Abstract
LL.M. (Commercial Law)
Courts globally have grappled with the notion of recognising exceptions to the independence
principle. The trickling effect of recognising exceptions to the independence principle is that it
results in the erosion of the independence principle. Currently there exists scattered authority
on the exceptions which may be used to interdict or block payment under a letter of credit.
Consequently, it is only in those jurisdictions that acknowledge and accept nullity, illegality or
fraud into their legal system that the exception(s) becomes applicable. Circumvention of the
independence principle leads to its corrosion, therefore the trust, certainty and security of letters
of credit is compromised. This view is supported by the fact that where the security, certainty
and trust of letters is rattled, traders will not want to trade internationally for fear of not being
paid as a result of the employment of either one of the exceptions. This brings back the risks
faced by the buyer, seller and financier into light, which is the chief purpose that the
independence principle aims to overcome. In light of this, the aim of this dissertation is to
consider the emergence of the exceptions (fraud, illegality and nullity) through the lens of case
law. Moreover, to determine how the independence principle has been eroded by
acknowledgement of these exceptions. Furthermore, it touches on the implications of
recognising exceptions to the independence principle. However before delving into this
analysis due consideration will be given to letters of credit, along with the rationale behind
their employment, purpose and role in international trade. Furthermore, examining the two
principles underlying letters of credit, namely the independence principle and the doctrine of
strict compliance.