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In South African law the required standard of compliance regarding documents presented in terms of commercial letters of credit is unclear. It is presumed that the English law is followed. However, the English law is also not entirely clear as to the required standard of compliance for documents and demands required in terms of demand guarantees. Some English courts have expressed the view that as regards demand guarantees, the doctrine of strict compliance is not as strict as that demanded for letters of credit. In two recent South African cases it was argued that a less strict standard of compliance applies to demand guarantees in South Africa. English authorities were advanced to support this argument. However, this article shows that the exact application of the doctrine of strict compliance to demand guarantees under the English law is neither straightforward nor has it yet been fully established. The article examines these South African cases against the backdrop of the English cases. [ABSTRACT FROM AUTHOR]

Demand guarantees, standby letters of credit, and commercial letters of credit are all treated as autonomous contracts whose operation will not be interfered with by courts on grounds irrelevant to the guarantee or credit itself. The idea in the documentary credit or demand guarantee transaction is that if the documents (where applicable) presented are in line with the terms of the credit or guarantee the bank has to pay, and if the documents do not correspond to the requirements, the bank must not pay. However, over the years a limited number of exceptions to the autonomy principle of demand guarantees and letters of credit have come to be acknowledged and accepted in practice, in certain circumstances, the autonomy of demand guarantees and letters of credit may be ignored by the bank and regard may be had to the terms and conditions of the underlying contract. Established fraud is the main accepted international exception to the autonomy principle. For some time it has been uncertain whether illegality in the underlying contract is also an exception. In this article attention will be given to whether England, the United States of America and South Africa consider illegality in the underlying contract to be a valid exception to the autonomy principle of demand guarantees. From the discussion that follows it will be seen that illegality as an exception is very controversial and its scope remains uncertain. [ABSTRACT FROM AUTHOR]