A Consideration on Fraud Exception and the Principle of Independence under the L/C transaction

신용장의 독립성의 원칙의 예외로서의 사기원칙에 관한 고찰

The documentary credit has been functioning as an indispensable tool for making international commercial transactions safer throughout the world since ICC adopted the second revision of the Uniform Customs and Practices for Commercial Documentary Credits in 1962. Letter of Credit transaction should be cleared by the principle of the trust and integrity and vile partners sometimes make a fraud on the L/C by the misinterpretation of the documents. As there is no rule but no exception, exception from application of these principles is allowed. The fraud exception nile constitutes contracting out an application of basic principles, this rule should apply restrictively and in many authorities a court does not apply this rule to nominated bank, confirming bank, and bona fide holder of draft even if fraud is involved in L/C transactions. If not, we lose a lot of benefits from the credit as valuable commercial device through reservation of these principles to take a few benefits. So, We need to recognize that the fraud exception rule should be applied restrictively. Therefore, this study reviewed condition of application and exception from application of fraud exception rule in view of Cardozo's opinion, the Sztejn court, and UCC Sections-114(2).