The effect of illegality of the underlying contract on the documentary credit with an emphasis on the approach of Iran's civil courts in case of the big bank fraud

Document Type : Research Paper

Authors

1 Tarbiat Modares University

2 Kharazmi University of Tehran

Abstract

A documentary credit consists of a combination of several legal relationships. In some cases, the underlying contract or the contract for the opening of the credit may be illegal; hence the question arises what is the effect of underlying contract on the documentary credit and whether illegality in the underlying contract should be accepted as an exception to the autonomy principle of documentary letters of credit.In the law of Iran, the issue of illegality of the documentary credit itself and the underlying contract has been raised in the civil cases of the biggest bank fraud and the opinion of The majority of judges do not accept illegitimacy as an exception to the principle of autonomy and believe in the absolute sovereignty of the principle of independence;But in recent English cases, the judge’s obiter dicta accepted the illegality of the underlying contract as the exception to the principle of autonomy in documentary credit. A comparative study of illegality in common law countries also demonstrates that some jurisdictions have getting ready to recognize it as another exception to principal of autonomy in the documentary letters of credit

Keywords

References

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Law Quarterly
Volume 50, Issue 4
January 2021
Pages 707-723

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