Private Law
Mohammad Arian
Abstract
Fraud as an exception to the principle of independence of documentary credit from the underlying contract is one of the key challenges facing the issuing bank, which in particular has been more the center of attention in deferred payment letter of credits. In case, the proceeds of the credit are assigned ...
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Fraud as an exception to the principle of independence of documentary credit from the underlying contract is one of the key challenges facing the issuing bank, which in particular has been more the center of attention in deferred payment letter of credits. In case, the proceeds of the credit are assigned to third party by the beneficiary through the discount of the credit and it is later discovered that the beneficiary had committed fraud, so in such a case, this question arises whether in Iranian legal system, the third party assignee shall be immune from the effects of fraud committed by the beneficiary? In this regard, some believe that according to the general rule that "no one can transfer to another more rights than he has", the assignee of proceeds shall not be immune from the effects of fraud. From a comparative law perspective, there are two profoundly different approaches concerning the impact of fraud on the rights of the assignee of proceeds. According to the first approach accepted in the English legal system, an assignee of proceeds shall not be immune from fraud, even if it is considered as a bona fide holder. However, according to the second approach which is reflected in Section 109 of Article 5 of the US Uniform Commercial Code, the assignee shall be immune from fraud on condition that it is considered as a bona fide holder. In Iranian legal system, although there is no specific law in the field of documentary credits, such a person must be immune from the effects of fraud having regard to the banking practice, case law, and legal doctrine, as this is requisite for maintaining the commercial utility of letter of credit as an important financing mechanism.
Morteza Shahbazinia; Fatemeh Alholui Zare
Abstract
Letter of credit(LC')due to its special characteristics, is one of the most prevalent methods for payment in international transactions. By establishing the Uniform Customs and Practice for Documentary Credits (since) 1933, in order to unification of the rules governing letters of credit, International ...
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Letter of credit(LC')due to its special characteristics, is one of the most prevalent methods for payment in international transactions. By establishing the Uniform Customs and Practice for Documentary Credits (since) 1933, in order to unification of the rules governing letters of credit, International Chamber of Commerce) ICC) has tried to clarify this method of payment. ICC has standardized issuing of the documents related to letter of credit, so as to declining problems which are come across with engaged parties due to this method of payment. However, despite these efforts, still numerous ambiguities surround this method of payment, especially banks are challenging with several problems in connection with the documents presented by the beneficiaries. This shows that prevailing rules on the principle of strict compliance of documents are not clear enough. In order to enhance the letters of credit’s efficiency, this paper will try to review the contrast interpretations regarding the concept of the principle and provide solutions for the above problems. This study includes all engaged parties in )LC)’s operations and specially will examine Doctrine of Strict Compliance in Commercial Invoices.