UK: The Jaq Ravi

Last Updated: 20 September 2011
Article by Linda Jacques

How effective is a Letter of Indemnity issued under charterparty terms by a party who is not the charterer?

In Great Eastern Shipping Co Ltd v Far East Chartering Ltd ("The Jaq Ravi") the English Court has addressed the effectiveness of a Letter of Indemnity which was issued by receivers to ensure that cargo could be delivered in the event that original bills of lading had not arrived at the discharge port.

The Jaq Ravi had been chartererd in to carry a shipment of coal from Indonesia to India. That shipment was being carried to fulfil a sale contract between the shippers who were Indonesian and a Swiss Company Visa Comtrade. A subsidiary company of Visa Comtrade – FEC were the named charterer of the Jaq Ravi.

The charterparty provided that if original bills of lading were not available at the discharge port the owners of the Jaq Ravi were to allow discharge the cargo against the charterers Letter of Indemnity (LOI) in the owners PNI club format. The clause also provided that a fax copy of the LOI was to be acceptable and that a copy of the bills of lading were to be attached with the LOI.

On completion of loading in Indonesia five bills of lading were issued on 30 September 2008. The vessel then sailed for India – and arrived at Navlakhi on 12 October. In the interim on 22 August the original buyer Visa Comtrade had on sold the cargo to another company – Binani on CIF terms. The on sale contract provided that in the event the vessel arrived at the discharge port before the buyer had received the bills of lading – the seller Visa Comtrade would make arrangements with the vessel owners to allow unloading against the Buyers – Binani's LOI.

On 6 October the charterers FEC sent a draft LOI which was in the PNI club standard form to Binani to issue. This they duly signed and returned to FEC – agreeing to hold harmless the owners/disponent owners/charterers of the Jaq Ravi in respect of any liability,loss,damage or expense of whatsoever nature which "you" may sustain by reason of delivering cargo in accordance with our request. It is clear from the case report that the owners of the vessel did not see this particular LOI before allowing discharge. It is unclear what they were given a copy of by the charterers pre discharge and whether the charterparty terms had been followed.

The LOI also included an extra clause providing that delivery into barges was to be deemed to be delivery to the party "to whom we have requested you to make such delivery."

Discharge commenced in Navlakhi on 14 October into barges and was completed on 16 October. On 21 October the discharge port surveyors advised that the cargo was below specification and on 23 October Binani wrote to its seller Visa Comtrade rejecting the entire consignment. By this time a substantial part of the coal cargo had already been removed from the port vicinity.

Unbeknown to the owners of the vessel and the end buyers Binani – the original parties to the sale contract the shippers and Comtrade Visa were in dispute about matters related to the original sale contract. This resulted in the shipper's lawyers putting the owners of the Jaq Ravi on notice of a claim for damages for delivering the cargo to Binani without presentation of the bills of lading. This was in and around 12 November.

Understandably the owners took immediate steps to try to prevent the balance of the cargo from being removed from the port vicinity – including an application to the local court for an injunction. They appear to have received little support from the Indian Courts on this issue and the upshot of their efforts was that Binani eventually removed all of the cargo from the port.

Meanwhile the shippers started proceedings against the owners in Singapore and were given judgement in their favour against the owners. The details of that legal action are unfortunately scant.

The owners then commenced legal proceedings against Binani under the Letter of Indemnity for an indemnity in respect of their liability to the shippers. The charterers FEC had by this stage gone into liquidation so there was no direct recovery possible from them.

The owners claimed they had a direct contractual right against Binani because of the wording of the LOI which was addressed to the owners/disponent owners. The problem for the owners though was they were unaware of the Binani LOI when they agreed to discharge the cargo without bills of lading. Binani therefore argued that the owners could not rely upon it because their conduct was in ignorance of the offer – and was therefore incapable of being an acceptance in law. Mackie Q.C sitting as a Judge of the High Court found for the owners on other points and did not unfortunately need to consider this argument- although he indicated Binani had the better argument on it.

The owner's primary argument was that they had a right to bring a claim against Binani under the LOI relying on the Contracts (Rights of Third Parties) Act 1999.

They argued that the charterer FEC had instructed the owners to deliver cargo to Binani and to that extent owners were acting as charterers agents. The LOI stated that it was intended for the "servants and agents" of charterers and the owners were therefore entitled to enforce under the 1999 Act.

Binani denied the owners were entitled to rely on the 1999 Act on three grounds.

1. There was no direct contract between the charterers FEC and Binani which allowed the Act to be relied upon.

2. The owners did not deliver the cargo in accordance with the terms of the LOI. Delivery of the cargo had been given to the port authorities. The owners had issued a delivery order prior to delivery which gave possession of the cargo to the owners own bailees with authority to them to deliver to Binani. This did not constitute delivery to Binani.

3. Even if the cargo had been delivered the owners should be prevented on public policy grounds from enforcing their rights under the LOI. Binani argued that from 12 November any delivery to them by the owners was wrongful because the shippers had claimed the cargo had belonged to them. In those circumstances Binani argued its liability should be restricted to the 7,400 mts of cargo that had been delivered before the 12 November.

The Judge decided that the owners were entitled to enforce the LOI under the 1999 Act. This was on the basis that the LOI had been addressed to FEC and its servants and agents, that the cargo had been discharged to Binani. There were were no public policy considerations in the case to prevent enforcement. The judge described the case as a commercial transaction with some complex aspects going wrong!

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.