Letter Of Indemnity

Letter Of Indemnity
See also

Letter Of Indemnity (LOI) is a document which reffers to shipping law. In this letter the author surrender to the other party, accepting the policy of their protection against liability for the performance of specific actions[1]. Such lists are traditionally drawn up by external parties, such as Banks or insurance companies. They agree to pay a refund to one of the parties if the other party defaults[2]. The bank usually receives a similar letter from its customers to protect itself from the responsibility it accepts on the customer's faith[3]. It is mostly used when the shipping goods reach the destination port before the original bills of lading[4]. Letters of indemnity issues from the supplier's change of destination are usually awarded by the owners to shipowners in the tramp industry[5].

Purchaser's benefits of using the Letters Of Indemnity[edit]

There is a lot of advantages that comes form using the letter of idemnity, especially when shipped goods have a high value or shipping distance is long, but the most importat benefits for purchaser are such as[6]:

  • LOI allows save a time
  • Allows to take immediate delivery
  • Reduces additional demurrage
  • Cuts storage expenses
  • Reduces insurance costs

Practical issues affecting Letters Of Indemnity effectiveness[edit]

The effectiveness of a letter depends on some legal aspects such as[7]:

  1. The letter's legitimate performance
  2. Creditworthiness of the entity issuing the letter
  3. Legal capacity of the entity issuing the letter
  4. Beneficiary of the letter
  5. The letter's conditions
  6. The letter's law and jurisdiction

It is emphasized that the letter should normally comprises two components - request from one party for another to provide a service and promise made by the applicant to oblige the party to comply with the request without prejudice to any loss, damage or liability which it may incur as a result of complying with the request[8].

See also: Period of indemnity


  1. Fernandis E (2006)
  2. Zhao L, Lianjun L (2017)
  3. Fernandis E (2006)
  4. Hinkelman G. E (2005)
  5. Arizon F, Semark D (2014)
  6. Hinkelman G. E (2005)
  7. Soyer B, Tettenborn A (2016)
  8. Soyer B, Tettenborn A (2016)


Author: Angelika Załęska