Letters of indemnity *Capt. Zin Maung Tun

Capt. Zin Maung Tun

When the carrier notes that the goods do not correspond to the shipper's statement and, especially, when he fails to describe them as in 'good order and condition', the shipper has a problem. *Capt. Zin Maung Tun

Capt. Zin Maung Tun

The bill of lading is no longer 'clean', and the shipper may have difficulty in selling the goods by transferring the bill of lading. As a result, the shipper will exert considerable pressure on the carrier to issue a clean bill of lading. *Capt. Zin Maung Tun

Capt. Zin Maung Tun

If a clean bill of lading is issued, this is often in return for a so-called 'letter of indemnitywhich is a document whereby the shipper promises to indemnify the carrier for any liability arising due to the issue of a clean bill of lading.

*Capt. Zin Maung Tun

Capt. Zin Maung Tun

the practice of the issue of a letter of indemnity to secure an unclaused bill of lading may be regarded as a fraud perpetrated against the consignee who has bought the goods in reliance on the description in the bill of lading. Banks, advancing payment against the production of a clean bill of lading *Capt. Zin Maung Tun

Capt. Zin Maung Tun

In a situation of fraud, e.g. when the carrier has issued a clean bill of lading where this was clearly inappropriate, the letter of indemnity cannot be invoked before the courts (it is not the courts' function to allocate losses between crooks!). *Capt. Zin Maung Tun

Capt. Zin Maung Tun

The disappointed consignee will have a claim not only against the carrier but also against the shipper when he has engaged in fraud *Capt. Zin Maung Tun

Capt. Zin Maung Tun

The general question of whether an agreement to indemnify against the consequences of issuing a clean bill of lading is enforceable has been decided by courts. *Capt. Zin Maung Tun

Capt. Zin Maung Tun

On this occasion it was said that there may perhaps be some circumstances in which indemnities can properly be given. *Capt. Zin Maung Tun

Capt. Zin Maung Tun

In the opinion of the authority "such indemnities might be useful where there was a bona fide dispute as to the condition or packing of the goods in order to avoid the necessity of rearranging a letter of credit which might cause difficulty where time was short" [Wilson].

*Capt. Zin Maung Tun

Capt. Zin Maung Tun

It is worth mentioning that the Hamburg Rules warrant the practice of the issue of letters of indemnity if such a practice is not of a deceitful and fraudulent character.*Capt. Zin Maung Tun

Capt. Zin Maung Tun