Research On The Application Of Implied Terms In Letter Of Credit Fraud

With its unique advantage, the letter of credit (hereinafter refer to L/C) which has greatly promoted the development of international trade becomes the main instrument in today’s international trade settlement. Two pillars that support the existence and development of L/C system are the principle of independence and the principle of strict compliance which make the bank independent of the underlying transaction contracts and get rid of the complicated trade disputes to ensure the smooth progress of the international trade. But it also provides opportunities for some criminals to commit fraud. The frequently occurred L/C fraud have seriously disrupted the normal order of international trade and are harmful to the L/C trading mechanism.Under this background, the L/C fraud exception principle is produced and developed, and to a certain extent has curbed the spread of the L/C fraud. But because the international community does not enter into a unified rule or standard, the judicial tradition varies and different understanding of a series of problems produced by L/C, the application of the L/C fraud exception principle standard of the court are also not the same, many problems still exists in theory and practice. In the L/C transaction system includes the contracts between buyers and sellers, the L/C issuing contract between the issuing bank and the applicant and other types of contracts. Principle of implied terms, as an important principle in the field of common law of contract, play an important role in perfecting the contract content, maintaining fairness and justice and promoting the standardize trade. It has the same effects as the express terms in terms of binding parties.On the basis of a introduction to the definition and causes of L/C fraud, this paper analyzes the specific forms of L/C fraud. After current status researches, this paper expounds a in-depth analysis of the establishment and application of the L/C fraud exception principle with real cases happened domestically and abroad, and analyses its main problems, that is the undefined application standard, the embarrassment position of bank and the concerns of the courts. Through the analysis of the feasibility and effectiveness of the principle of implied terms, this paper draws a conclusions that the principle of implied terms can find a new balance between the protection of the L/C trading mechanism and curbing fraud, which is more in line with the present running situation of the L/C system.