Letter Of Indemnity
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Letter Of Indemnity (LOI) is a document which refers 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
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
The effectiveness of a letter depends on some legal aspects such as[7]:
- The letter's legitimate performance
- Creditworthiness of the entity issuing the letter
- Legal capacity of the entity issuing the letter
- Beneficiary of the letter
- The letter's conditions
- 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
Examples of Letter Of Indemnity
- A Letter Of Indemnity may be used to guarantee payment of freight charges, even if the bill of lading or other documents issued to the carrier have been lost or stolen.
- A Letter Of Indemnity may be used to guarantee payment of fees, taxes, and/or customs duties, even if the documents necessary for proof of payment are not available.
- A Letter Of Indemnity may be used to guarantee that the goods loaded onto a vessel are of the same description as found in the bill of lading, even if the documentation is not available.
- A Letter Of Indemnity may be used to guarantee that the goods were properly loaded onto the vessel, even if the documentation is not available.
- A Letter Of Indemnity may be used to guarantee that the cargo was not tampered with between the time of loading and the time of delivery, even if the documentation is not available.
- A Letter Of Indemnity may be used to guarantee that the cargo was not damaged while in transit, even if the documentation is not available.
Limitations of Letter Of Indemnity
A Letter of Indemnity (LOI) is a document which refers to shipping law. It is used to surrender to the other party, accepting the policy of their protection against liability for the performance of specific actions. However, there are certain limitations to a Letter of Indemnity. These include:
- The LOI does not protect the indemnifying party from liability for negligence on the part of the indemnifying party. This means that the LOI does not protect the indemnifying party from liability for any harm or damage that may be caused by the indemnifying party’s negligence.
- The LOI does not protect the indemnifying party from liability for any intentional acts or omissions. This means that the LOI does not protect the indemnifying party from liability for any harm or damage that may be caused by the indemnifying party’s intentional acts or omissions.
- The LOI does not protect the indemnifying party from liability for any breach of contract. This means that the LOI does not protect the indemnifying party from liability for any harm or damage that may be caused by the indemnifying party’s breach of contract.
- The LOI does not protect the indemnifying party from liability for any third-party claims, including claims for patent infringement or copyright infringement. This means that the LOI does not protect the indemnifying party from liability for any harm or damage that may be caused by third-party claims.
- The LOI does not provide any guarantee or warranty regarding the quality of the goods or services provided by the indemnifying party. This means that the LOI does not guarantee or warrant the quality of the goods or services provided by the indemnifying party.
- The LOI does not provide any protection against loss or damage that may occur due to the actions of a third party. This means that the LOI does not provide any protection against loss or damage that may occur due to the actions of a third party.
Overall, a Letter of Indemnity is a document which can provide some protection to the indemnifying party, however, it is important to note that there are certain limitations to this protection.
A Letter of Indemnity (LOI) is a document which refers to shipping law and serves to protect one party against certain liabilities. Other approaches related to LOI are:
- A Letter of Comfort (LOC) is a document which serves to assure the other party that they will be provided with support during a certain period of time.
- A Letter of Credit (LC) is a document issued by a bank which serves as a guarantee of payment to the other party.
- A Letter of Intent (LOI) is a document which serves to demonstrate the intention of one party to enter into a contractual relationship with the other party.
In conclusion, a Letter of Indemnity is a document which serves to protect one party against certain liabilities in regards to shipping law. Other approaches related to LOI include a Letter of Comfort, a Letter of Credit, and a Letter of Intent.
Footnotes
References
- Arizon F, Semark D (2014), Maritime Letters of Indemnity, CRC Press
- Eggers M. P (2013), Deceit: The Lie of the Law, CRC Press
- Fernandis E (2006), Commerce, Lotus Press
- Hinkelman G. E (2005), Dictionary of International Trade: Handbook of the Global Trade Community Includes 21 Key Appendices, World Trade Press,
- Soyer B, Tettenborn A (2016), International Trade and Carriage of Goods, CRC Press
- Zhao L, Lianjun L (2017), Maritime Law and Practice in China, Taylor & Francis
Author: Angelika Załęska
