Title: Unconscionability in letters of credit and demand guarantee transactions

Authors: Alan Davidson

Addresses: TC Beirne School of Law, University of Queensland, Brisbane Qld 4072, Australia

Abstract: The backbone of the letter of credit is the autonomy principle, which dictates that banks deal with documents and are not concerned with nor bound by any underlying contract. This paper raises the controversial issue that the emerging unconscionability exception to this principle jeopardises the integrity and viability of the letter of credit product. Subsequent cases in Singapore and Malaysian replicate the underlying Australian principle without the legislative platform. The conclusion of the paper is that an understanding of the nature and purpose of letters of credit and the limited application of the fraud exception must lead lawyers in the field to conclude there should be no unconscionability exception.

Keywords: letters of credit; demand guarantees; unconscionability exception; fraud exception; integrity; viability; Singapore; Malaysia; Australia.

DOI: 10.1504/IJTPL.2012.050216

International Journal of Technology Policy and Law, 2012 Vol.1 No.2, pp.183 - 204

Published online: 30 Sep 2014 *

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