Letter of Indemnity

The new Act also recognises that with the current speed of ships, it is not unusual for the cargo to be correctly delivered against a letter of indemnity.  At the time of delivery, in such a case, the consignee is not in actual possession of the B/L and by the time it reaches him it will have ceased to be a document of title because the goods will no longer be in transit. The 1992 Act in separating the title to sue from the passing of the property in the goods; lawful possession of the B/L is sufficient. Even actual possession is not necessary provided that the steps taken to transfer the B/L were made before it ceased to be a document of title. The Act, after listing the B/L holder or the person to whom delivery is to be made under a sea waybill or ship delivery order then states “shall have transferred to and vested in him all rights of suit under the contract of carriage as if he had been a party to that contract”. With rights come liabilities and the person who demands delivery under a B/L, sea waybill or ship delivery order becomes subject to the same liabilities as the original shipper which may include obligations to pay freight, port charges demurrage etc.  The latter is important with containers where undue delay in collection can incur demurrage on the container as well as penal rent charges from the terminal operator. Those liabilities are not imposed on a party who simply holds the B/L as security for payment, such as a bank in a letter of indemnity transaction. An interesting aspect of the 1992 Act is that a B/L is considered as conclusive evidence of such shipment against the carrier which appears to overrule Grant -v- Norway [1851].