. Finally, the author introduces the specific situations that can beexempted from the principle of the fraud exception in detail.Chapter III discusses the measures of judicial remedies in the event of fraud inindependent guarantees. First, the author analyses the objective premise as well as thelegal conditions for the court to approve the judicial remedies. Meanwhile, the authorconducts a comparative analysis on the existing judicial remedies of some countries. Chapter IV discusses the application of the principle of fraud exception in the Chineselegal system of independent guarantees. First, the author analyzes the legal status ofthe independent guarantees in China’s domestic and foreign-related transactions.Following this, the author further analyzes the application of the principle of fraudexception in the independent guarantees in China. Finally, the author proposes someadvices on achieving the balance between the principles of independent and fraudexception under the system of independent guarantees of China.