Letter Of Indemnity
| Letter Of Indemnity |
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| See also |
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
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
