A Comparative Analysis of the Standard of Fraud Required Under the Fraud Rule in Letter of Credit Law

National courts have required different standards of fraud to justify non-payment, or restraint of payment, under a letter of credit.The United Nations Commission on Trade Law (UNCITRAL) has adopted its own position.The issue is far from settled in any legal system.Based on an analysis of the law in the United States, United Kingdom, Canada and Australia, and under the Convention, this article proposes a standard that is a distinct improvement on the various standards applied around the world and suggests a means for its implementation.The fraud rule allows the issuer of a letter of credit or a court to disrupt the payment of a letter of credit when fraud is involved.The raison d'etre of letters of credit is to provide an absolute assurance of payment to a seller, provided the seller presents documents that comply with the terms of the credit.The fraud rule thus goes to the very heart of the letter of credit obligation.The fraud rule is necessary to limit the activities of fraudsters, but its scope must be carefully circumscribed so as not to deny commercial utility to an instrument that exists to serve as an assurance of payment. 1 This article explores the kind of fraud required to invoke the fraud rule or, in other words, what does fraud mean under the fraud rule in the law governing letters of credit?This is a challenging ques-