The Doctrine of Subrogation

Paper Summary:

This paper discusses the doctrine of subrogation and relates that it is squarely grounded on the law of restitution and thus the reversal of unjust enrichment. The paper specifically looks at how subrogation, while implicit in surety relationships, is a matter of controversy in the context of bankers' autonomous undertakings such as the letter of credit and bank guarantees. The paper concludes that it seems that the question of the availability of subrogation in the case of bankers' autonomous undertakings turns on the extent to which it would introduce uncertainty into this area of law. Since this area of law is also controversial and often unclear, subrogation in these cases should be avoided.

From the Paper:

"If subrogation is essentially a remedy, then the doctrine of autonomy, which ousts the co-extensiveness of customer and issuer obligations, cannot of itself oust subrogation. The independence [autonomy] principle basically determines that the beneficiary will have the money in its pocket if there is a dispute between it and the customer over the underlying transaction. This distinguishes a letter of credit from an ordinary guarantee: a guarantee is not independent in this sense, and guarantors may generally assert defenses available to the party whose obligation is guaranteed. The independence principle undoubtedly requires the issuer to pay first, without even looking through to the underlying transaction. Subrogation should therefore be unavailable before the issuer has paid the beneficiary; it may be considered unnecessary. Once the issuer has done so, however, the purpose of the independence principle has been served: the beneficiary has the money."

Sample of Sources Used:

• Gartside, L. Commerce: A guide to the business world. London: Pitman Publishing, 1977.
• Bank Guarantee. 15 May 2001. < www.wfmo.net/documents/bankguarantee.htm>
• Hammond, Rick. "The right of subrogation by an insurer against its insured and the impact of recent legislation." Chuhak & Tecson. 15 May 2001. <www.insurancefraudlaw.com/a_sub.htm>
• London Short Form/Format 3034 Letter of Credit. 15 May 2001. <www.wfmo.net/documents/lsf.htm>
• Oddo, Kevin P. "Party Who Fails To Find Deed Of Trust Equitably Subrogated To Position Of Prior Lienholders." 15 May 2001. < www.flippindensmore.com/news/banking/05-01-100-1844.html>

More papers on The Doctrine of Subrogation:

• Research Paper # 44051 : "Subrogation"
• Analytical Essay # 142944 : "The Doctrine Of Justification In The Book Of Romans"
• Analytical Essay # 149068 : "The Doctrine of Ultra Vires"

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